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Financial Instruments and Fair Value Measurements | 12 Months Ended
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Oct. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments and Fair Value Measurements | NOTE 10 – FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Financial Instruments The Company uses derivatives from time to time to mitigate partially the effect of exposure to interest rate movements, exposure to currency fluctuations, and energy cost fluctuations. Under ASC 815, “Derivatives and Hedging,” all derivatives are to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives are recognized in either net income or in other comprehensive income, depending on the designated purpose of the derivative. While the Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts, its counterparties are established banks and financial institutions with high credit ratings. The Company has no reason to believe that such counterparties will not be able to fully satisfy their obligations under these contracts. During the next twelve months, the Company expects to reclassify into earnings a net loss from accumulated other comprehensive income of approximately $0.1 million after tax at the time the underlying hedge transactions are realized. Recurring Fair Value Measurements The following table presents the fair value of those assets and (liabilities) measured on a recurring basis as of October 31, 2014 and 2013 (Dollars in millions):
|  | October 31, 2014 |  |  | October 31, 2013 |  |  | Balance sheet
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Location
Interest rate derivatives |  | $ | — |  |  | $ | (0.2 | ) |  | $ | — |  |  | $ | (0.2 | ) |  | $ | — |  |  | $ | (0.9 | ) |  | $ | — |  |  | $ | (0.9 | ) |  | Other long-term liabilities
Foreign exchange hedges |  |  | — |  |  |  | 0.6 |  |  |  | — |  |  |  | 0.6 |  |  |  | — |  |  |  | 0.3 |  |  |  | — |  |  |  | 0.3 |  |  | Prepaid expenses and other current assets
Foreign exchange hedges |  |  | — |  |  |  | (0.2 | ) |  |  | — |  |  |  | (0.2 | ) |  |  | — |  |  |  | (1.0 | ) |  |  | — |  |  |  | (1.0 | ) |  | Other current liabilities
Total* |  | $ | — |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | (1.6 | ) |  | $ | — |  |  | $ | (1.6 | ) |  |
* | The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, current liabilities and short-term borrowings as of October 31, 2014 and 2013 approximate their fair values because of the short-term nature of these items and are not included in this table.
Interest Rate Derivatives The Company had interest rate swap agreements with various maturities through December 2014. Such interest rate swap agreements are used to manage the Company’s fixed and floating rate debt mix, specifically the Amended Credit Agreement. The assumptions used in measuring fair value of these interest rate derivatives are considered level 2 inputs, which were based on monthly interest rates from the counterparties over the life of the swap agreements. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on these derivative instruments is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument is recognized in earnings immediately. As of October 31, 2014, the Company had two interest rate derivatives, both of which were entered into during the first quarter of 2012 (floating to fixed swap agreements designated as cash flow hedges) with a total notional amount of $150 million. Under these swap agreements, the Company received interest based upon a variable interest rate from the counterparties (weighted average of 0.16% as of October 31, 2014 and 0.17% as of October 31, 2013) and paid interest based upon a fixed interest rate (weighted average of 0.75% as of October 31, 2014 and 0.75% as of October 31, 2013). Losses reclassified to earnings under these contracts were $0.9 million, $0.8 million and $0.9 million for the twelve months ended October 31, 2014, 2013 and 2012, respectively. These losses were recorded within the consolidated statements of income as interest expense, net. The fair value of these contracts was $0.2 million and $0.9 million recorded in accumulated other comprehensive income as of October 31, 2014 and 2013, respectively. Foreign Exchange Hedges The Company conducts business in various international currencies and is subject to risks associated with changing foreign exchange rates. Accordingly, on a limited basis, the Company enters into various contracts that change in value as foreign exchange rates change to protect the value of certain existing foreign currency assets and liabilities, commitments and anticipated foreign currency cash flows. The Company’s objective is to reduce volatility associated with foreign exchange rate changes. As of October 31, 2014, the Company had outstanding foreign currency forward contracts in the notional amount of $122.4 million ($137.6 million as of October 31, 2013). At October 31, 2014, these derivative instruments were designated and qualified as fair value hedges. Adjustments to fair value for fair value hedges are recognized in earnings, offsetting the impact of the hedged item. The assumptions used in measuring fair value of foreign exchange hedges are considered level 2 inputs, which were based on observable market pricing for similar instruments, principally foreign exchange futures contracts. Gains recorded under fair value contracts were immaterial for the twelve months ended October 31, 2013. Losses recorded under fair value contracts were $6.2 million and $1.6 million for the twelve months ended October 31, 2014 and 2012, respectively. During 2012, some derivative instruments were designated and qualified as cash flow hedges. Accordingly, the effective portion of the gain or loss on these derivative instruments was previously reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affected earnings. Gains reclassified to earnings for hedging contracts qualifying as cash flow hedges were immaterial for the twelve months ended October 31, 2012. These gains were recorded within the consolidated statements of income as other (income) expense, net. The change in fair value of these contracts resulted in an immaterial gain recorded in accumulated other comprehensive income as of October 31, 2012. The ineffective portion of the gain or loss on the derivative instrument was previously recognized in earnings immediately. Energy Hedges The Company is exposed to changes in the price of certain commodities. Accordingly, on a limited basis, the Company may enter into derivative contracts to manage the price risk associated with certain of these forecasted purchases. The Company’s objective is to reduce volatility associated with forecasted purchases of these commodities to allow management of the Company to focus its attention on business operations. There were no energy hedges in effect as of October 31, 2014 or October 31, 2013. Other Financial Instruments The fair values of the Company’s Amended Credit Agreement and the Amended Receivables Facility do not materially differ from carrying value as the Company’s cost of borrowing is variable and approximates current borrowing rates. The fair values of the Company’s long-term obligations are estimated based on either the quoted market prices for the same or similar issues or the current interest rates offered for the debt of the same remaining maturities, which are considered level 2 inputs in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures.” The following table presents the estimated fair values for the Company’s Senior Notes, Assets held by special purpose entities and Insurance annuity (Dollars in millions):
|  | October 31, 2014 |  |  | October 31, 2013 |
Senior Notes due 2017 Estimated fair value |  | $ | 325.5 |  |  | $ | 334.5 |
Senior Notes due 2019 Estimated fair value |  |  | 287.5 |  |  |  | 289.9 |
Senior Notes due 2021 Estimated fair value |  |  | 297.7 |  |  |  | 317.9 |
Assets held by special purpose entities Estimated fair value |  |  | 54.5 |  |  |  | 50.1 |
Insurance annuity Estimated Fair Value |  |  | 22.6 |  |  |  | 24.0 |
Pension Plan Assets On an annual basis we compare the asset holdings of our pension plan to targets established by the Company. The pension plan assets are categorized as either equity securities, debt securities, fixed income securities, insurance annuities, or other assets, which are considered level 1, level 2 and level 3 fair value measurements. The typical asset holdings include:
• |  | Common stock: Valued based on quoted prices and are primarily exchange-traded.
• |  | Mutual funds: Valued at the Net Asset Value “NAV” available daily in an observable market.
• |  | Common collective trusts: Unit value calculated based on the observable NAV of the underlying investment.
• |  | Pooled separate accounts: Unit value calculated based on the observable NAV of the underlying investment.
• |  | Government and corporate debt securities: Valued based on readily available inputs such as yield or price of bonds of comparable quality, coupon, maturity and type.
• |  | Insurance Annuity: Value is derived based on the value of the corresponding liability.
Non-Recurring Fair Value Measurements Long-Lived Assets The following table is a summary of losses as a result of the Company measuring long-lived assets at fair value on a non-recurring basis during the years ended October 31, 2014, 2013, and 2012, all of which were valued using Level 3 inputs.
|  | 2014 |  |  | 2013 |  |  | 2012 |
Long-lived assets held and used |  | $ | 14.1 |  |  | $ | 27.4 |  |  | $ | 3.0 |
Long-lived assets held for sale or disposal |  |  | 21.4 |  |  |  | 4.0 |  |  |  | 10.2 |
Total |  | $ | 35.5 |  |  | $ | 31.4 |  |  | $ | 13.2 |
The Company may close manufacturing facilities during the next few years as part of restructuring plans to rationalize costs and realize benefits of synergies. The assumptions used in measuring fair value of long-lived assets are considered level 3 inputs, which include bids received from third parties, recent purchase offers, market comparable information and discounted cash flows based on assumptions that market participants would use. During the year ended October 31, 2014, the Company wrote down long-lived assets with a carrying value of $58.0 million to a fair value of $22.5 million, resulting in recognized asset impairment charges of properties, plants and equipment of $35.5 million, consisting of: $11.5 million for assets in the Rigid Industrial Packaging & Services segment related to the third quarter 2014 impairment of assets to be sold for a loss in the fourth quarter of 2014, underutilized and damaged equipment, and unutilized facilities in Europe; and $24.0 million for assets in Flexible Products & Services segment related to underutilized equipment and the shutdown of the fabric hub in the Kingdom of Saudi Arabia. The impairment charges in the Flexible Products & Services segment included $15.7 million related to assets valued on the basis of their highest and best use. During the year ended October 31, 2013, the Company wrote down long-lived assets with a carrying value of $84.2 million to a fair value of $52.8 million, resulting in recognized asset impairment charges of properties, plants, and equipment of $31.4 million, consisting of: $1.6 million for assets in the Paper Packaging segment primarily for assets under contract to be sold; $18.8 million for assets in the Rigid Industrial Packaging & Services segment related to loss making facilities, underutilized and damaged equipment, and unutilized facilities in Europe; and $11.0 million for assets in Flexible Products & Services segment related to underutilized equipment which was valued on the basis of their highest and best use. During the year ended October 31, 2012, the Company wrote down long-lived assets with a carrying value of $27.4 million to a fair value of $14.2 million, resulting in recognized asset impairment charges of $13.2 million, consisting of: $7.2 million for assets in the Flexible Products & Services segment primarily related to restructuring activities; $3.5 million for assets in the Rigid Industrial Packaging & Services segment primarily related to restructuring activities and underutilized equipment; and $2.5 million for assets in the Paper Packaging segment related to asset groups under contract to be sold. Assets and Liabilities Held for Sale The assumptions used in measuring fair value of assets and liabilities held for sale are considered level 3 inputs, which include recent purchase offers, market comparables and/or data obtained from commercial real estate brokers. During the year ended October 31, 2014, the Company has not recorded additional impairment related to assets which were previously classified as held for sale. During the year ended October 31, 2013, the Company recorded no impairment related to assets which were previously classified as held for sale. Goodwill and Indefinite-Lived Intangibles On an annual basis or when events or circumstances indicate impairment may have occurred, the Company performs impairment tests for goodwill and intangibles as defined under ASC 350, “Intangibles-Goodwill and Other.” As of October 31, 2014, the Company concluded that the carrying amount of the Flexible Products & Services reporting unit exceeded the fair value of the Flexible Products & Services reporting unit and the goodwill of $50.3 million on the Flexible Products & Services reporting unit as of October 31, 2014 was fully impaired. See Note 6 for additional information. The Company concluded that no impairment existed as of October 31, 2013 and 2012. Additional fair value disclosures The Company presents additional fair value disclosures in Note 13 to these Consolidated Financial Statements.

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