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Financial Instruments and Fair Value Measurements | 9 Months Ended
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Jul. 31, 2015
Fair Value Disclosures [Abstract] |
Financial Instruments and Fair Value Measurements | NOTE 10 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Financial Instruments The Company uses derivatives to mitigate partially the effect of exposure to interest rate movements, exposure to currency translation. 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. ASC 820, “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements for financial and non-financial assets and liabilities. Additionally, this guidance established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:
| • |  | Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets and liabilities.
| • |  | Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities.
| • |  | Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.
Recurring Fair Value Measurements The following table presents the fair value for those assets and (liabilities) measured on a recurring basis as of July 31, 2015 and October 31, 2014 (Dollars in millions):
|  | July 31, 2015 |  |  | Balance sheet
|  | Fair Value Measurement |  |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Location
Foreign exchange hedges |  |  | — |  |  |  | 0.8 |  |  |  | — |  |  |  | 0.8 |  |  | Prepaid expenses and other current assets
Foreign exchange hedges |  |  | — |  |  |  | (0.5 | ) |  |  | — |  |  |  | (0.5 | ) |  | Other current liabilities
Insurance annuity |  |  | — |  |  |  | — |  |  |  | 19.6 |  |  |  | 19.6 |  |  | Other long-term assets
Total* |  | $ | — |  |  | $ | 0.3 |  |  | $ | 19.6 |  |  | $ | 19.9 |  |  |
|  | October 31, 2014 |  |  | Balance sheet Location
|  | Fair Value Measurement |  |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |
Interest rate derivatives |  | $ | — |  |  | $ | (0.2 | ) |  | $ | — |  |  | $ | (0.2 | ) |  | Other long-term liabilities
Foreign exchange hedges |  |  | — |  |  |  | 0.6 |  |  |  | — |  |  |  | 0.6 |  |  | Prepaid expenses and other current assets
Foreign exchange hedges |  |  | — |  |  |  | (0.2 | ) |  |  | — |  |  |  | (0.2 | ) |  | Other current liabilities
Insurance annuity |  |  | — |  |  |  | — |  |  |  | 22.6 |  |  |  | 22.6 |  |  | Other long-term assets
Total* |  | $ | — |  |  | $ | 0.2 |  |  | $ | 22.6 |  |  | $ | 22.8 |  |  |
* | The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, current liabilities and short-term borrowings as of July 31, 2015 and October 31, 2014 approximate their fair values because of the short-term nature of these items and are not included in this table.
Interest Rate Derivatives As of July 31, 2015, the Company has no interest rate derivatives. Through December 2014, the Company had two interest rate derivatives (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 and paid interest based upon a fixed interest rate. The assumptions that were used in measuring fair value of the interest rate derivatives were considered level 2 inputs, which were based on interest from the counterparties based upon LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements. These derivative instruments were designated and qualified as cash flow hedges. Accordingly, the effective portion of the gain or loss on these derivative instruments was 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. The ineffective portion of the gain or loss on the derivative instrument was recognized in earnings immediately. Losses reclassified to earnings under these contracts were $0.2 million for the three months ended July 31, 2014 and were $0.2 million and $0.7 million for the nine months ended July 31, 2015 and 2014, respectively. These losses were recorded within the condensed consolidated statements of income as interest expense, net. The fair value of these contracts was $0.2 million recorded in accumulated other comprehensive income as of October 31, 2014. Foreign Exchange Hedges The Company conducts business in various international currencies and is subject to risks associated with changing foreign exchange rates. The Company’s objective is to reduce volatility associated with foreign exchange rate changes. Accordingly, 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. As of July 31, 2015, the Company had outstanding foreign currency forward contracts in the notional amount of $81.6 million ($122.4 million as of October 31, 2014). Adjustments to fair value 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 (losses) recorded under fair value contracts were $0.6 million and ($2.5) million for the three months ended July 31, 2015 and 2014, respectively; and were ($6.2) million and ($2.6) million for the nine months ended July 31, 2015 and 2014, respectively. 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 of the Company’s Senior Notes and the Assets held by special purpose entities (Dollars in millions):
|  | July 31, 2015 |  |  | October 31, 2014 |
Senior Notes due 2017 |  |  |  |  |  |  |  |
Estimated fair value |  | $ | 317.3 |  |  | $ | 325.5 |
Senior Notes due 2019 |  |  |  |  |  |  |  |
Estimated fair value |  |  | 278.1 |  |  |  | 287.5 |
Senior Notes due 2021 |  |  |  |  |  |  |  |
Estimated fair value |  |  | 260.7 |  |  |  | 297.7 |
Assets held by special purpose entities |  |  |  |  |  |  |  |
Estimated fair value |  |  | 54.4 |  |  |  | 54.5 |
Non-Recurring Fair Value Measurements Long-Lived Assets The Company recognized asset impairment charges of $17.6 million during the three months ended July 31, 2015 and $15.4 million for the three months ended July 31, 2014. As a result of the Company measuring long-lived assets at fair value on a non-recurring basis, during the three months ended July 31, 2015 these impairment charges included $15.0 million related to Venezuelan property, plants and equipment, net, $1.5 million of IT software assets that were identified as obsolete during the quarter and $0.5 million other-than-temporary impairment of an equity method investment within the Flexible Products & Services segment. During the three months ended July 31, 2014 the impairment charges included $5.0 million of IT software assets that were identified as obsolete during the quarter, impairment of $5.9 million related to an equity method investment within the Rigid Industrial Packaging & Services segment and $4.3 million of impairment charges related to plant closures and restructuring plans. The Company recognized asset impairment charges of $22.3 million and $15.6 million during the nine months ended July 31, 2015 and 2014, respectively. These charges during the nine months ended July 31, 2015 included $15.0 million of impairment charges related to Venezuelan properties, plants and equipment, net, $1.5 million of IT software assets that were identified as obsolete, $0.5 million other-than-temporary impairment of equity method investment within the Flexible Products & Services segment, and $4.2 million of impairment charges related to plant closures within the Rigid Industrial Packaging & Services segment. 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. The following table presents quantitative information about the significant unobservable inputs used to determine the fair value of the impairment of long-lived assets held and used for the nine months ended July 31, 2015.
|  | Fair Value of Impairment |  |  | Valuation Technique |  | Unobservable Input |  | Range of Input Values
|  | (in millions) |  |  |  |  |  |  |
July 31, 2015 |  |  |  |  |  |  |  |  |  |
Impairment of Long-lived assets - Land & Building |  | $ | 17.7 |  |  | Broker Quote/ Indicative Bids |  | Indicative Bids |  | N/A
Impairment of Long-lived assets - Machinery & Equipment |  | $ | 3.0 |  |  | Sales Value |  | Sales Value |  | N/A
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 nine month period ended July 31, 2015, the Company recorded no additional impairment related to assets which were previously classified as assets and liabilities held for sale. During the nine month period ended July 31, 2014, the Company recorded no impairment related to assets which were previously classified as assets and liabilities held for sale. Goodwill and Other Intangible Assets On an annual basis or whenever events or circumstances indicate impairment may have occurred, the Company performs impairment tests for goodwill and long lived intangible assets as defined under ASC 350, “Intangibles-Goodwill and Other.” The Company concluded that no such impairment existed as of July 31, 2015.

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