GUARANTEES AND WARRANTIES

9 Months Ended

Jul. 31, 2011

8.	GUARANTEES AND WARRANTIES

From time to time, our subsidiaries guarantee third party payment obligations in connection with the sale of machines to customers that use financing. We follow FASB guidance for accounting for contingencies with respect to these guarantees. As of July 31, 2011, we had 26 outstanding third party payment guarantees totaling approximately $1.5 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer has the risk of ownership. The customer does not obtain title, however, until it has paid for the machine. A retention of title clause allows us to recover the machine if the customer defaults on the financing. We accrue for potential liabilities under these guarantees when we believe a loss is probable and can be estimated.

We provide warranties on our products with respect to defects in material and workmanship. The terms of these warranties are generally one year for machines and shorter periods for service parts. We recognize a reserve with respect to this obligation at the time of product sale, with subsequent warranty claims recorded against the reserve. The amount of the warranty reserve is determined based on historical trend experience and any known warranty issues that could cause future warranty costs to differ from historical experience. The increased provision in the first nine months ended July 31, 2011 compared to the first nine months ended July 31, 2010 reflects the increased volume of sales and anticipated claims related to machines under warranty and the sale of a greater number of our higher performance machines which have a higher cost per claim. A reconciliation of the changes in our warranty reserve is as follows (in thousands):

	Nine months ended
	July 31, 2011			July 31, 2010
Balance, beginning of period	$	1,591		$	1,286
Provision for warranties during the period		2,224			1,285
Charges to the reserve		(2,061	)		(1,329	)
Impact of foreign currency translation		27			(59	)
Balance, end of period	$	1,781		$	1,183