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FAIR VALUE MEASUREMENTS
 12 Months Ended
Oct. 31, 2012
FINANCIAL INSTRUMENTS [Abstract]  
FINANCIAL INSTRUMENTS

5. FAIR VALUE MEASUREMENTS

 

The carrying amounts for cash and cash equivalents approximate their fair values due to the short maturity of these instruments and meet the Level 1 criteria of the three-tier fair value hierarchy discussed below. The carrying amount of short-term debt approximates fair value due to the variable rate of the interest and the short term nature of the instrument. Accordingly, the fair value is based on an internally developed model using current interest rate data for similar issues and there is no active markets for this type of facility and meets the Level 2 criteria of the three-tier fair value hierarchy discussed below.

 

Derivative instruments are reported in the accompanying consolidated financial statements at fair value. We have derivative financial instruments in the form of foreign currency forward exchange contracts as described in Note 1 of Notes to Consolidated Financial Statements in which the U.S. Dollar equivalent notional amount of these contracts was $107.3 million and $126.4 million at October 31, 2012 and 2011, respectively. The fair value of Derivative Assets recorded on our Consolidated Balance Sheets at October 31, 2012 and 2011 was $708,000 and $1.2 million, respectively. The fair value of Derivative Liabilities recorded on our Consolidated Balance Sheets at October 31, 2012 and 2011 was $569,000 and $1.6 million, respectively.

 

The fair value of the foreign currency forward exchange contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility. The counterparty to the forward exchange contract is a substantial and creditworthy financial institution. We do not consider either the risk of counterparty non-performance or the economic consequences of counterparty non-performance as material risks.

 

FASB fair value guidance established a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exist, therefore requiring an entity to develop its own assumptions.

 

In accordance with this guidance, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value as of October 31, 2012 (in thousands):

 

    Assets     Liabilities  
    October 31,     October 31,     October 31,     October 31,  
    2012     2011     2012     2011  
Level 1                                
Deferred compensation   $ 861     $ 741     $ -     $ -  
                                 
Level 2                                
Derivatives   $ 708     $ 1,197     $ 569     $ 1,609  

 

Included in Level 1 assets are mutual fund investments under a nonqualified deferred compensation plan. We estimate the fair value of these investments on a recurring basis using market prices which are readily available. Included as Level 2 fair value measurements are derivative assets and liabilities related to gains and losses on foreign currency forward exchange contracts entered into with a third party. We estimate the fair value of these derivatives on a recurring basis using foreign currency exchange rates obtained from active markets.

 

During fiscal 2012, we did not have any significant non-recurring measurements of nonfinancial assets and nonfinancial liabilities.