12.

Financial instruments

We operate internationally and enter into intercompany transactions denominated in foreign currencies. Consequently, we are subject to market risk arising from exchange rate movements between the dates foreign currencies are recorded and the dates they are settled. We regularly use foreign currency forward contracts to reduce our risks related to most of these transactions. These contracts usually have maturities of 90 days or less and generally require us to exchange foreign currencies for U.S. dollars at maturity, at rates stated in the contracts. These contracts are not designated as hedging instruments. We do not use financial instruments for trading or speculative purposes.

Gains and losses on foreign currency forward contracts are recorded in “Other – net” on the Consolidated Statement of Income together with the transaction gain or loss from the hedged balance sheet position. For the three months ended July 31, 2014, we recognized losses of $285 on foreign currency forward contracts and gains of $267 from the change in fair value of balance sheet positions. For the three months ended July 31, 2013, we recognized losses of $1,313 on foreign currency forward contracts and gains of $1,402 from the change in fair value of balance sheet positions. For the nine months ended July 31, 2014, we recognized losses of $2,614 on foreign currency forward contracts and gains of $2,448 from the change in fair value of balance sheet positions. For the nine months ended July 31, 2013, we recognized losses of $1,887 on foreign currency forward contracts and losses of $571 from the change in fair value of balance sheet positions.

We had the following outstanding foreign currency forward contracts at July 31, 2014:


	Sell				Buy
	Notional Amounts		Fair Market Value		Notional Amounts		Fair Market Value
Euro	$	379,824	$	374,283	$	338,853	$	334,180
British pound		51,386		52,049		68,286		68,078
Japanese yen		15,667		15,477		9,161		9,068
Australian dollar		468		465		9,018		9,024
Hong Kong dollar		53,195		53,202		111,493		111,508
Singapore dollar		—		—		10,447		10,454
Others		4,330		4,263		26,626		26,162

Total	$	504,870	$	499,739	$	573,884	$	568,474

The carrying amounts and fair values of financial instruments at July 31, 2014, other than receivables and accounts payable, are shown in the table below. The carrying values of receivables and accounts payable approximate fair value due to the short-term nature of these instruments.


	Carrying Amount			Fair Value
Cash and cash equivalents	$	53,223		$	53,223
Notes payable		9,405			9,405
Long-term debt, including current maturities		623,113			624,973
Foreign currency forward contracts (net)		(278	)		(278	)

We used the following methods and assumptions in estimating the fair value of financial instruments:

•

Cash, cash equivalents and notes payable are valued at their carrying amounts due to the relatively short period to maturity of the instruments.

•

Long-term debt is valued by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy.

•

Foreign currency forward contracts are valued using observable market based inputs, which are considered to be Level 2 inputs under the fair value hierarchy.