FINANCIAL INSTRUMENTS AND RISKS & UNCERTAINTIES

12 Months Ended

Jul. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FINANCIAL INSTRUMENTS AND RISKS AND UNCERTAINTIES

FINANCIAL INSTRUMENTS AND RISKS & UNCERTAINTIES

The Company manages certain financial exposures through a risk management program that includes the use of foreign exchange derivative financial instruments. Derivatives are executed with counterparties with a minimum credit rating of “A” by Standard & Poors and Moody’s Investor Services, in accordance with the Company’s policies. The Company does not utilize derivative instruments for trading or speculative purposes. As of July 31, 2013, the Company had foreign currency forward contracts outstanding with notional amounts aggregating $414,981, whose fair values were a net asset of $2,765.

Foreign Exchange

a. Derivatives Not Designated as Hedging Instruments

The risk management objective of holding foreign exchange derivatives is to mitigate volatility to earnings and cash flows due to changes in foreign exchange rates. The Company and its subsidiaries conduct transactions in currencies other than their functional currencies. These transactions include non-functional intercompany and external sales as well as intercompany and external purchases. The Company uses foreign exchange forward contracts, matching the notional amounts and durations of the receivables and payables resulting from the aforementioned underlying foreign currency transactions, to mitigate the exposure to earnings and cash flows caused by the changes in fair value of these receivables and payables from fluctuating foreign exchange rates. The notional amount of foreign currency forward contracts not designated as hedging instruments entered into during the twelve months ended July 31, 2013 and July 31, 2012 was $2,414,999 and $2,781,113, respectively. The notional amount of foreign currency forward contracts outstanding not designated as hedging instruments as of July 31, 2013 was $316,660.

b. Cash Flow Hedges

The Company uses foreign exchange forward contracts for cash flow hedging on its future transactional exposure to the Euro due to changes in market rates to exchange Euros for British Pounds. The hedges cover a British subsidiary (British Pound functional) with Euro revenues and a Swiss subsidiary (Euro functional) with British Pound expenses. The probability of the occurrence of these transactions is high and our assessment is based on observable facts including the frequency and amounts of similar past transactions. The objective of the cash flow hedges is to lock the British Pound equivalent amount of Euro sales for the British subsidiary and the Euro equivalent amount of British Pound expenses for the Swiss subsidiary at the agreed upon exchange rates in the foreign exchange forward contracts. The notional amount of foreign currency forward contracts outstanding designated as hedging instruments as of July 31, 2013 was $98,321 and cover certain monthly transactional exposures through July 2014. The notional amount of foreign currency forward contracts outstanding designated as hedging instruments as of July 31, 2012 was $77,557 and covered certain monthly transactional exposures through July 2013.

c. Net Investment Hedges

The risk management objective of designating the Company’s foreign currency loan as a hedge of a portion of its net investment in a wholly owned Japanese subsidiary is to mitigate the change in the fair value of the Company’s net investment due to changes in foreign exchange rates. The Company uses a JPY loan outstanding to hedge its equity of the same amount in the Japanese wholly owned subsidiary. The hedge of net investment consists of a JPY 9 billion loan.

Interest Rates

At July 31, 2013 and July 31, 2012, there were no interest rate related derivatives.

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives			Liability Derivatives
July 31, 2013	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	—	Other current liabilities	$	1,941
Derivatives not designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	301	Other current liabilities	$	1,125
Total derivatives		$	301		$	3,066
Nonderivative instruments designated as hedging instruments
Net investment hedge				Long-term debt, net of current portion	$	91,800

	Asset Derivatives			Liability Derivatives
July 31, 2012	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	270	Other current liabilities	$	—
Derivatives not designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	3,508	Other current liabilities	$	1,457
Total derivatives		$	3,778		$	1,457
Nonderivative instruments designated as hedging instruments
Net investment hedge				Long-term debt, net of current portion	$	115,129

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments for the years ended July 31, 2013 and July 31, 2012 are presented as follows:

	Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)					Location of Loss Reclassified from Accumulated OCI into Earnings	Amount of Loss Reclassified from Accumulated OCI into Earnings (Effective Portion) (a)
	Jul. 31, 2013			Jul. 31, 2012		(Effective Portion)	Jul. 31, 2013			Jul. 31, 2012
Derivatives in cash flow hedging relationships
Foreign exchange forward contracts	$	(2,572	)	$	270	Sales	$	(1,444	)	$	—
						Cost of sales	$	(1,811	)	$	—
	$	(2,572	)	$	270		$	(3,255	)	$	—

(a) There were no gains or losses recognized in earnings related to the ineffective portion of the hedging relationship or related to the amount excluded from the assessment of hedge effectiveness for the twelve months ended July 31, 2013 and July 31, 2012.

The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments for the years ended July 31, 2013 and July 31, 2012 are presented as follows:

	Location of Loss Recognized in Earnings on Derivatives	Amount of Gain/(Loss) Recognized in Earnings on Derivatives
		Jul. 31, 2013			Jul. 31, 2012
Derivatives not designated as hedging relationships
Foreign exchange forward contracts	Selling, general and administrative expenses	$	(15,897	)	$	12,545

The amounts of the gains and losses related to the Company’s nonderivative financial instruments designated as hedging instruments for the years ended July 31, 2013 and July 31, 2012 are presented as follows:

	Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)				Location of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)(b)
	Jul. 31, 2013		Jul. 31, 2012			Jul. 31, 2013		Jul. 31, 2012
Nonderivatives designated as hedging relationships
Net investment hedge	$	14,930	$	432	N/A	$	—	$	—

(b) There were no gains or losses recognized in earnings related to the ineffective portion of the hedging relationship or related to the amount excluded from the assessment of hedge effectiveness for the years ended July 31, 2013 and July 31, 2012.

The credit risk related to the foreign exchange forwards is considered low because such instruments are entered into only with financial institutions having high credit ratings and are generally settled on a net basis.

The Company’s cash and cash equivalents are in high-quality securities placed with a wide array of financial institutions with high credit ratings limiting the Company’s exposure to concentration of credit risks.

The Company’s products are sold to a diverse group of customers throughout the world. The Company is subject to certain risks and uncertainties as a result of changes in general economic conditions, sources of supply, competition, foreign exchange rates, tax regulatory changes, litigation and other regulatory developments. Management believes the diversity and breadth of the Company’s products, markets served and geographic operations mitigate the risk that adverse changes in any one area would materially affect the Company’s financial position. Additionally, as a result of the diversity of its customer base, the Company does not consider itself exposed to concentration of credit risks. These customer risks are further minimized by placing credit limits, ongoing monitoring of customers’ account balances, and assessment of customers’ financial strength.