DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Apr. 30, 2011

Derivative Instruments and Hedging Activities [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 15 - DERIVATIVE FINANCIAL INSTRUMENTS

     The Company manages certain financial exposures through a risk management program that includes the use of foreign exchange derivative and nonderivative financial instruments. Derivatives are executed with counterparties with a minimum credit rating of “A” by Standard & Poor’s and Moody’s Investor Services, in accordance with the Company’s policies. The Company does not utilize derivative instruments for trading or speculative purposes.

Foreign Exchange Related:

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 currency 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 entered into during the three and nine months ended April 30, 2011 was $651,343 and $1,675,952, respectively. The notional amount of foreign currency forward contracts outstanding as of April 30, 2011 was $265,677.

b. Net Investment Hedges

The Company uses a Japanese Yen (“JPY”) loan outstanding to hedge its equity of the same amount in a Japanese wholly owned subsidiary. The hedge of net investment consists of a JPY 9 billion loan. 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.

Interest Rate Related:

As of April 30, 2011, there are no existing interest rate related derivatives.

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

	Asset Derivatives			Liability Derivatives
April 30, 2011	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Not applicable (“NA”)
Derivatives not designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	1,646	Other current liabilities	$	1,952
Total derivatives		$	1,646		$	1,952
Nonderivative instruments designated as hedging instruments
Net investment hedge				Long-term debt, net of
				current portion	$	110,376

	Asset Derivatives			Liability Derivatives
July 31, 2010	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
N/A
Derivatives not designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	2,166	Other current liabilities	$	555
Total derivatives		$	2,166		$	555
Nonderivative instruments designated as hedging instruments
Net investment hedge				Long-term debt, net of
				current portion	$	104,166

     The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments for the three and nine months ended April 30, 2011 and April 30, 2010 are presented as follows:

					Location of Gain
	Amount of Gain				or (Loss)
	Recognized in Other				Reclassified from
	Comprehensive Income				Accumulated	Amount of Loss Reclassified from
	(“OCI”) on Derivatives				OCI into	Accumulated OCI into Earnings
	(Effective Portion)				Earnings	(Effective Portion) (a)
	Three Months Ended				(Effective	Three Months Ended
	Apr. 30, 2011		Apr. 30, 2010		Portion)	Apr. 30, 2011		Apr. 30, 2010
Derivatives in cash flow
hedging relationships
Interest rate swap contract	$	N/A	$	178	Interest expense	$	N/A	$	(272	)

 

(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 three months ended April 30, 2010.

					Location of Gain
					or (Loss)
	Amount of Gain				Reclassified from
	Recognized in OCI on				Accumulated	Amount of Loss Reclassified from
	Derivatives				OCI into	Accumulated OCI into Earnings
	(Effective Portion)				Earnings	(Effective Portion) (b)
	Nine Months Ended				(Effective	Nine Months Ended
	Apr. 30, 2011		Apr. 30, 2010		Portion)	Apr. 30, 2011		Apr. 30, 2010
Derivatives in cash flow
hedging relationships
Interest rate swap contract	$	N/A	$	345	Interest expense	$	N/A	$	(744	)

 

(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 nine months ended April 30, 2010.

     The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments for the three and nine months ended April 30, 2011 and April 30, 2010 are presented as follows:

		Amount of Gain or (Loss) Recognized in
		Earnings on Derivatives
		Three Months						Nine Months
		Ended						Ended
	Location of Gain or (Loss) Recognized	Apr. 30,			Apr. 30,			Apr. 30,			Apr. 30,
	in Earnings on Derivatives	2011			2010			2011			2010
Derivatives not designated as
hedging relationships
Foreign exchange forward contracts	Selling, general and
	administrative expenses	$	(7,527	)	$	(2,689	)	$	(11,877	)	$	(4,779	)

The amounts of the gains and losses related to the Company’s nonderivative financial instruments designated as hedging instruments for the three and nine months ended April 30, 2011 and April 30, 2010 are presented as follows:

					Location of Gain or
					(Loss) Reclassified
	Amount of Gain or (Loss)				from Accumulated	Amount of Gain or (Loss) Reclassified from
	Recognized in OCI on Derivatives				OCI into Earnings	Accumulated OCI into Earnings
	(Effective Portion)				(Effective Portion)	(Effective Portion) (c)
	Three Months Ended					Three Months Ended
	Apr. 30, 2011		Apr. 30, 2010			Apr. 30, 2011		Apr. 30, 2010
Nonderivatives
designated as hedging
relationships
Net investment hedge	$	(506 )	$	2,500	N/A	$	–	$	–

(c)       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 three months ended April 30, 2011 and April 30, 2010.

							Location of Gain or
							(Loss) Reclassified
	Amount of Gain or (Loss)						from Accumulated	Amount of Gain or (Loss) Reclassified from
	Recognized in OCI on Derivatives						OCI into Earnings	Accumulated OCI into Earnings
	(Effective Portion)						(Effective Portion)	(Effective Portion) (d)
	Nine Months Ended							Nine Months Ended
	Apr. 30, 2011			Apr. 30, 2010				Apr. 30, 2011		Apr. 30, 2010
Nonderivatives
designated as hedging
relationships
Net investment hedge	$	(3,974	)	$	(443	)	N/A	$	–	$	–

(d)      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 nine months ended April 30, 2011 and April 30, 2010.