DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 Months Ended

Apr. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company manages certain financial exposures through a risk management program that includes the use of foreign exchange and interest rate 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.

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 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, 2013 was $643,813 and $1,867,299. The notional amount of foreign currency forward contracts outstanding as of April 30, 2013, including the cash flow hedges discussed below, was $353,589.

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 the Company’s 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 as of April 30, 2013 was $63,968 and covers certain monthly transactional exposures through February 2014.

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 Rate Related:

As of April 30, 2013, 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, 2013	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	165	Other current liabilities	$	1,433
Derivatives not designated as hedging instruments
Foreign exchange forward contracts	Other current assets	$	2,372	Other current liabilities	$	591
Total derivatives		$	2,537		$	2,024
Nonderivative instruments designated as hedging instruments
Net investment hedge				Long-term debt, net of current portion	$	92,070

	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 three and nine months ended April 30, 2013 and April 30, 2012 are presented as follows:

	Amount of Gain or (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) (a)
	Three Months Ended					Three Months Ended
	Apr 30, 2013		Apr 30, 2012			Apr 30, 2013			Apr 30, 2012
Derivatives in cash flow hedging relationships
Foreign exchange forward contracts	$	1,548	$	—	Net sales	$	(615	)	$	—
					Cost of sales	(537		)	—
Total derivatives	$	1,548	$	—		$	(1,152	)	$	—

	Amount of Gain or (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) (a)
	Nine Months Ended						Nine Months Ended
	Apr 30, 2013			Apr 30, 2012			Apr 30, 2013			Apr 30, 2012
Derivatives in cash flow hedging relationships
Foreign exchange forward contracts	$	(2,229	)	$	—	Net sales	$	(1,002	)	$	—
						Cost of sales	(707		)	—
Total derivatives	$	(2,229	)	$	—		$	(1,709	)	$	—

(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 and nine months ended April 30, 2013 and April 30, 2012.

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, 2013 and April 30, 2012 are presented as follows:

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended					Nine Months Ended
	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Apr 30, 2013			Apr 30, 2012		Apr 30, 2013			Apr 30, 2012
Derivatives not designated as hedging relationships
Foreign exchange forward contracts	Selling, general and administrative expenses	$	(5,206	)	$	1,836	$	(15,032	)	$	7,998

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, 2013 and April 30, 2012 are presented as follows:

	Amount of Gain or (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)
	Three Months Ended					Three Months Ended
	Apr 30, 2013		Apr 30, 2012			Apr 30, 2013		Apr 30, 2012
Nonderivatives designated as hedging relationships
Net investment hedge	$	4,320	$	3,688	N/A	$	—	$	—

	Amount of Gain or (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)
	Nine Months Ended					Nine Months Ended
	Apr 30, 2013		Apr 30, 2012			Apr 30, 2013		Apr 30, 2012
Nonderivatives designated as hedging relationships
Net investment hedge	$	14,757	$	2,352	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 three and nine months ended April 30, 2013 and April 30, 2012.