Auction Rate Securities

12 Months Ended

Oct. 31, 2012

Auction Rate Securities

6. AUCTION RATE SECURITIES

As of October 31, 2012, the Company holds investments in auction rate securities from four different issuers having an original principal amount of $5.0 million each (aggregating $20.0 million). These auction rate securities are debt instruments with stated maturities ranging from 2033 to 2050, for which the interest rate is designed to be reset through Dutch auctions approximately every 30 days. Auctions for these securities have not occurred since August 2007. At October 31, 2012 and 2011, the estimated fair value of these securities, in total, was approximately $17.8 million and $15.7 million, respectively.

As of October 31, 2012, two of the Company’s auction rate securities, with an aggregate fair value of $7.8 million, were in a continuous unrealized loss position for less than twelve months and the remaining two auction rate securities, with a fair value of $10.0 million, were not in an unrealized loss position. As of October 31, 2011, three of the Company’s auction rate securities, with an aggregate fair value of $10.7 million, were in a continuous unrealized loss position for more than twelve months, and the remaining auction rate security, with a fair value of $5.0 million, was not in an unrealized loss position.

The following table presents the significant assumptions used to determine the fair value of the Company’s auction rate securities at October 31, 2012 and 2011:

Assumption	October 31, 2012	October 31, 2011
Discount rates	L + 1.37% - L + 6.86%	L + 3.21% - L + 17.50%
Yields	2.15%, L + 2.00% - L + 3.50%	L + 2.00% - L + 3.50%
Average expected lives	4 - 10 years	4 - 10 years

L - One Month LIBOR

The fair value of the auction rate securities is affected most significantly by the changes in the average expected lives of the securities, but is also impacted by the specific discount rate used to adjust the outcomes to their present values. If the average expected lives of the securities increase or decrease, the fair value of the securities will decrease or increase accordingly, in amounts that will vary, based on the timing of the projected cash flows and the specific discount rate used to calculate the present value of the expected cash flows.

During the year ended October 31, 2012, the Company recorded an other than temporary impairment (“OTTI”) credit loss of $0.3 million for one of its auction rate securities, driven primarily from a change in the expected values of cash flows to be received in the future.

The following tables present the changes in the cost basis and fair value of the Company’s auction rate securities for the years ended October 31, 2012 and 2011:

(in thousands)	Cost Basis			Fair Value (Level 3)
Balance at November 1, 2011	$	18,307		$	15,670
Unrealized gains included in accumulated other comprehensive loss		—			2,110
Other-than-temporary credit loss recognized in earnings		(313	)		—
Balance at October 31, 2012	$	17,994		$	17,780
(in thousands)	Cost Basis			Fair Value (Level 3)
Balance at November 1, 2010	$	23,307		$	20,171
Unrealized gains included in accumulated other comprehensive loss		—			499
Redemption of security by issuer		(5,000	)		(5,000	)
Balance at October 31, 2011	$	18,307		$	15,670

At October 31, 2012 and 2011, unrealized losses of $0.2 million ($0.1 million net of tax) and $2.6 million ($1.6 million net of tax) were recorded in accumulated other comprehensive loss, respectively.