Fair Value of Financial Instruments

6 Months Ended

Jul. 31, 2014


8.	FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. U.S. GAAP prescribes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 1 inputs are considered to carry the most weight within the fair value hierarchy due to the low levels of judgment required in determining fair values.

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Unobservable inputs reflecting the reporting entity's own assumptions. Level 3 inputs are considered to carry the least weight within the fair value hierarchy due to substantial levels of judgment required in determining fair values.

The Company uses the market approach to measure fair value for its marketable securities and derivative instruments. The Company's foreign exchange forward contracts, as well as its put option contracts, are primarily valued using the appropriate foreign exchange spot rates. The Company's precious metal forward contracts are primarily valued using the relevant precious metal spot rate. For further information on the Company's hedging instruments and program, see "Note 7. Hedging Instruments."

Financial assets and liabilities carried at fair value at July 31, 2014 are classified in the table below in one of the three categories described above:



			Estimated Fair Value
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Marketable securities ^a	$	53,362	$	53,362	$	—	$	—	$	53,362
Derivatives designated as hedging instruments:
Precious metal forward contracts ^b	663		—		663		—		663
Foreign exchange forward contracts ^b	3,354		—		3,354		—		3,354
Total financial assets	$	57,379	$	53,362	$	4,017	$	—	$	57,379



			Estimated Fair Value
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Derivatives designated as hedging instruments:
Precious metal forward contracts ^c	$	241	$	—	$	241	$	—	$	241
Foreign exchange forward contracts ^c	226		—		226		—		226
Total financial liabilities	$	467	$	—	$	467	$	—	$	467

Financial assets and liabilities carried at fair value at July 31, 2013 are classified in the table below in one of the three categories described above:



			Estimated Fair Value
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Marketable securities ^a	$	49,343	$	49,343	$	—	$	—	$	49,343
Derivatives designated as hedging instruments:
Precious metal forward contracts ^b	212		—		212		—		212
Foreign exchange forward contracts ^b	18,744		—		18,744		—		18,744
Total financial assets	$	68,299	$	49,343	$	18,956	$	—	$	68,299



			Estimated Fair Value
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Total Fair Value
Derivatives designated as hedging instruments:
Precious metal forward contracts ^c	$	3,470	$	—	$	3,470	$	—	$	3,470
Foreign exchange forward contracts ^c	617		—		617		—		617
Total financial liabilities	$	4,087	$	—	$	4,087	$	—	$	4,087

aIncluded within Other assets, net.

bIncluded within Prepaid expenses and other current assets.

cIncluded within Accounts payable and accrued liabilities.

The fair value of derivatives not designated as hedging instruments was not significant in the periods ended July 31, 2014 and 2013. The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates carrying value due to the short-term maturities of these assets and liabilities and would be measured using Level 1 inputs. The fair value of debt with variable interest rates approximates carrying value and is measured using Level 2 inputs. The fair value of debt with fixed interest rates was determined using the quoted market prices of debt instruments with similar terms and maturities, which are considered Level 2 inputs. The total carrying value of short-term borrowings and long-term debt was $1,025,503,000 and $964,219,000 and the corresponding fair value was approximately $1,100,000,000 at both July 31, 2014 and 2013.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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