Fair value measurements of financial instruments are reported in one of three levels based on the lowest level of significant input used. For Level 1, inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities. For Level 2, inputs to the fair value measurement include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. For Level 3, inputs to the fair value measurement are unobservable inputs or valuation techniques.

At July 31, 2020 and 2019, the carrying values of cash and cash equivalents, accounts receivables, short-term borrowings and trade accounts payable approximate fair value because of the short-term nature of these instruments. These investments are classified as Level 1 in the fair value hierarchy, except for certain cash and cash equivalents as discussed below.

As of July 31, 2020, the estimated fair value of long-term debt with fixed interest rates was $297.3 million compared to its carrying value of $275.0 million. As of July 31, 2019, the estimated fair value of long-term debt with fixed interest rates was $281.5 million compared to its carrying value of $275.0 million.

The carrying values of long-term debt with variable interest rates of $344.3 million and $310.9 million as of July 31, 2020 and 2019, respectively, approximate fair value. The fair value is estimated by discounting the projected cash flows using the rate at which similar amounts of debt could currently be borrowed. Long-term debt is classified as Level 2 in the fair value hierarchy.

The fair values of the Company’s financial assets and liabilities listed below reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price). The fair values are based on inputs other than quoted prices that are observable for the asset or liability, and therefore are classified as Level 2 in the fair value hierarchy. These inputs include foreign currency exchange rates and interest rates. The financial assets and liabilities are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and currency rates.

Derivative Fair Value Measurements The Company enters into derivative instrument agreements, including forward foreign currency exchange contracts and net investment hedges, to manage risk in connection with changes in foreign currency. The Company only enters into derivative instrument agreements with counterparties who have highly rated credit. The Company does not enter into derivative contracts for trading or speculative purposes.

Forward Foreign Currency Exchange Contracts The Company uses forward currency exchange contracts to manage exposure to fluctuations in foreign currency. The Company enters into certain purchase commitments with foreign suppliers based on the value of its purchasing subsidiaries’ local currency relative to the currency’s requirement of the supplier on the date of the commitment. The Company also sells into foreign countries based on the value of purchaser’s local currency. The Company mitigates risk through using forward currency contracts that generally mature in 12 months or less, which is consistent with the related purchases and sales. Contracts that qualify for hedge accounting are designated as cash flow hedges.

Net Investment Hedges The Company uses fixed-to-fixed cross-currency swap agreements, which mature in July 2029, to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe. The Company has elected the spot method of designating these contracts.

The Company determines the fair values of its derivatives based on valuation models which project future cash flows and discount the future amounts to a present value using market based observable inputs including foreign currency rates, interest rate curves, futures and basis spreads, as applicable.

The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the Consolidated Balance Sheets as of July 31, 2020 and 2019 (in millions):


					Fair Values of Significant Other Observable Inputs (Level 2)
	Notional Amounts						Assets							Liabilities⁽¹⁾
	July 31,						July 31,							July 31,
	2020		2019		2020		2019			2020		2019
Forward foreign currency exchange contracts	$	26.2	$	28.2	$	2.1	$	1.6	⁽²⁾	$	(1.4)	$	(1.8)
Net investment hedge	55.8		55.8		1.2		1.1		⁽³⁾	—		(1.9)
Total	$	82.0	$	84.0	$	3.3	$	2.7		$	(1.4)	$	(3.7)

(1)Amounts of $3.2 million and of $0.1 million, respectively, are recorded within prepaid expenses and other current assets, and in other long-term assets, in the Company’s Consolidated Balance Sheets as of July 31, 2020. Amount of $2.7 million is recorded within prepaid expenses and other current assets in the Company’s Consolidated Balance Sheets as of July 31, 2019.

Changes in the fair value of the Company’s forward foreign currency exchange contracts are recorded in equity as a component of accumulated other comprehensive income (loss), and are reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s Consolidated Statements of Earnings and Consolidated Statements of Comprehensive Income (Loss). The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses as a component of accumulated other comprehensive income (loss) on the Company’s Consolidated Balance Sheets. The interest earned is reclassified out of accumulated other comprehensive income (loss) and into other income, net on the Company’s Consolidated Statements of Earnings.

Credit Risk Related Contingent Features Contract provisions may require the posting of collateral or settlement of the contracts for various reasons, including if the Company’s credit ratings are downgraded below its investment grade credit rating by any of the major credit agencies or for cross default contractual provisions if there was a failure under other financing arrangements related to payment terms or covenants. As of July 31, 2020 and 2019, no collateral has been posted.

Counterparty Credit Risk There is risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors.

The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts and net investment hedges (in millions):


	Pre-tax Gains (Losses) Recognized in Accumulated Other Comprehensive Income (Loss):
	Year Ended July 31,
	2020		2019		2018
Forward foreign currency exchange contracts	$	(1.4)	$	0.2	$	3.2
Net investment hedge	2.0		(0.8)		—


	Pre-tax (Gains) Losses Reclassified from Accumulated Other Comprehensive Income (Loss):
	Year Ended July 31,
	2020		2019		2018
Forward foreign currency exchange contracts	$	1.0	$	0.1	$	0.2
Net investment hedge	—		—		—

The Company expects that substantially all of the amounts recorded in accumulated other comprehensive income (loss) for its forward foreign currency exchange contracts recorded within the Company’s Consolidated Balance Sheet will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and sales. See Note 15 for additional information on accumulated other comprehensive loss.

The Company holds equity method investments, which are classified in other long-term assets in the accompanying Consolidated Balance Sheets. The aggregate carrying amount of these investments was $21.7 million and $23.0 million as of July 31, 2020 and 2019, respectively. These equity method investments are measured at fair value on a nonrecurring basis. The fair value of the Company’s equity method investments has not been estimated as there have been no identified events or changes in circumstance that would have had an adverse impact on the value of these investments. In the event that these investments were required to be measured, they would fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value, as the investments are in privately-held entities.