Fair Value Measurements

9 Months Ended

Jul. 29, 2011

Fair Value Measurements

Fair Value Measurements

Fair Value Measurements

The company categorizes its assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair value measurements.  The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures.  The framework discusses valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost).  The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels.  Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs reflecting management’s assumptions about the inputs used in pricing the asset or liability.

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820). ASU No. 2010-06 requires new disclosures regarding activity in Level 3 fair value measurements, including information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The company adopted the provision of ASU No. 2010-06 for Level 3 fair-value measurements for its third fiscal quarter beginning on April 30, 2011, as required. The adoption of ASU No. 2010-06 for Level 3 fair value measurements did not have an impact on the company’s disclosures.

Cash and cash equivalents are valued at their carrying amounts in the consolidated balance sheets, which are reasonable estimates of their fair value due to their short maturities. Foreign currency forward exchange contracts are valued at fair market value using the market approach based on exchange rates as of the reporting date, which is the amount the company would receive or pay to terminate the contracts. The unfunded deferred compensation liability is primarily subject to changes in fixed-income investment contracts based on current yields. For accounts receivable and accounts payable, carrying amounts are a reasonable estimate of fair value given their short-term nature.

Assets and liabilities measured at fair value on a recurring basis, as of July 29, 2011, are summarized below:

(Dollars in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	118,113	$	118,113	—		—
Total Assets	$	118,113	$	118,113	—		—
Liabilities:
Foreign exchange contracts	$	4,173	—		$	4,173	—
Deferred compensation liabilities	4,477		—		4,477		—
Total Liabilities	$	8,650	—		$	8,650	—

Assets measured at fair value on a nonrecurring basis related to the company’s acquisitions of Lawn Solutions and Unique Lighting, as of July 29, 2011, are summarized below:

(Dollars in thousands)	Fair Value		Level 1	Level 2	Level 3		Valuation Technique
Assets:
Trade name	$	1,500	—	—	$	1,500	(a)
Patents	700		—	—	700		(a)
Non-compete agreements	3,100		—	—	3,100		(a)
Customer list	713		—	—	713		(b)
Developed technology	11,250		—	—	11,250		(a)
Total Assets	$	17,263	—	—	$	17,263

Assets and liabilities measured at fair value are based on one or more valuation techniques. The valuation techniques are identified in the table above and are as follows:

(a) We used an internally developed income based approach to value these assets. Inputs for this valuation model were based on internally developed forecasts and assumptions.

(b) We used a replacement cost model to value these assets. Inputs for this valuation model were based on internal estimates of the cost to recreate these assets.