Fair Value Measurements

6 Months Ended

Apr. 29, 2016

Fair Value Measurements

Fair Value Measurements

Note 13 — 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.

Cash balances are valued at their carrying amounts in the consolidated balance sheets, which are reasonable estimates of their fair value due to their short-term nature. Forward currency contracts are valued based on observable market transactions of forward currency prices and spot currency rates as of the reporting date. The fair value of cross currency contracts is determined using discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs such as interest rates and foreign currency exchange rates. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, such as collateral postings, thresholds, mutual puts, and guarantees, are incorporated in the fair values to account for potential nonperformance risk. 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 April 29, 2016, May 1, 2015, and October 31, 2015 are summarized below:

(Dollars in thousands)			Fair Value Measurements Using Inputs Considered as:
April 29, 2016	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	174,639	$	174,639	$	—	$	—
Forward currency contracts	40		—		40		—
Cross currency contracts	1,935		—		1,935		—
Total Assets	$	176,614	$	174,639	$	1,975	$	—
Liabilities:
Forward currency contracts	$	3,753	$	—	$	3,753	$	—
Cross currency contracts	—		—		—		—
Deferred compensation liabilities	1,400		—		1,400		—
Total Liabilities	$	5,153	$	—	$	5,153	$	—

(Dollars in thousands)			Fair Value Measurements Using Inputs Considered as:
May 1, 2015	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	109,295	$	109,295	$	—	$	—
Forward currency contracts	7,830		—		7,830		—
Cross currency contracts	2,070		—		2,070		—
Total Assets	$	119,195	$	109,295	$	9,900	$	—
Liabilities:
Forward currency contracts	$	985	$	—	$	985	$	—
Cross currency contracts	319		—		319		—
Deferred compensation liabilities	1,896		—		1,896		—
Total Liabilities	$	3,200	$	—	$	3,200	$	—

(Dollars in thousands)			Fair Value Measurements Using Inputs Considered as:
October 31, 2015	Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	126,275	$	126,275	$	—	$	—
Forward currency contracts	3,173		—		3,173		—
Cross currency contracts	2,136		—		2,136		—
Total Assets	$	131,584	$	126,275	$	5,309	$	—
Liabilities:
Forward currency contracts	$	1,711	$	—	$	1,711	$	—
Cross currency contracts	134		—		134		—
Deferred compensation liabilities	1,652		—		1,652		—
Total Liabilities	$	3,497	$	—	$	3,497	$	—

There were no transfers between Level 1 and Level 2 during the three and six months ended April 29, 2016 and May 1, 2015, or the twelve months ended October 31, 2015.