Auction Rate Securities

3 Months Ended

Jan. 31, 2013

Auction Rate Securities

6. AUCTION RATE SECURITIES

As of January 31, 2013, the Company held investments in auction rate securities from four different issuers having an original principal amount of $5.0 million each (aggregating to $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. On February 8, 2013, one of the Company’s auction rate securities was redeemed by the issuer at its par value of $5.0 million. As of January 31, 2013 and the redemption date, this security was valued at $5.0 million, therefore, no gain or loss was recognized upon its redemption.

At January 31, 2013 and October 31, 2012, the estimated fair value of these securities, in total, were approximately $17.8 million.

As of January 31, 2013, one of the Company’s auction rate securities, with a fair value of $4.8 million, was in a continuous unrealized loss position for less than twelve months and the remaining three auction rate securities, with a fair value of $13.0 million, were not in an unrealized loss position. 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.

The following table presents the significant assumptions used to determine the fair value of the Company’s auction rate securities at January 31, 2013 and October 31, 2012:

Assumption	January 31, 2013	October 31, 2012
Discount rates	L + 1.29% – L + 5.53%	L + 1.37% – L + 6.86%
Yields	2.15%, L + 2.00% – L + 3.50%	2.15%, 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.

The following tables present the changes in the cost basis and fair value of the Company’s auction rate securities as of January 31, 2013 and October 31, 2012:

(in thousands)	Cost Basis			Fair Value (Level  3)
Balance at November 1, 2012	$	17,994		$	17,780
Unrealized gains included in accumulated other comprehensive loss		—			52
Balance at January 31, 2013	$	17,994		$	17,832
(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

At January 31, 2013 and October 31, 2012, unrealized losses of $0.2 million ($0.1 million net of tax) were recorded in accumulated other comprehensive loss.