Fair Value Measurements And Risk
|3 Months Ended|
Feb. 29, 2012
|Fair Value Measurements And Risk [Abstract]|
|Fair Value Measurements And Risk||
Note C – Fair Value Measurements and Risk
Financial Risk Management Objectives and Policies
The Company is exposed primarily to credit, interest rate and currency exchange rate risks which arise in the normal course of business.
Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Company, as and when they fall due. The primary credit risk for the Company is its accounts receivable and the maximum exposure of credit risk would be represented primarily by the carrying amount of those receivables. The Company has established credit limits for customers and monitors their balances to mitigate its risk of loss. There was no single customer which represented more than 10% of the Company's net trade receivables at February 29, 2012 or greater than 10% of consolidated net sales during the first quarter of 2012.
Interest Rate Risk
The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's $200 million Term Loan B and various foreign subsidiary borrowings, which bear interest at variable rates, approximating market interest rates.
Foreign Currency Risk
The Company incurs foreign currency risk on sales and purchases denominated in other than the functional currency. The currencies giving rise to this risk are primarily the Euro, Chinese Yuan, Thai Baht, Great Britain Pound Sterling, and Indian Rupee.
Foreign currency exchange contracts are used by the Company's Thailand subsidiary to manage risks from the change in the exchange rate of the Thai Baht on sales and purchases made in U.S. dollars. These forward contracts are used on a continuing basis for periods of less than one year, consistent with the underlying transactions. The use of these contracts minimizes the impact of foreign exchange rate movements on the Company's operating results. The notional amount of outstanding foreign exchange contracts was $2.4 million as of February 29, 2012. These forward exchange contracts are not designated as hedging instruments.
The Company recognizes the fair value of derivative instruments as either an asset or a liability within its statement of financial position. For a cash flow hedge, the fair value of the effective portion of the derivative is recognized as an asset or liability with a corresponding amount in Accumulated Other Comprehensive Income (Loss) ("AOCI"). Amounts in AOCI are recognized in earnings when the underlying hedged transaction is recognized in earnings. Ineffectiveness, if any, is measured by comparing the present value of the cumulative change in the expected future cash flows of the derivative to the present value of the cumulative change in the expected future cash flows of the related instrument. Any ineffective portion of a cash flow hedge is recognized in earnings immediately. For derivative instruments not designated as hedges, the change in fair value of the derivative is recognized in earnings each reporting period.
As of February 29, 2012 and November 30, 2011, the fair value of the Company's foreign currency contracts was less than $0.1 million and was recognized in other current assets. Gains and losses on these contracts are recognized in other expense (income).
The Company does not enter into derivative instruments for trading or speculative purposes.
Fair Value Measurements
Assets and liabilities that are within the provisions of the Fair Value Measurements and Disclosure topic of the Accounting Standards Codification ("ASC"), such as the Company's foreign currency exchange contracts, are recorded at fair value using market and income valuation approaches and considering the credit risk of the Company and/or the counterparty, as appropriate. The Company's foreign currency exchange contracts are not exchange traded instruments, however, they are valued based on observable inputs for similar assets or liabilities and accordingly are classified as Level 2 inputs.