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Note 3 - Fair Value Measurements
 6 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
3
)         Fair Value
Measurements
 
The financial instruments shown below are presented at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are
not
available, valuation models
may
be applied.
 
Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are as follows:
 
Level
1
– Quoted prices in active markets for identical assets and liabilities. The Company’s deferred compensation plan assets consist of shares in various mutual funds (for the deferred compensation plan, investments are participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on publicly quoted market prices for the funds’ shares as of the balance sheet dates.
 
Level
2
– Inputs, other than quoted prices in an active market, that are observable either directly or indirectly through correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company values the instruments based on the market price of instruments with similar terms, which are based on spot and forward rates as of the balance sheet dates. The Company has considered the creditworthiness of counterparties in valuing all assets and liabilities.
 
Level
3
– Unobservable inputs based upon the Company’s best estimate of what market participants would use in pricing the asset or liability.
 
T
here were
no
transfers of assets or liabilities between any levels of the fair value measurement hierarchy at
December 31, 2017
and
June 30, 2017.
The Company’s policy is to recognize transfers between levels as of the date they occur.
 
Cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value.
 
Items presented at fair value at
December 31, 2017
and
June 30, 2017
consisted of the following (in thousands):
 
   
December 31
, 201
7
  
   
Total
    
Level 1
    
Level 2
    
Level 3
  
Assets
                                
Marketable securities - deferred compensation plan
   $
2,398
     $
2,398
     $
-
     $
-
  
Foreign exchange contracts
    
1,108
      
-
      
1,108
      
-
  
Interest rate swaps
    
469
      
-
      
469
      
-
  
                                 
Liabilities
                                
Foreign exchange contracts
   $
6,235
     $
-
     $
6,235
     $
-
  
Interest rate swaps
    
13
      
-
      
13
      
-
  
Contingent acquisition payments
(a)
    
3,513
      
-
      
-
      
3,513
  
 
 
 
 
   
June 30, 201
7
  
   
Total
    
Level 1
    
Level 2
    
Level 3
  
Assets
                                
Marketable securities - deferred compensation plan
   $
2,397
     $
2,397
     $
-
     $
-
  
Foreign exchange contracts
    
399
      
-
      
399
      
-
  
Interest rate swaps
    
3,777
      
-
      
3,777
      
-
  
                                 
Liabilities
                                
Foreign exchange contracts
   $
3,232
     $
-
     $
3,232
     $
-
  
Interest rate swaps
    
3,958
      
-
      
3,958
      
-
  
Contingent acquisition payments
(a)
    
2,108
      
-
      
-
      
2,108
  
 
 
(a)
The fair value of our contingent consideration arrangement is determined based on our evaluation as to the probability and amount of any deferred compensation that has been earned to date.
 
Our financial liabilities based upon Level
3
inputs include a contingent consideration arrangement relating to our acquisition of Horizon Scientific.
We are contractually obligated to pay contingent consideration payments based on the criteria of continued employment of the seller on the
second
and
third
anniversary of the closing date of the acquisition. We will update our assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the consideration is paid.
 
Contingent acquisition payment liabilities are scheduled to be paid in periods through fiscal year
2020.
As of
December 31, 2017,
we could be required to pay up to
$8.4
million for contingent consideration arrangements if specific criteria are achieved. We have determined the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs
not
observable in the market and thus represents a Level
3
measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are continued employment of the seller and the risk-adjusted discount rate for the fair value measurement. As of
December 31, 2017,
neither the amount recognized for the contingent consideration arrangement, nor the range of outcomes or the assumptions used to develop the estimate had changed.