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Fair Value of Financial Instruments
 12 Months Ended
Jun. 30, 2011
Fair Value of Financial Instruments  
Fair Value of Financial Instruments
(9)

Fair Value of Financial Instruments

The Company's financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

 

  •  

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

  •  

Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

 

  •  

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

 

The following table summarizes the valuation of the Company's short-term investments and financial instruments by the above categories as of June 30, 2011:

 

      unobservable       unobservable       unobservable       unobservable  
    Total     Quoted
prices  in
active
markets
(Level  1)		     Significant
other
observable
inputs
(Level 2)		     Significant
unobservable
inputs
(Level 3)		  
    (in thousands)  

Assets:

                                

Deferred compensation plan investments(1)

  $ 12,926      $ 12,926      $ -      $ -   
   

 

 

    

 

 

    

 

 

    

 

 

  

Total assets at fair value

   $ 12,926      $ 12,926      $ -      $ -   
   

 

 

    

 

 

    

 

 

    

 

 

  
         

Liabilities:

                                

Derivative instruments(2)

                               

Forward foreign currency exchange contracts

   $ 71        -      $ 71      $ -   

Interest rate swap liability

     215        -        215        -   

Liability for contingent consideration, current and non-current

     23,794        -        -        23,794   
   

 

 

    

 

 

    

 

 

    

 

 

  

Total liabilities at fair value

   $ 24,080      $ -      $ 286      $ 23,794   
   

 

 

    

 

 

    

 

 

    

 

 

  

 (1)

These investments are held in a rabbi trust and include mutual funds and cash equivalents for payment of certain non-qualified benefits for certain retired, terminated and active employees, as well as the Founder's SERP. As of June 30, 2011, approximately $3.1 million was considered current.

 (2)

See Note 8, "Derivatives and Hedging Activities".

The Company's foreign currency forward contracts are measured using the market approach on a recurring basis considering foreign currency spot rates and forward rates quoted by banks or foreign currency dealers (Level 2 criteria).

The Company's interest rate swap contract is measured using the market approach on a recurring basis considering LIBOR forward rates quoted by the Company's counter-party (Level 2 criteria).

The Company recorded a contingent consideration liability at the acquisition date representing the amounts payable to former CDC shareholders, as outlined under the terms of the Share Purchase and Sale Agreement, based upon the achievement of projected earnings, net of specific pro forma adjustments. As the Company is still finalizing the valuation process, the fair value of the liability recorded at the acquisition date is subject to change with the corresponding change to goodwill. The fair value of this Level 3 liability is estimated using a probability-weighted discounted cash flow analysis. Subsequent changes in the fair value of these contingent consideration liabilities are recorded to the "selling, general and administrative expenses" line item in the Consolidated Income Statement. The Company remeasured the fair value at June 30, 2011. The change in fair value is driven primarily by changes to the discounted cash flow analysis as actual results for the first twelve month earnout period varied from the initial projections, partially offset by normal lapse of time in the discount period. Refer to Note 5 for further details.

 

The table below provides a summary of the changes in fair value of the Company's only financial asset or liability, the contingent consideration for the CDC earnout that is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended June 30, 2011:

 

         
     Contingent Consideration  for
the Year Ended June 30, 2011		  
     (in thousands)  

Fair value at beginning of period

    $ -   

Issuance of contingent consideration

      23,952   

Change in valuation

      (128 ) 

Fluctuation due to foreign currency exchange

      (30 ) 
    

 

 

  

Fair value at end of period

    $ 23,794   
    

 

 

  

There were no Level 3 assets or liabilities in the prior fiscal year.