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Fair Value Of Financial Instruments
3 Months Ended
Sep. 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; and

 

  •  

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; and

 

  •  

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 assets and liabilities measured at fair value as of September 30, 2011:

 

     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, current and non-current portion(1)

   $ 12,433       $ 12,433       $ —         $ —     

Forward foreign currency exchange contracts(2)

     112         —           112         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets at fair value

    $ 12,545       $ 12,433       $ 112       $ —     
  

 

 

     

 

 

     

 

 

     

 

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

Liabilities:

            

Forward foreign currency exchange contracts(2)

   $ —         $ —         $ —         $ —     

Liability for contingent consideration, current and non-current portion

      21,253         —           —           21,253   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 21,253       $ —         $ —         $ 21,253   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(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.
(2) See Note 8, "Derivatives and Hedging Activities". Foreign currency contracts are classified in the condensed consolidated balance sheet in Prepaid expenses and other assets or Accrued expenses and other liabilities, depending on the respective contracts' favorable or unfavorable positions.

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 recorded a contingent consideration liability at the acquisition date of CDC 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 "change in fair value of contingent consideration" line item in the condensed consolidated income statement that is included in the calculation of operating income. The Company remeasured the fair value at September 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 and a change in the interest rate input, partially offset by the 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 quarter ended September 30, 2011:

 

     Contingent Consideration for
quarter ended September 30,		  
         2011             2010      
     (in thousands)  

Fair value at beginning of period

    $ 23,794      $ —     

Issuance of contingent consideration

      —          —     

Payments

      —          —     

Change in fair value

      894        —     

Fluctuation due to foreign currency translation

      (3,435 )      —     
  

 

 

    

 

 

  

Fair value at end of period

    $ 21,253      $ —