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Financial Instruments Measured At Fair Value
 12 Months Ended
Jun. 30, 2011
Financial Instruments Measured At Fair Value  
Financial Instruments Measured At Fair Value

15. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

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 presents assets and (liabilities) measured at fair value on a recurring basis as of June 30, 2011:

 

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

Assets:

            

Cash equivalents

    $ 7,300         —         $ 7,300         —     

Available for sale securities

      6,390       $ 6,390         —           —     
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 13,690       $ 6,390       $ 7,300         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Derivatives designated as hedging instruments:

            

Forward foreign currency contracts

    $ 766          $ 766         —     

Contingent consideration

      37,145         —           —         $ 37,145   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 37,911         —         $ 766       $ 37,145   
  

 

 

     

 

 

     

 

 

     

 

 

  

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2010:

 

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

Assets:

            

Cash equivalents

    $ 10,586         —         $ 10,586         —     

Available for sale securities

      6,232       $ 6,232         —           —     

Derivatives designated as hedging instruments:

            

Forward foreign currency contracts

      256         —           256         —     
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 17,074       $ 6,232       $ 10,842         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Derivatives designated as hedging instruments:

            

Forward foreign currency contracts

    $ 57         —         $ 57         —     

Contingent consideration

      28,580         —           —         $ 28,580   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 28,637         —         $ 57       $ 28,580   
  

 

 

     

 

 

     

 

 

     

 

 

  

Available for sale securities consist of the Company's investment in YHS (see Note 14). Fair value is measured using the market approach based on quoted prices. The Company utilizes the income approach to measure fair value for its foreign currency forward contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices.

In connection with the acquisitions of the assets and business of 3 Greek Gods, LLC in July 2010, the assets and business of World Gourmet Marketing LLC in June 2010, GG UniqeFiber AS in January 2011 and Churchill Products Limited in June 2010, payment of a portion of the respective purchase prices are contingent upon the achievement of certain operating results. We estimated the original fair value of the contingent consideration as the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. We are required to reassess the fair value of contingent payments on a periodic basis. During the fiscal year ended June 30, 2011, the Company reassessed the fair value of the contingent consideration for each of these acquisitions, resulting in additional expense of $443 related to the Greek Gods acquisition and a reduction of expense of $4,620 related to the World Gourmet acquisition (See Note 5).

 

The following table summarizes the Level 3 activity:

 

Year ended June 30,    2011     2010  

Balance at beginning of year

    $ 28,580        —     

Accretion of interest expense on contingent consideration

      1,691        —     

Fair value of initial contingent consideration

      25,950      $ 28,580   

Contingent consideration adjustment expense

      (4,177 )      —     

Contingent consideration paid

      (15,400 )   

Translation adjustment

      501        —     
  

 

 

    

 

 

  

Balance at end of year

    $ 37,145      $ 28,580   
  

 

 

    

 

 

  

There were no transfers of financial instruments between the three levels of fair value hierarchy during the years ended June 30, 2011 or 2010.

Derivative Financial Instruments

Cash Flow Hedges – Foreign Exchange Contracts

The Company utilizes foreign currency contracts to hedge forecasted transactions, primarily intercompany transactions, on certain foreign currencies and designates these derivative instruments as foreign currency cash flow hedges when appropriate. Derivative financial instruments are not used for speculative purposes. The notional and fair value amounts of the Company's foreign exchange derivative contracts at June 30, 2011 and 2010 were $13,650 and $766 of net liabilities and $13,450 and $199 of net assets, respectively. The fair value of these derivatives is included on the Company's consolidated balance sheets in accrued expenses at June 30, 2011 and 2010. For these derivatives, which qualify as hedges of probable forecasted cash flows, the effective portion of changes in fair value is temporarily reported in Accumulated Other Comprehensive Income ("OCI") and recognized in earnings when the hedged item affects earnings. These foreign exchange contracts have maturities over the next 13 months.

The Company assesses effectiveness at the inception of the hedge and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of change in fair value is not deferred in accumulated OCI and is included in current period results. For the years ended June 30, 2011 and 2010, the impact of hedge ineffectiveness on earnings was not significant. The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date or when the hedge is no longer effective. There were no discontinued foreign exchange hedges for the years ended June 30, 2011 and 2010.

The impact on Other Comprehensive Income ("OCI") from foreign exchange contracts that qualified as cash flow hedges for the fiscal years ended June 30, 2011 and 2010 were as follows:

 

Year ended June 30,    2011     2010  

Net carrying amount at beginning of year

    $ 152      $ 201   

Cash flow hedges deferred in OCI

      (975 )      (81 ) 

Change in deferred taxes

      251        32   
  

 

 

    

 

 

  

Net carrying amount at end of year

    $ (572 )    $ 152