v2.4.0.6
Fair Value of Financial Instruments
 3 Months Ended
Sep. 29, 2012
Fair Value of Financial Instruments

2. Fair Value of Financial Instruments

At September 29, 2012, as part of its cash management and investment program, the Company maintained a portfolio of $7,965 in short-term investments, comprised of marketable investment securities in the form of variable rate demand notes. The marketable investment securities are classified as available-for-sale. These marketable investment securities are carried at cost, which approximates fair value.

In addition, at September 29, 2012, the Company held a derivative instrument in the form of an interest rate contract that served as a cash flow hedge on interest rate change exposure on a portion of its borrowings under a floating-rate term-loan facility entered into by the Company in March 2011. See “Note 9—Derivative Instruments and Hedging Activities” below.

Financial Accounting Standards Board Accounting Standard Codification (“FASB ASC”) 820-10 (the overall Subtopic of topic 820 on fair value measurements and disclosures) provides guidance on fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. This accounting standard provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

  •  

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

  •  

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

  •  

Level 3 inputs are unobservable inputs for the asset or liability.

 

The level in the fair value hierarchy within which a fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Cash, cash equivalents, short-term investments, accounts receivable, short-term notes payable, accounts payable and accrued expenses, as reported in the condensed consolidated financial statements, approximate their respective fair values because of the short-term maturity of those instruments. The fair value of the Company’s long-term debt is based on the present value of expected cash flows, considering expected maturity and using current interest rates available to the Company for borrowings with similar terms. The carrying amount of the Company’s long-term debt approximates its fair value.

The following table presents assets and liabilities that were measured at fair value on a recurring basis (including items that are required to be measured at fair value) at September 29, 2012:

 

            Fair Value Measurements at Reporting Date Using:  
     Carrying Amount      Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant
Unobservable Inputs
(Level 3)		  

Assets:

            

Available-for-sale securities

    $ 7,965         —         $ 7,965         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 7,965         —         $ 7,965         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Interest rate contract

    $ 467         —         $ 467         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 467         —         $ 467         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

The following table presents assets and liabilities that were measured at fair value on a recurring basis (including items that are required to be measured at fair value) at June 30, 2012:

 

            Fair Value Measurements at Reporting Date Using:  
     Carrying Amount      Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		      Significant Other
Observable Inputs
(Level 2)		      Significant
Unobservable Inputs
(Level 3)		  

Assets:

            

Available-for-sale securities

    $ 17,145         —         $ 17,145         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 17,145         —         $ 17,145         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Liabilities:

            

Interest rate contract

    $ 472         —         $ 472         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 472         —         $ 472         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

The fair value for available-for-sale securities was based on market observable inputs and the fair value of the interest rate contract was determined based on models utilizing market observable inputs and credit risk.