Fair Value Measurements

6 Months Ended

May 28, 2016

FAIR VALUE MEASUREMENTS

Fair Value Measurements

The Company measures certain assets and liabilities at fair value as discussed throughout the notes to its quarterly and annual financial statements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Fair value measurements are categorized in a hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs are the highest level and reflect market data obtained from independent sources, while unobservable inputs are the lowest level and reflect internally developed market assumptions. The Company classifies fair value measurements by the following hierarchy:


•	Level 1 – Quoted active market prices for identical assets


•	Level 2 – Significant other observable inputs, such as quoted prices for similar (but not identical) instruments in active markets, quoted prices for identical or similar instruments in markets which are not active and model determined valuations in which all significant inputs or significant value-drivers are observable in active markets


•	Level 3 – Significant unobservable inputs, such as model determined valuations in which one or more significant inputs or significant value-drivers are unobservable

Assets or liabilities that have recurring fair value measurements are shown below:



	Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
May 28, 2016
Restricted trust, included in Other noncurrent assets
Mutual fund investments - equities	$	305	$	305	$	—	$	—
Mutual fund investments - bonds	332		332		—		—
Cash and equivalents	14		14		—		—
Total restricted trust	$	651	$	651	$	—	$	—

FibeRio contingent earn-out, included in Other long-term liabilities	$	3,887	$	—	$	—	$	3,887

Filter Resources contingent earn-out, included in Accrued liabilities	$	6	$	—	$	—	$	6

Foreign exchange contracts, included in Prepaid expenses and other current assets	$	262	$	—	$	262	$	—

Foreign exchange contracts, included in Accrued liabilities	$	120	$	—	$	120	$	—



	Fair Value Measurements at Reporting Date
	Total		Level 1		Level 2		Level 3
November 28, 2015
Restricted trust, included in Other noncurrent assets
Mutual fund investments - equities	$	352	$	352	$	—	$	—
Mutual fund investments - bonds	363		363		—		—
Cash and equivalents	14		14		—		—
Total restricted trust	$	729	$	729	$	—	$	—

Filter Resources contingent earn-out, included in Accrued liabilities	$	1,285	$	—	$	—	$	1,285

Foreign exchange contracts, included in Prepaid expenses and other current assets	$	418	$	—	$	418	$	—

Foreign exchange contracts, included in Accrued liabilities	$	40	$	—	$	40	$	—

There were no changes in the fair value determination methods or significant assumptions used in those methods during the six months ended May 28, 2016. There were no transfers between Level 1 and Level 2 and there were no transfers into or out of Level 3 during the six months ended May 28, 2016. The Company's policy is to recognize transfers on the actual date of transfer. The restricted trust, which is used to fund certain payments for the Company’s U.S. combined nonqualified pension plans, consists of actively traded equity and bond funds.

The Company is liable for a contingent earn-out established in connection with the acquisition of FibeRio on March 7, 2016. This earn-out, which is payable to the former owners of FibeRio, has been recorded at its estimated fair-value of $3,887, in Other long-term liabilities in the Consolidated Condensed Balance Sheet. The contingent liability for the earn-out will continue to be accounted for and measured at fair value through the end of the earn-out period five years from the acquisition date. The fair value measurement of the earn-out payment is based on an option pricing approach, which represent significant inputs not observed in the market and thus represents a Level 3 measurement.

The Company is liable for a contingent earn-out established in connection with the acquisition of Filter Resources on December 17, 2014. This earn-out, which is payable to the former owners of Filter Resources, has been recorded at its estimated fair-value of $6, in Accrued liabilities in the Consolidated Condensed Balance Sheet. The contingent liability for the earn-out will continue to be accounted for and measured at fair value until the contingency is settled during the Company's fiscal year 2016. The fair value measurement of the earn-out payment is based on estimated adjusted earnings from certain capital projects, which represent significant inputs not observed in the market and thus represents a Level 3 measurement.

The Company is liable for a contingent earn-out established in connection with the acquisition of TransWeb on December 29, 2010. This earn-out, which is payable to one of the former owners of TransWeb, had an acquisition-date estimated fair value of $1,018, which was recorded as an other long-term liability at that time. The contingent liability for the earn-out payment will continue to be accounted for and measured at fair value until the contingency is settled during fiscal year 2016. The fair value measurement of the contingent earn-out payment is based primarily on 2014 and 2015 TransWeb adjusted earnings, which represent significant inputs not observed in the market and thus represents a Level 3 measurement. The contingent consideration payment is revalued to its current fair value at each reporting date. The fair value of the TransWeb contingent earn-out payment was $0 at May 28, 2016 and at November 28, 2015, based on the adjusted earnings of TransWeb.

Fair Values of Financial Instruments

The fair values of the Company’s financial instruments, which are cash and cash equivalents, restricted cash, accounts receivable, the restricted trust, derivative instruments and accounts payable and accrued liabilities, approximated the carrying values of those financial instruments at both May 28, 2016 and November 28, 2015. An expected present value technique is used to estimate the fair value of long-term debt, using a model that discounts future principal and interest payments at interest rates available to the Company at the end of the period for similar debt of the same maturity. A fair value estimate of $340,891 and $403,821 for long-term debt at May 28, 2016 and November 28, 2015, respectively, is based on a Level 2 measurement using the current interest rates available to the Company for debt with similar remaining maturities. The carrying value for the long-term debt at May 28, 2016 and November 28, 2015 is $342,566 and $405,156, respectively.

See Note 6 for information related to the fair value of hedging instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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