Fair Value Measurements

9 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

9. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received upon selling an asset or the price paid to transfer a liability on the measurement date. It focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are as follows:

Level 1	–	Observable prices in active markets for identical assets and liabilities.
Level 2	–	Observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3	–	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

Recurring Fair Value Measurements

The following table presents the fair values for those assets and (liabilities) measured on a recurring basis as of March 31, 2012:

	Fair Value Measurements
(in millions)	Level 1		Level 2		Level 3			Total
Cash Equivalents (1)	$	1,293.4	$	0.0	$	0.0		$	1,293.4
Forward Contracts (2)		0.0		36.2		0.0			36.2
Other Investments (3)		75.1		0.0		0.0			75.1
Contingent Consideration Obligation (4)		0.0		0.0		(22.2	)		(22.2	)
Total	$	1,368.5	$	36.2	$	(22.2	)	$	1,382.5

The following table presents the fair values for those assets and (liabilities) measured on a recurring basis as of June 30, 2011:

	Fair Value Measurements
(in millions)	Level 1		Level 2		Level 3			Total
Cash Equivalents (1)	$	1,065.6	$	0.0	$	0.0		$	1,065.6
Forward Contracts (2)		0.0		32.1		0.0			32.1
Other Investments (3)		79.7		0.0		0.0			79.7
Contingent Consideration Obligation (4)		0.0		0.0		(75.4	)		(75.4	)
Total	$	1,145.3	$	32.1	$	(75.4	)	$	1,102.0

(1) Cash equivalents are comprised of highly liquid investments purchased with a maturity of three months or less. The carrying value of these cash equivalents approximates fair value due to their short-term maturities.

(2) The fair value of foreign currency contracts, commodity contracts and interest rate swaps is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows.

(3) The other investments balance includes investments in mutual funds, which are used to offset fluctuations in deferred compensation liabilities. These mutual funds primarily invest in the equity securities of companies with large market capitalization and high quality fixed income debt securities. The fair value of these investments is determined using quoted market prices.

(4) The contingent consideration obligation was incurred in connection with the acquisition of P4 Healthcare. See Note 2 for additional information regarding the contingent consideration obligation related to the P4 Healthcare acquisition. The fair value of the contingent consideration obligation is determined based on a probability-weighted income approach derived from EBITDA estimates and probability assessments with respect to the likelihood of achieving the various EBITDA targets. The fair value measurement is based on significant inputs unobservable in the market and thus represents a Level 3 measurement. At each reporting date, we revalue the contingent consideration obligation to estimated fair value. Changes in the fair value of the contingent consideration obligation may result from changes in the terms of the contingent payments, changes in discount periods and rates, changes in the timing and amount of EBITDA estimates, and changes in probability assumptions with respect to the timing and likelihood of achieving the EBITDA targets. Actual progress toward achieving the EBITDA targets for the remaining measurement periods may be different than our expectations of performance in future measurement periods. Failure to meet current expectations of progress could increase the probability of not achieving the targets within the measurement periods and result in a reduction in the fair value of the contingent consideration obligation. As a result of changes in our estimate of performance in future periods due in large part to the loss of revenue from a significant customer of the P4 Healthcare legacy business that began during the three months ended March 31, 2012, we revised the timing and amount of EBITDA estimates and made changes in probability assumptions with respect to the likelihood of achieving the EBITDA targets, which resulted in a $54.7 million decrease in the fair value of the total contingent consideration obligation.

The following table presents a reconciliation of those liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3):

(in millions)	Contingent Consideration Obligation
Carrying value at June 30, 2011	$	75.4
Income, net (1)		(53.2	)
Carrying value at March 31, 2012	$	22.2

(1) Reflects changes in our estimate of performance in future measurement periods offset by implied interest for the period. Amount is included in acquisition-related costs in our condensed consolidated statements of earnings.