Note 12 - Fair Value

9 Months Ended

Feb. 28, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

12. FAIR VALUE

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure 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 value are as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

	As of February 28, 2015
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands)
Derivative instruments	$	-		(821	)		-			(821	)
Contingent consideration liabilities	$	-		-			(18,342	)		(18,342	)

	As of May 31, 2014
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands)
Derivative instruments	$	-		(1,357	)		-			(1,357	)
Contingent consideration liabilities	$	-		-			(11,300	)		(11,300	)

The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short-term maturity of these instruments. Of the $11.5 million and $23.6 million of cash and cash equivalents at February 28, 2015 and May 31, 2014, respectively, approximately 10% and 19% was located in the U.S., respectively.

The Company uses derivative financial instruments, primarily in the form of floating-to-fixed interest rate swap agreements, in order to mitigate the risks associated with interest rate fluctuations on the Company’s floating rate indebtedness. The estimated fair value of the Company’s derivative instruments is based on quoted market prices for similar instruments (a level 2 input) and are reflected at fair value in the consolidated balance sheets. The level 2 inputs used to calculate fair value were interest rates, volatility and credit derivative markets. The Company’s current and long-term derivative financial instrument liabilities are included in Accrued interest and interest rate swap liability and Other long-term liabilities in the Company’s consolidated balance sheets.

The fair value of the Company’s Notes and the Term Loan Facility (collectively referred to as the Company’s debt instruments) is estimated to be $429.3 million and $653.3 million at February 28, 2015, respectively, based on recent trades of similar instruments. The fair value of the Notes and the Term Loan Facility was estimated to be $446.3 million and $656.7 million at May 31, 2014, respectively, based on the fair value of these instruments at that time.

Management believes that these liabilities can be liquidated without restriction.

At February 28, 2015, the Company had $18.3 million in contingent consideration liabilities for earn-out provisions resulting from acquisitions completed since May 30, 2014. The fair value of these contingent consideration liabilities was determined by applying a form of the income approach (a level 3 input), based upon the probability-weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the performance targets. The key assumptions included in the calculations were the earn-out period payment probabilities, projected revenues, discount rate and the timing of payments. The present value of the expected payments considers the time at which the obligations are expected to be settled and a discount rate that reflects the risk associated with the performance payments. As of February 28, 2015, $0.1 million of the contingent consideration liabilities was included in Accrued expenses and other current liabilities and $18.2 million was included in Other long-term liabilities on the Company’s consolidated balance sheet. As of May 31, 2014, the contingent consideration liabilities were included in Other long-term liabilities on the Company’s consolidated balance sheet.

As of the beginning of fiscal 2014, the Company had a contingent consideration liability of $4.5 million for an earn-out provision resulting from the LIFECODES acquisition, which was unchanged for the third quarter of fiscal 2014 and was written down by $4.6 million in the first nine months of fiscal 2014. The adjustment to the estimated fair value amount was reflected as a gain in the acquisition-related items on the Company’s consolidated statements of operations.

The changes in the contingent consideration liabilities are summarized in the following table (in thousands):

	Nine Months Ended			Twelve Months Ended
	February 28, 2015			May 31, 2014
Balance at the beginning of the period	$	(11,300	)		(4,504	)
Additions due to acquisitions		(6,456	)		(11,300	)
Change in fair value		-			4,638
Payments		56			-
Accretion of fair value		(642	)		(134	)
Balance at the end of the period	$	(18,342	)		(11,300	)