FAIR VALUE MEASUREMENTS

ASC Topic 820 provides a consistent definition of fair value, which focuses on exit price, prioritizes the use of market-based inputs over entity-specific inputs for measuring fair value and establishes a three-level hierarchy for fair value measurements. ASC Topic 820 requires fair value measurements to be classified and disclosed in one of the following three categories:


Level 1:	Quoted prices (unadjusted) in active markets for identical assets and liabilities.


Level 2:	Either direct or indirect inputs, other than quoted prices included within Level 1, which are observable for similar assets or liabilities.


Level 3:	Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The following tables summarize the valuation of the Company’s financial instruments by the above pricing categories as of March 31, 2012, June 25, 2011 and March 26, 2011:



	Fair Value Measurements as of March 31, 2012 Using:
	Total as of March 31, 2012		Quoted Prices In Active Markets (Level 1)		Prices With Other Observable Inputs (Level 2)		Prices With Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	451,521	$	451,521	$	—	$	—
Investment securities	6,570		—		—		6,570
Funds associated with Israeli post-employment benefits	15,264		—		15,264		—
Total	$	473,355	$	451,521	$	15,264	$	6,570
Liabilities:
Contingent consideration	$	2,900	$	—	$	—	$	2,900
Foreign currency forward contracts, net	698		—		698		—
Interest rate swap agreements	13,248		—		13,248		—
Total	$	16,846	$	—	$	13,946	$	2,900



	Fair Value Measurements as of June 25, 2011 Using:
	Total as of June 25, 2011		Quoted Prices In Active Markets (Level 1)		Prices With Other Observable Inputs (Level 2)		Prices With Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	267,221	$	267,221	$	—	$	—
Investment securities	7,503		—		—		7,503
Funds associated with Israeli post-employment benefits	17,170		—		17,170		—
Foreign currency forward contracts, net	3,353		—		3,353		—
Total	$	295,247	$	267,221	$	20,523	$	7,503
Liabilities:
Interest rate swap agreements	$	7,283	$	—	$	7,283	$	—
Total	$	7,283	$	—	$	7,283	$	—

	Fair Value Measurements as of March 26, 2011 Using:
	Total as of March 26, 2011		Quoted Prices In Active Markets (Level 1)		Prices With Other Observable Inputs (Level 2)		Prices With Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	151,941	$	151,941	$	—	$	—
Investment securities	5,435		—		—		5,435
Funds associated with Israeli post-employment benefits	16,896		—		16,896		—
Foreign currency forward contracts, net	3,235		—		3,235		—
Interest rate swap agreements	2,092				2,092		—
Total	$	179,599	$	151,941	$	22,223	$	5,435

The carrying amounts of the Company’s financial instruments, consisting of cash and cash equivalents, investment securities, accounts receivable, accounts payable and variable rate long-term debt, approximate their fair value. As of March 31, 2012, the carrying value and fair value of the Company’s fixed rate long-term debt were $965,000 and $1,012,670, respectively. As of June 25, 2011, the carrying value and fair value of the Company’s fixed rate long-term debt were $615,000 and $650,812, respectively. As of March 26, 2011, the carrying value and fair value of the Company’s fixed rate long-term debt were $615,000 and $628,050, respectively. Fair values were calculated by discounting the future cash flows of the financial instruments to their present value, using interest rates currently offered for borrowings and deposits of similar nature and remaining maturities. There were no transfers between Level 1 and Level 2 during the three and nine months ended March 31, 2012. The Company’s policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period.

As of March 31, 2012, the Company had $15,264 deposited in funds managed by financial institutions that are designated by management to cover post-employment benefits for its Israeli employees. Israeli law generally requires payment of severance upon dismissal of an employee or upon termination of employment in certain other circumstances. These funds are included in the Company’s long-term investments reported in other non-current assets. The Company’s Level 2 securities values are determined using prices for recently traded financial instruments with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

The Company’s investment securities include auction rate securities (ARS) totaling $18,000 in par value. ARS are privately placed variable rate debt instruments whose interest rates are reset within a contractual range, approximately every 7 to 35 days. Historically, the carrying value of ARS approximated their fair value due to the frequent resetting of the interest rates at auction. With the tightening of the credit markets beginning in calendar 2008, ARS have failed to settle at auction resulting in an illiquid market for these types of securities for an extended period of time. While there are some recent indications that a market is starting to materialize for these securities, though at a much reduced level than the pre-2008 period, the Company cannot predict when liquidity will return for these securities. The Company has reclassified the securities from current assets to other non-current assets due to the unpredictable nature and the illiquidity of the market for the securities.

The Company currently engages the services of an independent third-party valuation firm to assist the Company in estimating the current fair value of the ARS using a discounted cash flow analysis and an assessment of secondary markets, as well as other factors. As this fair value is based on significant inputs not observable in the market, the Company has classified these securities as Level 3 in the tables above. The inputs to the discounted cash flow model include market interest rates and a discount factor to reflect the illiquidity of the investments. The discount rates used in the analysis were based on market rates for similar liquid tax-exempt securities with comparable ratings and maturities. Due to the uncertainty surrounding the timing of future liquidity, the discount rates were adjusted further to reflect the illiquidity of the investments. The Company's valuation is sensitive to market conditions and management's judgment. A 100 basis point increase in the discount rate would result in a decrease in the fair value of approximately $200. During the second quarter of fiscal 2012, the Company received an updated estimate for the current fair value of these securities and based on this estimation and other factors, the Company recorded an unrealized loss of $933, net of tax, in other comprehensive income in the second quarter of fiscal 2012. At March 31, 2012, June 25, 2011 and March 26, 2011, these securities were considered as available-for-sale and were recorded at a fair value of $6,570, $7,503 and $5,435, respectively. Although the Company continues to earn and collect interest on these investments at the maximum contractual rate, the estimated fair value of ARS cannot be determined by the auction process until liquidity is restored to these markets. The Company will continue to monitor the credit worthiness of the companies that issued these securities and other appropriate factors and make such adjustments as it deems necessary to reflect the fair value of these securities. All of the ARS investments have a contractual maturity of more than five years as of March 31, 2012. The gross realized gains and losses on the sale of ARS are determined using the specific identification method.

In addition to ARS, as of September 25, 2010, the Company held a total of $560 of collateralized debt obligations backed primarily by U.S. Treasury obligations. In the second quarter of fiscal 2011, the Company sold its collateralized debt obligations for proceeds of $560. As of December 25, 2010, the Company no longer held any collateralized debt obligations.

As a result of the acquisition of CanAm completed on January 6, 2012, the Company recorded a contingent consideration liability of $2,900 based upon the estimated fair value of contingent payments to the seller pending the Company's future execution of a promotion agreement with a third party related to a certain diabetes care product. The fair value measurements for this liability are valued using Level 3 inputs. Based on the terms of the acquisition agreement, the Company will pay the seller $2,000 upon the Company's execution of the promotion agreement with the third party. Additional consideration, not to exceed $5,000, is to be paid in an amount equal to the gross revenue associated with the promotion agreement during the first year subsequent to the endorsement of the agreement. The Company estimated the fair value of the contingent consideration using probability assessments with respect to the timing of executing the agreement with the third party, along with the expected future cash flows during the first year subsequent to the endorsement of the agreement. This fair value is based on significant inputs not observable in the market and will be evaluated each quarter.

The following table presents a rollforward of the assets and liabilities measured at fair value using unobservable inputs (Level 3) at March 31, 2012:



Assets:	Investment Securities (Level 3)
Balance as of June 25, 2011	$	7,503
Unrealized loss on ARS	(933		)
Balance as of March 31, 2012	$	6,570

Liabilities:	Contingent Consideration (Level 3)
Balance as of June 25, 2011	$	—
Transfers in to Level 3	2,900
Balance as of March 31, 2012	$	2,900