FAIR VALUE MEASUREMENTS

Accounting Standards Codification ("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 December 29, 2012, June 30, 2012, and December 31, 2011:



	Fair Value Measurements as of December 29, 2012 Using:
	Total as of December 29, 2012		Quoted Prices In Active Markets (Level 1)		Prices With Other Observable Inputs (Level 2)		Prices With Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	376,471	$	376,471	$	—	$	—
Investment securities	7,507		—		—		7,507
Foreign currency forward contracts, net	7,492		—		7,492		—
Funds associated with Israeli post employment benefits	16,059		—		16,059		—
Total	$	407,529	$	376,471	$	23,551	$	7,507
Liabilities:
Contingent consideration	$	900	$	—	$	—	$	900
Interest rate swap agreements	13,819		—		13,819		—
Total	$	14,719	$	—	$	13,819	$	900



	Fair Value Measurements as of June 30, 2012 Using:
	Total as of June 30, 2012		Quoted Prices In Active Markets (Level 1)		Prices With Other Observable Inputs (Level 2)		Prices With Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	479,548	$	479,548	$	—	$	—
Investment securities	6,470		—		—		6,470
Funds associated with Israeli post employment benefits	14,973		—		14,973		—
Total	$	500,991	$	479,548	$	14,973	$	6,470
Liabilities:
Contingent consideration	$	2,900	$	—	$	—	$	2,900
Interest rate swap agreements	14,706		—		14,706		—
Foreign currency forward contracts, net	5,567		—		5,567		—
Total	$	23,173	$	—	$	20,273	$	2,900



	Fair Value Measurements as of December 31, 2011 Using:
	Total as of December 31, 2011		Quoted Prices In Active Markets (Level 1)		Prices With Other Observable Inputs (Level 2)		Prices With Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	421,653	$	421,653	$	—	$	—
Investment securities	6,570		—		—		6,570
Funds associated with Israeli post employment benefits	15,371		—		15,371		—
Total	$	443,594	$	421,653	$	15,371	$	6,570
Liabilities:
Foreign currency forward contracts, net	$	5,957	$	—	$	5,957	$	—
Interest rate swap agreements	13,433		—		13,433		—
Total	$	19,390	$	—	$	19,390	$	—

The carrying amounts of the Company’s financial instruments, consisting of cash and cash equivalents, investment securities, accounts receivable, accounts payable, short-term debt and variable rate long-term debt, approximate their fair value. As of December 29, 2012, the carrying value and fair value of the Company’s fixed rate long-term debt were $965,000 and $1,040,710, respectively. As of June 30, 2012, the carrying value and fair value of the Company’s fixed rate long-term debt were $965,000 and $1,050,343, respectively. As of December 31, 2011, the carrying value and fair value of the Company’s fixed rate long-term debt were $965,000 and $1,039,265, 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 six months ended December 29, 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 December 29, 2012, the Company had $16,059 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 seven 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 a market has materialized for these securities, though at a much reduced level than the pre-2008 period, the Company cannot predict when liquidity will fully return to historical levels for these securities. The Company has classified the securities as other non-current assets due to the unpredictable nature and the illiquidity of the market for the securities.

The Company's process to estimate the fair value of these investments includes a review of both data from an independent third-party valuation firm and quotations from secondary market brokers, as well as other factors. The third-party valuation firm has been engaged 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 the estimated 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 $350. At December 29, 2012, June 30, 2012, and December 31, 2011, these securities were considered as available-for-sale and were recorded at a fair value of $7,507, $6,470 and $6,570, respectively. During the second quarter of fiscal 2013, the Company received an updated estimate for the current fair value of these securities, and based on this estimation and other factors, recorded an unrealized gain of $1,037, net of tax, in other comprehensive income. In the second quarter of fiscal 2012, the Company recorded an unrealized loss of $933, net of tax, in other comprehensive income related to the ARS. Although the Company continued 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 fully 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 December 29, 2012. The gross realized gains and losses on the sale of ARS are determined using the specific identification method.

As a result of the acquisition of CanAm completed on January 6, 2012, the Company recorded a contingent consideration liability of $2,900 on the acquisition date 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. The terms of the acquisition agreement required the Company to pay the seller $2,000 upon the Company's execution of the promotion agreement with the third-party. During the first quarter of fiscal 2013, the Company executed the promotion agreement with the third-party and paid the seller the initial consideration of $2,000. 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. The assumptions associated with expected future cash flows will be evaluated each quarter. During the second quarter of fiscal 2013, the Company updated the estimated fair value of the contingent consideration and determined there was no change to the remaining fair value of $900.

The following table presents a rollforward of the assets and liabilities measured at fair value using unobservable inputs (Level 3) at December 29, 2012:



Assets:	Investment Securities (Level 3)
Balance as of June 30, 2012	$	6,470
Unrealized gain on ARS	1,037
Balance as of December 29, 2012	$	7,507

Liabilities:	Contingent Consideration (Level 3)
Balance as of June 30, 2012	$	2,900
Payments	(2,000		)
Balance as of December 29, 2012	$	900