Financial Instruments Measured At Fair Value

12 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Financial Instruments Measured At Fair Value

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company’s financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

• Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table presents by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of June 30, 2013:

	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Cash equivalents	$	6,200	—		$	6,200	—
Forward foreign currency contracts	1,066		—		1,066		—
Available for sale securities	11,237		$	11,237	—		—
	$	18,503	$	11,237	$	7,266	—
Liabilities:
Contingent consideration, of which $12,531 is noncurrent	$	22,814	—		—		$	22,814
Total	$	22,814	—		—		$	22,814

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2012:

	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Cash equivalents	$	300	—		$	300	—
Forward foreign currency contracts	361		—		361		—
Available for sale securities	6,725		$	6,725	—		—
	$	7,386	$	6,725	$	661	—
Liabilities:
Contingent consideration, of which $6,207 is noncurrent	$	6,582	—		—		$	6,582
Total	$	6,582	—		—		$	6,582

Available for sale securities consist of the Company’s investment in YHS (see Note 14). Fair value is measured using the market approach based on quoted prices. The Company utilizes the income approach to measure fair value for its foreign currency forward contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices.

In connection with the acquisitions of BluePrint in December 2012, Cully & Sully in April 2012, Daniels in October 2011, GG UniqeFiber AS in January 2011, Greek Gods in July 2010 and the Sensible Portions business in June 2010, payment of a portion of the respective purchase prices are contingent upon the achievement of certain operating results. We estimated the original fair value of the contingent consideration as the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. We are required to reassess the fair value of contingent payments on a periodic basis. During the fiscal year ended June 30, 2013, the Company’s reassessment resulted in additional expense of $2,337 related to BluePrint. During the fiscal year ended June 30, 2012, the Company’s reassessment resulted in a reduction of expense related to the Daniels acquisition of $15,527. Additionally, during fiscal 2012, the Company finalized the payment of contingent consideration related to the acquisition of the Sensible Portions brand which resulted in additional expense of $900. The significant inputs used in these estimates include numerous possible scenarios for the payments based on the contractual terms of the contingent consideration, for which probabilities are assigned to each scenario, which are then discounted based on an individual risk analysis of the respective liabilities (weighted average discount rate of 8.2% for the outstanding liabilities as of June 30, 2013). Although we believe our assumptions are reasonable, different assumptions or changes in the future may result in different estimated amounts. A one percentage point change in the discount rates used would result in a change to the recorded liability of approximately $300 as of June 30, 2013.

The following table summarizes the Level 3 activity:

	Fiscal Year ended June 30,
	2013		2012
Balance at beginning of year	$	6,582	$	37,145
Fair value of initial contingent consideration	13,491		19,000
Contingent consideration adjustment and accretion of interest expense, net	2,487		(15,131		)
Contingent consideration paid	—		(33,230		)
Translation adjustment	254		(1,202		)
Balance at end of year	$	22,814	$	6,582

There were no transfers of financial instruments between the three levels of fair value hierarchy during the fiscal years ended June 30, 2013 or 2012.

Cash Flow Hedges

The Company primarily has exposure to changes in foreign currency exchange rates relating to certain anticipated cash flows from its international operations. To reduce that risk, the Company may enter into certain derivative financial instruments, when available on a cost-effective basis, to manage such risk. Derivative financial instruments are not used for speculative purposes.

The Company utilizes foreign currency contracts to hedge forecasted transactions, primarily intercompany transactions, on certain foreign currencies and designates these derivative instruments as foreign currency cash flow hedges when appropriate. The notional and fair value amounts of the Company’s foreign exchange derivative contracts at June 30, 2013 were $29,916 and $1,066 of net assets. There were $16,550 of notional amount and $361 of net assets of foreign exchange derivative contracts outstanding at June 30, 2012. The fair value of these derivatives is included in prepaid expenses and other current assets and accrued expenses and other current liabilities in the Consolidated Balance Sheets. For these derivatives, which qualify as hedges of probable forecasted cash flows, the effective portion of changes in fair value is temporarily reported in accumulated OCI and recognized in earnings when the hedged item affects earnings. These foreign exchange contracts have maturities over the next 13 months.

The Company assesses effectiveness at the inception of the hedge and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of change in fair value is not deferred in accumulated OCI and is included in current period results. For the fiscal years ended June 30, 2013 and 2012, the impact of hedge ineffectiveness on earnings was not significant. The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date or when the hedge is no longer effective. There were no discontinued foreign exchange hedges for the fiscal years ended June 30, 2013 and 2012.

The impact on OCI from foreign exchange contracts that qualified as cash flow hedges was as follows:

	Fiscal Year ended June 30,
	2013			2012
Net carrying amount at beginning of year	$	270		$	(572	)
Cash flow hedges deferred in OCI	705			1,127
Changes in deferred taxes	(176		)	(285		)
Net carrying amount at end of year	$	799		$	270