Fair Value of Financial Instruments

12 Months Ended

Jun. 30, 2016

Note 8—Fair Value of Financial Instruments

The following table sets forth the Company’s financial assets and liabilities carried at fair value on a recurring basis by level within the fair value hierarchy:


	Successor
As of June 30, 2016	Level 1		Level 2		Level 3		Total
Assets:
Available for sale securities	$	261	$	—	$	—	$	261
Foreign currency contracts		—		435		—		435

Liabilities:
Interest rate swaps		—		3,573		—		3,573
Foreign currency contracts		—		323		—		323
Contingent consideration		—		—		1,265		1,265


	Successor
As of June 30, 2015	Level 1		Level 2		Level 3		Total
Assets:
Available for sale securities	$	253	$	—	$	—	$	253
Foreign currency contracts		—		57		—		57

Liabilities:
Interest rate swaps		—		2,988		—		2,988
Foreign currency contracts		—		34		—		34

Available for sale securities represent an investment in Zoo Digital Group PLC (“Zoo”), a provider of software and software-led services for the filmed entertainment and pharmaceutical markets, and is reported at fair value based on quoted market prices. The fair value of interest rate swaps and foreign currency contracts are based on pricing models that rely on market observable inputs such as yield curves, currency exchange rates and forward prices.

The Company maintains two amortizing interest rate swaps that mature in December 2017. The swaps are being used to hedge the exposure to changes in the market LIBOR or EURIBOR rates. At June 30, 2016 and 2015, one of the swaps had a notional amount of £84,608 and £113,970 respectively, whereby the Company pays a fixed rate of interest of 1.1649% and receives a variable rate based on LIBOR on the amortizing notional amount. The other swap had a notional amount of €97,786 and €131,719, respectively, whereby the Company pays a fixed rate of interest of 1.0139% and receives a variable rate based on EURIBOR on the amortizing notional amount. As of June 30, 2016 and 2015, the swaps had a negative fair value of $3,573 and $2,988, respectively, which is included in other long-term liabilities in the consolidated balance sheets. The Company has not designated these interest rate swaps as effective hedges and, as such, the change in the fair value each period is recorded in other (expense) income, net.

In connection with the acquisition of BluePrint in July 2015, payment of a portion of the purchase price is contingent upon the achievement of certain operating results (see Note 4). The Company estimated the acquisition date fair value of the contingent consideration as the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. The Company is required to reassess the fair value of contingent payments on a periodic basis. The significant inputs used in the estimate of this obligation includes 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 liability. Although the Company believes its estimates and assumptions are reasonable, different assumptions, including those regarding the operating results of the respective businesses, or changes in the future may result in different estimated amounts. Other than translation adjustments, there were no changes in the balance of the contingent consideration during the fiscal year ended June 30, 2016.

During the fiscal year ended June 30, 2016, the Company recorded an impairment charge of $2,026 related to certain property, plant and equipment at the Stuttgart, Germany facility (part of the Europe operating segment) as a result of the indicator of impairment related to the announced decision to close this location. The impairment charge was based on the excess of the carrying value of such assets over their estimate fair values. The estimated fair values of the land and building portion of the impairment charge were determined based on level 3 measurements, while the estimated fair values of machinery and equipment were based on level 3 measurements.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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