Fair Value Measurements

12 Months Ended

Sep. 28, 2013

Fair Value Measurements

Fair Value Measurements

H.  Fair Value Measurements

Certain assets and liabilities are required to be recorded at fair value on a recurring basis.  The Company’s only assets and liabilities adjusted to fair value on a recurring basis are short-term investments in mutual funds and contingent consideration (see Note I).  In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities on a nonrecurring basis, generally as a result of acquisitions (see Note I) or the remeasurement of assets resulting in impairment charges.

The following table shows the assets and liabilities carried at fair value measured on a recurring basis as of September 28, 2013 and September 29, 2012 classified in one of the three levels as described in Note A:

	(000’s Omitted)
	Total Carrying Value			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of September 28, 2013:
Short-term investments in mutual funds	$	900		$	900	—		—
Investment in convertible promissory note	500			—		—		$	500
Forward foreign exchange contract	112			—		$	112	—
Contingent consideration liability	(4,960		)	—		—		(4,960		)
As of September 29, 2012:
Short-term investments in mutual funds	$	765		$	765	—		—
Contingent consideration liability	(385		)	—		—		(385		)

The contingent consideration liability at September 28, 2013 relates to the acquisition of FastPencil in April 2013 (see Note I). The fair value of the contingent consideration was determined to be Level 3 under the fair value hierarchy and was measured using a probability weighted, discounted cash flow model, which uses significant inputs which are unobservable in the market. Increases or decreases in the fair value of the contingent consideration liability would primarily result from changes in the estimated probabilities of achieving revenue targets during the earn out period.

In the third quarter of fiscal 2013, the Company invested $500,000 in a convertible promissory note issued by Nomadic Learning Limited, a start-up business focused on corporate and educational learning. The fair value of the convertible promissory note was determined to be Level 3 under the fair value hierarchy and was measured using a discounted cash flow model.  Significant unobservable inputs include estimates of future revenues and earnings and the discount rate.

The following table reflects fair value measurements using significant unobservable inputs (Level 3):

	(000’s omitted)
	Convertible Promissory Note		Contingent Consideration Liabilities
Balance at September 25, 2010	$	—	$	(920	)
Change in fair value			(165		)
Amounts paid			400
Balance at September 24, 2011	—		(685		)
Change in fair value			(100		)
Amounts paid			400
Balance at September 29, 2012	—		(385		)
Change in fair value			(275		)
Amounts paid	500		400
Acquisition of business (Note I)			(4,700		)
Balance at September 28, 2013	$	500	$	(4,960	)

During fiscal year 2011, assets remeasured at fair value on a nonrecurring basis subsequent to initial recognition are summarized below:

	Impairment Charge		Fair Value Measurement (Level 3)		Net Book Value
Fiscal year ended September 24, 2011:
Goodwill	$	8,408	—		—
Prepublication costs	200		$	7,334	$	7,334
	$	8,608	$	7,334	$	7,334

In the third quarter of fiscal 2011, the Company determined that the fair value of REA was below its carrying value using a valuation methodology based on a discounted cash flow and a market value approach (Level 3).  Key assumptions and estimates included revenue and operating income forecasts and the assessed growth rate after the forecast period. The Company recorded a pre-tax impairment charge of $8.4 million, representing all of REA’s goodwill (see Note G). In addition, an impairment charge of approximately $200,000 for prepublication costs was recorded relating to underperforming titles (see Note A).