Note 14 - Fair Value Measurements

9 Months Ended

Aug. 27, 2016

Note 14: Fair Value Measurements

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

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Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

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Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

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Level 3: Unobservable inputs that reflect management’s assumptions, and include situations where there is little, if any, market activity for the asset or liability.

Balances Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of August 27, 2016 and November 28, 2015, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

	August 27,		Fair Value Measurements Using:
Description	2016		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	1,816	$	1,816	$	-	$	-
Derivative assets		2,931		-		2,931		-
Interest rate swaps		2,337		-		2,337		-

Liabilities:
Derivative liabilities	$	7,501	$	-	$	7,501	$	-
Contingent consideration liability		10,192		-		-		10,192
Cash-flow hedges		2,048		-		2,048		-

	November 28,		Fair Value Measurements Using:
Description	2015		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	1,698	$	1,698	$	-	$	-
Derivative assets		15,185		-		15,185		-
Interest rate swaps		3,395		-		3,395		-
Cash-flow hedges		5,384		-		5,384		-

Liabilities:
Derivative liabilities	$	4,744	$	-	$	4,744	$	-
Contingent consideration liability		10,854		-		-		10,854

We use the income approach in calculating the fair value of our contingent consideration liabilities using a real option model with Level 3 inputs. The expected cash flows are affected by various significant judgments and assumptions, including revenue growth rates, profit margin percentages, volatility and discount rate, which are sensitive to change. Estimates of fair value are inherently uncertain and represent only management’s reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. The valuation of the contingent consideration liability related to the acquisition of Tonsan Adhesive, Inc. resulted in a fair value of $10,221 as of August 27, 2016 and a $2,018 mark to market adjustment recorded as a credit to selling, general and administrative in the Condensed Consolidated Statement of Income as of August 27, 2016.

Contingent consideration liabilities
Level 3 balance November 28, 2015	$	10,854
Opening balance sheet adjustment		700
Mark to market adjustment		(2,055	)
Foreign currency translation adjustment		693
Level 3 balance August 27, 2016	$	10,192

- 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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