Note 15 - Fair Value

12 Months Ended

May 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

15. FAIR VALUE

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis 

	As of May 31, 2014
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands of dollars)
Derivative instruments	$	-		(1,357	)		-			(1,357	)
Contingent consideration liability	$	-		-			(11,300	)		(11,300	)

	As of May 31, 2013
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands of dollars)
Derivative instruments	$	-		(1,906	)		-			(1,906	)
Contingent consideration liability	$	-		-			(4,504	)		(4,504	)

The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short-term maturity of these instruments. Of the $23.6 million and $29.4 million of cash and cash equivalents at May 31, 2014 and 2013, respectively, approximately 19% and 38% was located in the U.S., respectively.

The Company uses derivative financial instruments, primarily in the form of floating-to-fixed interest rate swap agreements, in order to mitigate the risks associated with interest rate fluctuations on the Company’s floating rate indebtedness. The estimated fair value of the Company’s derivative instruments is based on quoted market prices for similar instruments (a level 2 input) and are reflected at fair value in the consolidated balance sheets. The level 2 inputs used to calculate fair value were interest rates, volatility and credit derivative markets. The Company’s current and long-term derivative financial instrument liabilities are included in accrued interest and interest rate swap liability and other long-term liabilities in the Company’s consolidated balance sheets.

The fair value of the Company’s Notes and the Term Loan Facility (collectively referred to as the Company’s debt instruments) is estimated to be $446.3 million and $656.7 million at May 31, 2014, respectively, based on recent trades of these instruments. The fair value of the Notes and the Term Loan Facility was estimated to be $452.3 million and $669.1 million at May 31, 2013, respectively, based on the fair value of these instruments at that time.

Management believes that these liabilities can be liquidated without restriction.

The Company had a contingent consideration liability for an earn-out provision resulting from the LIFECODES acquisition completed in the fourth quarter of fiscal 2013. The fair value of this contingent consideration liability was estimated to be $4.4 million as of the acquisition date, and was determined by applying a form of the income approach (a level 3 input), based upon the probability weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the financial performance target. Assumptions included in the calculation were the cumulative probability of success, discount rate and time of payment. The present value of the expected payment considers the time at which the obligation was expected to be settled and a discount rate that reflects the risk associated with the performance payment. Based upon information available during fiscal 2014, management determined that the likelihood of achieving the financial performance target was lower than previously estimated and therefore the fair value of this contingent consideration liability decreased by $4.4 million in fiscal 2014. The adjustment to the estimated fair value amounts is reflected as a gain in the acquisition related items on the Company’s consolidated statements of operations. The contingent consideration liability was included in accrued expenses and other current liabilities in the Company’s consolidated balance sheets as of May 31, 2013.

The Company has a contingent consideration liability for earn-out provisions resulting from the Organ-i acquisition completed on May 30, 2014. The fair value of this contingent consideration liability was estimated to be $11.3 million as of the acquisition date, and was determined by applying a form of the income approach (a level 3 input), based upon the probability weighted projected payment amounts discounted to present value at a rate appropriate for the risk of achieving the financial performance target. Assumptions included in the calculation were the cumulative probability of success, discount rate and time of payment. The present value of the expected payments considers the time at which the obligations are expected to be settled and a discount rate that reflects the risk associated with the performance payment. The contingent consideration is record as other long-term liabilities.

These changes in the contingent consideration liability are summarized in the following table:

	Twelve Months Ended
	May 31, 2014			May 31, 2013
Balance at the beginning of the period	$	(4,504	)		-
Additions due to acquisitions		(11,300	)		(4,400	)
Change in fair value		4,638			-
Accretion of fair value		(134	)		(104	)
Balance at the end of the period	$	(11,300	)		(4,504	)