Note 11 - Fair Value

3 Months Ended

Aug. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

11. 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.

	As of August 31, 2014
	Fair Value Measurements of Assets (Liabilities) Using								Carrying
	(Level 1)		(Level 2)			(Level 3)			Amount
	(in thousands of dollars)
Derivative instruments	$	-		(1,108	)		-			(1,108	)
Contingent consideration liability	$	-		-			(11,579	)		(11,579	)

	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	)

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 $17.4 million and $23.6 million of cash and cash equivalents at August 31, 2014 and May 31, 2014, respectively, approximately 15% and 19% 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 $442.8 million and $656.7 million at August 31, 2014, respectively, based on recent trades of similar instruments. The fair value of the Notes and the Term Loan Facility was estimated to be $446.3 million and $656.7 million at May 31, 2014, respectively, based on the fair value of these instruments at that time.

Management believes that these liabilities can be liquidated without restriction.

At August 31, 2014, the Company had $11.6 million in contingent consideration liabilities for earn-out provisions resulting from acquisitions completed since May 30, 2014. The fair value of these contingent consideration liabilities 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 calculations were the cumulative probability of success, discount rate and time of payments. 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 payments. As of August 31, 2014, $0.2 million of the contingent consideration liability was included in Accrued expenses and other current liabilities and $11.4 million was included in Other long-term liabilities on the Company’s consolidated balance sheet. As of May 31, 2014, the contingent consideration liability was included in Other long-term liabilities on the Company’s consolidated balance sheet.

As of the beginning of fiscal 2014, the Company had a contingent consideration liability of $4.5 million for an earn-out provision resulting from the LIFECODES acquisition, which was written down by $1.3 million in the first quarter of fiscal 2014, and written down to zero by the end of fiscal 2014. The adjustment to the estimated fair value amount was reflected as a gain in the acquisition-related items on the Company’s consolidated statements of operations.

The changes in the contingent consideration liability are summarized in the following table (in thousands):

	Three Months Ended			Twelve Months Ended
	August 31, 2014			May 31, 2014
Balance at the beginning of the period	$	(11,300	)		(4,504	)
Additions due to acquisitions		(156	)		(11,300	)
Change in fair value		-			4,638
Accretion of fair value		(123	)		(134	)
Balance at the end of the period	$	(11,579	)		(11,300	)