Earn-out Liability Acquisition of Orchard Valley Harvest, Inc.

3 Months Ended

Sep. 29, 2011

Earn-out Liability Acquisition of Orchard Valley Harvest, Inc. [Abstract]

Earn-out Liability Acquisition of Orchard Valley Harvest, Inc.

Note 3 — Earn-out Liability — Acquisition of Orchard Valley Harvest, Inc.

Under terms of the Purchase Agreement by and between us and Orchard Valley Harvest, Inc. dated May 5, 2010 (the “Purchase Agreement”), future consideration up to $10,079 may be paid ($5,079 of which was earned in calendar 2010, the remainder of which is contingent upon performance of the acquired business for the 2011 calendar year), which is in addition to the $32,887 cash purchase price paid, of which $115 was paid in the first quarter of fiscal 2011. The following table summarizes the potential earn-outs to be paid under the terms of the Purchase Agreement. Net retail sales include packaged sales to the consumer distribution channel. Net sales are comprised of net retail sales plus bulk sales of products.

	Earn-out
Earn-out Measurement	Payment
Calendar 2010 net retail sales greater than $25,500	$	79
Calendar 2010 net sales greater than $41,500 and calendar 2010 net retail sales greater than $36,500		5,000
Calendar 2011 net retail sales greater than $43,000		2,500
Calendar 2010 and calendar 2011 net retail sales greater than $105,000		2,500
Total	$	10,079

The earn-out liability recorded as of September 29, 2011 represents the fair value of the expected future payments, which was estimated by applying the income approach. The fair value is based on significant inputs that are not observable in the market, which ASC 820 refers to as Level 3 inputs. Key assumptions included a discount rate of 3.25% and a probability adjusted level of future sales performance levels for each periodic performance benchmark that triggers an amount payable under the Purchase Agreement. The two earn-out measurements based upon calendar 2010 net sales and net retail sales were both achieved in calendar 2010. Under terms of the Purchase Agreement, we paid $4,135 of this amount during the third quarter of fiscal 2011 and the remaining $944 is expected to be paid in November 2011, during the second quarter of fiscal 2012.

We have established a current liability of $3,417 as of September 29, 2011 related to (i) the $944 remaining earn-out payment we will be required to make related to calendar year 2010, and (ii) $2,473 related to the anticipated earn-out payment we will be required to make related to calendar year 2011. The final earn-out liability will be measured as of December 29, 2011. The change in the fair value measurement of the earn-out liability during the first quarter of fiscal 2012 was not material.