FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY

12 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY

FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY

Assets and liabilities measured at fair value on our balance sheet on a recurring basis are as follows:

	September 30, 2012								September 30, 2011
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Compound embedded derivative liability	$	—	$	—	$	2,899	$	2,899	$	—	$	—	$	7,796	$	7,796
Total	$	—	$	—	$	2,899	$	2,899	$	—	$	—	$	7,796	$	7,796

There were no transfers in and out of Level 1 and Level 2 fair value measurements during fiscal year 2012.

We use a convertible bond valuation model within a lattice framework to estimate fair values of our financial instruments. The key unobservable input utilized in the model includes a discount rate of 8%.

The following table provides a reconciliation of the beginning and ending balances for the compound embedded derivative measured at fair value using significant unobservable inputs (Level 3).

	September 30,
	2012			2011
	(in thousands)
Beginning balance	$	7,796		$	15,476
Transfers in and /or out of Level 3	—			—
Purchases, sales, issuances, and settlements	—			—
Total net gains included in earnings	(4,897		)	(7,680		)
Ending balance	$	2,899		$	7,796

The compound embedded derivative liability represents the value of the equity conversion feature and a “make-whole” feature of the 2014 Debentures.

We measure the fair value of our Term A and B Loans and 2014 Debentures (“long-term debt”) carried at amortized/accreted cost quarterly for disclosure purposes. The estimated fair value of long-term debt is determined using Level 3 inputs based primarily on their comparability of their terms to the terms we could obtain, for similar instruments, in the current market.

The estimated fair values of our financial instruments are as follows:

	September 30,
	2012				2011
	Carrying value		Fair value		Carrying value		Fair value
	(in thousands)
Term A Loan	$	8,090	$	8,437	$	8,247	$	9,990
Term B Loan	7,755		9,776		7,177		8,661
2014 Debentures	42,521		46,725		40,736		45,228