Financial Instruments Measured At Fair Value

12 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Financial Instruments Measured At Fair Value

FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

The Company’s financial assets and liabilities measured at fair value are required to be grouped in one of three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:

• Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

• Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

• Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following table presents by level within the fair value hierarchy assets and liabilities measured at fair value on a recurring basis as of June 30, 2012:

	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Cash equivalents	$	300	—		$	300	—
Forward foreign currency contracts	361		—		361		—
Available for sale securities	6,725		$	6,725	—		—
	$	7,386	$	6,725	$	661	—
Liabilities:
Contingent consideration, of which $6,207 is noncurrent	$	6,582	—		—		$	6,582
Total	$	6,582	—		—		$	6,582

The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2011:

	Total		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Cash equivalents	$	7,300	—		$	7,300	—
Available for sale securities	6,390		$	6,390	—		—
	$	13,690	$	6,390	$	7,300	—
Liabilities:
Forward foreign currency contracts	$	766	—		$	766	—
Contingent consideration, of which $13,244 is noncurrent	37,145		—		—		$	37,145
Total	$	37,911	—		$	766	$	37,145

Available for sale securities consist of the Company’s investment in YHS (see Note 13). Fair value is measured using the market approach based on quoted prices. The Company utilizes the income approach to measure fair value for its foreign currency forward contracts. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices.

In connection with the acquisitions of Cully & Sully in April 2012, Daniels in October 2011, GG UniqeFiber AS in January 2011, the assets and business of Greek Gods in July 2010 and the assets and business of World Gourmet in June 2010, payment of a portion of the respective purchase prices are contingent upon the achievement of certain operating results. We estimated the original fair value of the contingent consideration as the present value of the expected contingent payments, determined using the weighted probabilities of the possible payments. We are required to reassess the fair value of contingent payments on a periodic basis. During the fiscal year ended June 30, 2012, the Company reassessed the fair value of the contingent consideration for each of these acquisitions, which resulted in a reduction of expense related to the Daniels acquisition of $15,527. Additionally, during fiscal 2012, the Company finalized the payment of contingent consideration related to the acquisition of the Sensible Portions brand which resulted in additional expense of $900. During the fiscal year ended June 30, 2011, additional expense of $443 was recorded related to the Greek Gods acquisition and a reduction of expense of $4,620 was recorded related to the World Gourmet acquisition. The significant inputs used in these estimates include a weighted average discount rate of 12.1% (which is based on a risk analysis of the respective liabilities) and numerous possible scenarios for the payments based on the contractual terms of the contingent consideration, for which probabilities are assigned to each scenario. Although we believe our assumptions are reasonable, different assumptions or changes in the future may result in different estimated amounts. A one percentage point change in the discount rates used would result in a change to the recorded liability of approximately $100 as of June 30, 2012.

The following table summarizes the Level 3 activity:

	Fiscal Year ended June 30,
	2012			2011
Balance at beginning of year	$	37,145		$	28,580
Fair value of initial contingent consideration	19,000			25,950
Contingent consideration adjustment and accretion of interest expense, net	(15,131		)	(2,486		)
Contingent consideration paid	(33,230		)	(15,400		)
Translation adjustment	(1,202		)	501
Balance at end of year	$	6,582		$	37,145

There were no transfers of financial instruments between the three levels of fair value hierarchy during the fiscal years ended June 30, 2012 or 2011.

Cash Flow Hedges

The Company primarily has exposure to changes in foreign currency exchange rates relating to certain anticipated cash flows from its international operations. To reduce that risk, the Company may enter into certain derivative financial instruments, when available on a cost-effective basis, to manage such risk. Derivative financial instruments are not used for speculative purposes.

The Company utilizes foreign currency contracts to hedge forecasted transactions, primarily intercompany transactions, on certain foreign currencies and designates these derivative instruments as foreign currency cash flow hedges when appropriate. The notional and fair value amounts of the Company’s foreign exchange derivative contracts at June 30, 2012 were $16,550 and $361 of net assets. There were $13,650 of notional amount and $766 of net liabilities of foreign exchange derivative contracts outstanding at June 30, 2011. The fair value of these derivatives is included in prepaid expenses and other current assets and accrued expenses and other current liabilities in the Consolidated Balance Sheets. For these derivatives, which qualify as hedges of probable forecasted cash flows, the effective portion of changes in fair value is temporarily reported in accumulated OCI and recognized in earnings when the hedged item affects earnings. These foreign exchange contracts have maturities over the next 13 months.

The Company assesses effectiveness at the inception of the hedge and on a quarterly basis. These assessments determine whether derivatives designated as qualifying hedges continue to be highly effective in offsetting changes in the cash flows of hedged items. Any ineffective portion of change in fair value is not deferred in accumulated OCI and is included in current period results. For the fiscal years ended June 30, 2012 and 2011, the impact of hedge ineffectiveness on earnings was not significant. The Company will discontinue cash flow hedge accounting when the forecasted transaction is no longer probable of occurring on the originally forecasted date or when the hedge is no longer effective. There were no discontinued foreign exchange hedges for the fiscal years ended June 30, 2012 and 2011.

The impact on OCI from foreign exchange contracts that qualified as cash flow hedges was as follows:

	Fiscal Year ended June 30,
	2012			2011
Net carrying amount at beginning of year	$	(572	)	$	152
Cash flow hedges deferred in OCI	1,127			(975		)
Changes in deferred taxes	(285		)	251
Net carrying amount at end of year	$	270		$	(572	)