Fair Value Measurements | 3 Months Ended |
Sep. 30, 2013 |
Fair Value Disclosures [Abstract] | ' |
Fair Value Measurements | ' |
(7) Fair Value Measurements |
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GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly fashion between market participants at the measurement date. GAAP establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The hierarchy consists of three levels: |
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Level 1 – Quoted market prices in active markets for identical assets or liabilities; |
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Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable; and |
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Level 3 – Unobservable inputs that are not corroborated by market data. |
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On a recurring basis, Aceto measures at fair value certain financial assets and liabilities, which consist of cash equivalents, investments and foreign currency contracts. The Company classifies cash equivalents and investments within Level 1 if quoted prices are available in active markets. Level 1 assets include instruments valued based on quoted market prices in active markets which generally include corporate equity securities publicly traded on major exchanges. Time deposits are very short-term in nature and are accordingly valued at cost plus accrued interest, which approximates fair value, and are classified within Level 2 of the valuation hierarchy. The Company uses foreign currency forward contracts (futures) to minimize the risk caused by foreign currency fluctuation on its foreign currency receivables and payables by purchasing futures with one of its financial institutions. Futures are traded on regulated U.S. and international exchanges and represent commitments to purchase or sell a particular foreign currency at a future date and at a specific price. Aceto’s foreign currency derivative contracts are classified within Level 2 as the fair value of these hedges is primarily based on observable forward foreign exchange rates. At September 30, 2013 the Company had foreign currency contracts outstanding that had a notional amount of $64,378. Unrealized gains (losses) on hedging activities for the three months ended September 30, 2013 and 2012 was $381 and ($61), respectively, and are included in interest and other income, net, in the condensed consolidated statements of income. The contracts have varying maturities of less than one year. |
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Pursuant to the requirements of the Credit Agreement, the Company is required to deliver Hedging Agreements (as defined in the Credit Agreement) fixing the interest rate on not less than $20,000 of the Term Loan. Accordingly, in March 2011, the Company entered into an interest rate swap for a notional amount of $20,000, which has been designated as a cash flow hedge. The expiration date of this interest rate swap is December 31, 2015. The unrealized loss to date associated with this derivative, which is recorded in accumulated other comprehensive income in the condensed consolidated balance sheet at September 30, 2013, is $227. The remaining balance of this derivative as of September 30, 2013 is $11,250. Aceto’s interest rate swap is classified within Level 2 as the fair value of this hedge is primarily based on observable interest rates. |
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As of September 30, 2013 and June 30, 2013, the Company had $5,473 and $5,346, respectively, of contingent consideration that was recorded at fair value in the Level 3 category, which related to the acquisition of Rising, which was completed during fiscal 2011. The contingent consideration was calculated using the present value of a probability weighted income approach. |
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During the fourth quarter of each year, the Company evaluates goodwill and indefinite-lived intangibles for impairment at the reporting unit level using an undiscounted cash flow model using Level 3 inputs. Additionally, on a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived assets and certain identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. Measurements based on undiscounted cash flows are considered to be Level 3 inputs. |
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The following tables summarize the valuation of the Company’s financial assets and liabilities which were determined by using the following inputs at September 30, 2013 and June 30, 2013: |
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| | Fair Value Measurements at September 30, 2013 Using | |
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| | Quoted Prices | | | Significant | | | Significant | | | | |
in Active | Other | Unobservable | |
Markets | Observable | Inputs | |
(Level 1) | Inputs (Level 2) | (Level 3) | Total |
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Cash equivalents: | | | | | | | | | | | | |
Time deposits | | | - | | | $ | 867 | | | | - | | | $ | 867 | |
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Investments: | | | | | | | | | | | | | | | | |
Time deposits | | | - | | | | 2,165 | | | | - | | | | 2,165 | |
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Foreign currency contracts-assets (1) | | | - | | | | 461 | | | | - | | | | 461 | |
Foreign currency contracts-liabilities (2) | | | - | | | | 81 | | | | - | | | | 81 | |
Derivative liability for interest rate swap (3) | | | - | | | | 227 | | | | - | | | | 227 | |
Contingent consideration (4) | | | - | | | | - | | | $ | 5,473 | | | | 5,473 | |
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-1 | Included in “Other receivables” in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2013. | | | | | | | | | | | | | | | |
(2) Included in “Accrued expenses” in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2013. |
(3) Included in “Long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2013. |
-4 | $3,000 included in “Accrued expenses” and $2,473 included in “Long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2013. | | | | | | | | | | | | | | | |
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| | Fair Value Measurements at June 30, 2013 Using | |
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| | Quoted Prices | | | Significant | | | Significant | | | Total | |
in Active | Other | Unobservable |
Markets | Observable | Inputs |
(Level 1) | Inputs (Level 2) | (Level 3) |
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Cash equivalents: | | | | | | | | | | | | |
Time deposits | | | - | | | $ | 856 | | | | - | | | $ | 856 | |
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Investments: | | | | | | | | | | | | | | | | |
Time deposits | | | - | | | | 2,144 | | | | - | | | | 2,144 | |
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Foreign currency contracts-assets (5) | | | - | | | | 14 | | | | - | | | | 14 | |
Foreign currency contracts-liabilities (6) | | | - | | | | 173 | | | | - | | | | 173 | |
Derivative liability for interest rate swap (7) | | | - | | | | 258 | | | | - | | | | 258 | |
Contingent consideration (8) | | | - | | | | - | | | $ | 5,346 | | | | 5,346 | |
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-5 | Included in “Other receivables” in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2013. | | | | | | | | | | | | | | | |
-6 | Included in “Accrued expenses” in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2013. | | | | | | | | | | | | | | | |
-7 | Included in “Long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2013. | | | | | | | | | | | | | | | |
-8 | $1,500 included in “Accrued expenses” and $3,846 included in “Long-term liabilities” in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2013. | | | | | | | | | | | | | | | |
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The carrying values of all financial instruments classified as a current asset or current liability are deemed to approximate fair value because of the short maturity of these instruments. The fair values of the Company’s notes receivable and short-term and long-term bank loans were based upon current rates offered for similar financial instruments to the Company. |