Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

 v2.3.0.11
Fair Value Measurement
 9 Months Ended
May 31, 2011
Fair Value Measurement  
Fair Value Measurement

Note 10. Fair Value Measurement

In accordance with ASC No. 820, "Fair Value Measurements and Disclosures," the Company assesses the inputs used to measure the fair value of financial assets and liabilities using a three-tier hierarchy. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management's own judgments about the assumptions market participants would use in pricing the asset or liability. The Company has no financial assets or liabilities that are recorded at fair value using significant unobservable inputs (Level 3). The fair value of financial assets and liabilities included in the Condensed Consolidated Balance Sheets are as follows (in thousands):

 

     May 31, 2011     August 31, 2010  

Level 1 Valuation:

     

Cash equivalents

    $ 11,195      $ 5,092   

Investments

      1,593        1,313   

Level 2 Valuation:

     

Fair value of derivative instruments

     

Foreign currency forward contracts

    $ 156      $ 207   

Interest rate swap contracts

      (1,285 )      —     

The fair value of the Company's accounts receivable, accounts payable, short-term borrowings and variable rate long-term debt approximated book value as of May 31, 2011 and August 31, 2010 due to their short-term nature and the fact that the applicable interest rates approximated market rates of interest. The fair value of the Company's outstanding $117.8 million 2% Convertible Notes at May 31, 2011 and August 31, 2010, was $148.6 million and $126.4 million, respectively. The fair value of the Company's outstanding $250.0 million of Senior Notes at May 31, 2011 and August 31, 2010 was $255.0 million and $252.5 million, respectively. The fair values of the 2% Convertible Notes and Senior Notes were based on quoted market prices.