Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

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Fair Value Measurement
 9 Months Ended
May 31, 2012
Fair Value Measurement

Note 8. Fair Value Measurement

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 sheet are as follows (in thousands):

 

     May 31, 2012     August 31, 2011  

Level 1 Valuation:

     

Cash equivalents

    $ 681      $ 1,958   

Investments

      1,514        1,464   

Level 2 Valuation:

     

Foreign currency forward contracts

    $ (1,790 )    $ (81 ) 

Interest rate swap contracts

      —          (4,552 ) 

The fair value of the Company’s accounts receivable, accounts payable and variable rate debt approximated book value as of May 31, 2012 and August 31, 2011 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 August 31, 2011 was $127.9 million, while the fair value of the Company’s outstanding $250.0 million of 6.875% Senior Notes was $252.5 million. The fair value of the Company’s outstanding $300.0 million of 5.625% Senior Notes at May 31, 2012 was $306.8 million. These fair values were based on quoted market prices and are therefore classified as Level 2 within the valuation hierarchy.