7. FAIR VALUE MEASUREMENTS
Derivative Instruments and Hedging Activities
Our derivative instruments are valued using third-party broker or counterparty statements, derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy.
Restructuring Charges
We estimated the fair value of our restructuring charges using a discounted cash flow model. The cash flows consist of the future lease payment obligations required under the lease agreements. Future cash flows also include estimated property taxes through the remainder of the lease terms, which are valued based upon historical tax payments. The future cash flows were discounted using a rate of 3%. A significant assumption used in determining the amount of the estimated liability for closing a facility is the estimated liability for future lease payments on vacant facilities. We determine our estimate of sublease payments based on our ability to successfully negotiate early termination agreements with landlords or a third-party broker or management’s assessment of our ability to sublease the facility based upon market conditions in which the facility is located. If the assumptions regarding early termination and the timing and amounts of sublease payments prove to be inaccurate, we may be required to record additional losses, or conversely, a future gain, in the Condensed Consolidated Statements of Operations. Severance payments that occur from reductions in workforce are in accordance with our postemployment plans and/or statutory requirements that are communicated to all employees upon hire date; therefore, severance liabilities are recognized when they are determined to be probable and reasonably estimable. Given that the restructuring charges were valued using our internal estimates using a discounted cash flow model; we have classified the accrued restructuring costs as Level 3 in the fair value hierarchy.
Long-Lived Assets
We recorded impairment losses on certain long-lived assets for which the carrying value of those assets is not recoverable by future cash flows. For assets that were not recoverable through future cash flows or could not be used in another facility, we reduced the carrying value to fair value. We estimated our future cash flows using internal estimates. Given that the impairment losses were valued using internal estimates, we have classified the remaining fair value of long-lived assets as Level 3 in the fair value hierarchy.
Fair Value Hierarchy
The following tables set forth our assets and liabilities measured at fair value on a recurring basis and a non-recurring basis by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
Assets Measured at Fair Value
on a Recurring Basis as of June 30, 2011 |
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
$ |
— |
|
$ |
99 |
|
$ |
— |
|
$ |
99 |
|
Total fair value of assets measured on a recurring basis |
|
$ |
— |
|
$ |
99 |
|
$ |
— |
|
$ |
99 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
$ |
— |
|
$ |
72 |
|
$ |
— |
|
$ |
72 |
|
Total fair value of liabilities measured on a recurring basis |
|
$ |
— |
|
$ |
72 |
|
$ |
— |
|
$ |
72 |
|
|
|
Assets Measured at Fair Value
on a Recurring Basis as of December 31, 2010 |
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
$ |
— |
|
$ |
1,078 |
|
$ |
— |
|
$ |
1,078 |
|
Total fair value of assets measured on a recurring basis |
|
$ |
— |
|
$ |
1,078 |
|
$ |
— |
|
$ |
1,078 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
$ |
— |
|
$ |
91 |
|
$ |
— |
|
$ |
91 |
|
Total fair value of liabilities measured on a recurring basis |
|
$ |
— |
|
$ |
91 |
|
$ |
— |
|
$ |
91 |
|
|
|
Assets and Liabilities Measured at Fair Value on a
Non-Recurring Basis as of June 30, 2011 |
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
Assets held for sale |
|
$ |
— |
|
$ |
— |
|
$ |
5,103 |
|
$ |
5,103 |
|
Property, plant and equipment, net |
|
— |
|
— |
|
806 |
|
806 |
|
Total fair value of assets measured on a non-recurring basis |
|
$ |
— |
|
$ |
— |
|
$ |
5,909 |
|
$ |
5,909 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Accrued restructuring costs |
|
$ |
— |
|
$ |
— |
|
$ |
5,006 |
|
$ |
5,006 |
|
Total fair value of liabilities measured on a non-recurring basis |
|
$ |
— |
|
$ |
— |
|
$ |
5,006 |
|
$ |
5,006 |
|
|
|
Assets and Liabilities Measured at Fair Value on a
Non-Recurring Basis as of December 31, 2010 |
|
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
Assets held for sale |
|
$ |
— |
|
$ |
— |
|
$ |
5,158 |
|
$ |
5,158 |
|
Property, plant and equipment, net |
|
— |
|
— |
|
10,565 |
|
10,565 |
|
Total fair value of assets measured on a non-recurring basis |
|
$ |
— |
|
$ |
— |
|
$ |
15,723 |
|
$ |
15,723 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Accrued restructuring costs |
|
$ |
— |
|
$ |
— |
|
$ |
2,760 |
|
$ |
2,760 |
|
Total fair value of liabilities measured on a non-recurring basis |
|
$ |
— |
|
$ |
— |
|
$ |
2,760 |
|
$ |
2,760 | |