Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 18 – Fair Value Measurements

The fair value measurement accounting guidance establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the Company’s own assumptions.

An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2011 and 2010:

	Total Fair Value
		Level 1	Level 2	Level 3
December 31, 2011
Assets:
Assets held in rabbi trusts	$31,698	$20,569	$11,129	$-
Available for sale securities	$6,776	6,776	-	-
U.S. Defined Benefit Pension Plan Assets:
Equity securities	$138,379	138,379	-	-
Fixed income securities	$93,842	40,606	53,236	-
Real Estate Investment Trust securities	$6,486	6,486	-	-
Cash and cash equivalents	$338	338	-	-
Non - U.S. Defined Benefit Pension Plan Assets:
Equity securities	$6,815	6,815	-	-
Fixed income securities	$10,173	10,173	-	-
Cash and cash equivalents	$18,556	18,556	-	-
	$313,063	$248,698	$64,365	$-
Liabilities:
Embedded derivative - convertible debentures due 2040	$(594)	-	-	(594)
Embedded derivative - convertible debentures due 2041	$(392)	-	-	(392)
	$(986)	$-	$-	$(986)
December 31, 2010
Assets:
Assets held in rabbi trusts	$25,585	$15,575	$10,010	$-
Available for sale securities	$5,736	5,736	-	-
U.S. Defined Benefit Pension Plan Assets:
Equity securities	$142,808	142,808	-	-
Fixed income securities	$87,233	39,063	48,170	-
Real Estate Investment Trust securities	$6,339	6,339	-	-
Cash and cash equivalents	$2,143	2,143	-	-
Non - U.S. Defined Benefit Pension Plan Assets:
Equity securities	$7,751	7,751	-	-
Fixed income securities	$8,538	8,538	-	-
Cash and cash equivalents	$16,172	16,172	-	-
	$302,305	$244,125	$58,180	$-
Liability:
Embedded derivative - convertible debentures due 2040	$(319)	-	-	(319)

The Company maintains non-qualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale and company-owned life insurance assets.  The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the year. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts.  The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.

The Company maintains defined benefit retirement plans in certain of its U.S. and non-U.S. subsidiaries.  The assets of the plans are measured at fair value.

Equity securities held by the U.S. defined benefit retirement plans consist of various mutual funds and exchange traded funds that are valued based on quoted market prices on the last business day of the year.  The fair value measurement of the mutual funds and exchange traded funds securities is considered a Level 1 measurement within the fair value hierarchy.

Fixed income securities held by the U.S. defined benefit retirement plans consist of exchange traded funds, investments in a group annuity contract, and a short-term investment fund.   The exchange traded funds are valued based on quoted market prices on the last business day of the year.  The fair value measurement of the exchange traded funds securities is considered a Level 1 measurement within the fair value hierarchy.  The group annuity contract consists of a general asset account and a pooled separate account.  Units of the general asset account are valued based on a discounted cash flow model using the current yields of similar instruments with comparable durations and similar credit risk.  The pooled separate accounts are valued based on the value of the underlying bond funds, which are valued at quoted market prices on the last business day of the year, with adjustments made to reflect the nature of how the investment is held.  The fair value measurement of the group annuity contract is considered a Level 2 measurement within the fair value hierarchy.  The short-term investment fund strictly invests in short-term investments, including commercial paper, certificates of deposit, U.S. government agency and instrumentality obligations, U.S. government obligations, corporate notes, and funding agreements.  The maturity date of all investments held by the short-term investment fund is within one year from the financial statement date.  There are no redemption restrictions on the plan’s investment. The fair value of the short-term investment fund has been estimated using the net asset value per share of the investment.  The fair value measurement of the short-term investment fund is considered a Level 2 measurement within the fair value hierarchy.

Real estate investments held by the U.S. defined benefit retirement plans consist of real estate investment trust securities that are valued at quoted market prices on the last business day of the year.  The fair value measurement of the real estate investments is considered a Level 1 measurement within the fair value hierarchy.

Equity securities held by the non-U.S. defined benefit retirement plans consist of equity securities that are valued based on quoted market prices on the last business day of the year.   The fair value measurement of the equity securities is considered a Level 1 measurement within the fair value hierarchy.

Fixed income securities held by the non-U.S. defined benefit retirement plans consist of government bonds and corporate notes that are valued based on quoted market prices on the last business day of the year.  The fair value measurement of the fixed income securities is considered a Level 1 measurement within the fair value hierarchy.

Cash held by the non-U.S. defined benefit retirement plans consists of deposits on account in various financial institutions.  The carrying amount of the cash approximates its fair value.

The Company holds available for sale investments in debt securities that are intended to fund a portion of its other postretirement benefit obligations outside of the U.S. and equity securities in a non-U.S. company.  The investments are valued based on quoted market prices on the last business day of the year.  The fair value measurement of the investments is considered a Level 1 measurement within the fair value hierarchy.

The convertible senior debentures, due 2040 and due 2041, issued by the Company on November 9, 2010 and May 13, 2011, respectively, contain embedded derivative features that GAAP requires to be bifurcated and remeasured each reporting period.  Each quarter, the change in the fair value of the embedded derivative features, if any, is recorded in the consolidated statements of operations.  The Company uses a derivative valuation model to derive the value of the embedded derivative features.  Key inputs into this valuation model are the Company’s current stock price, risk-free interest rates, the stock dividend yield, the stock volatility, and the debentures’ credit spread over London Interbank Offered Rate (LIBOR). The first three aforementioned inputs are based on observable market data and are considered Level 2 inputs while the last two aforementioned inputs are unobservable and thus require management’s judgment and are considered Level 3 inputs.  The fair value measurement is considered a Level 3 measurement within the fair value hierarchy.

The fair value of the long-term debt, excluding the derivative liability, at December 31, 2011 and 2010 is approximately $533,900 and $624,800, respectively, compared to its carrying value, excluding the derivative liability, of $398,068 and $431,363, respectively.  The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered level 2 inputs.

The Company’s financial instruments include cash and cash equivalents, short-term investments, accounts receivable, long-term notes receivable, short-term notes payable, and accounts payable.  The carrying amounts for these financial instruments reported in the consolidated balance sheets approximate their fair values.