Fair Value Measurements

9 Months Ended

Sep. 29, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 12 – 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. There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented.

The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis:

	Total Fair Value			Level 1		Level 2		Level 3
September 29, 2012:
Assets:
Assets held in rabbi trusts	$	33,678		$	21,750	$	11,928	$	-
Available for sale securities	$	7,095			7,095		-		-
	$	40,773		$	28,845	$	11,928	$	-
Liabilities:
Embedded derivative - convertible debentures due 2040	$	(608	)	$	-	$	-	$	(608	)
Embedded derivative - convertible debentures due 2041	$	(407	)		-		-		(407	)
Embedded derivative - convertible debentures due 2042	$	(265	)		-		-		(265	)
	$	(1,280	)	$	-	$	-	$	(1,280	)
December 31, 2011:
Assets:
Assets held in rabbi trusts	$	31,698		$	20,569	$	11,129	$	-
Available for sale securities	$	6,776			6,776		-		-
	$	38,474		$	27,345	$	11,129	$	-
Liabilities:
Embedded derivative - convertible debentures due 2040	$	(594	)	$	-	$	-	$	(594	)
Embedded derivative - convertible debentures due 2041	$	(392	)		-		-		(392	)
	$	(986	)	$	-	$	-	$	(986	)

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 period. 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 holds available for sale investments in debt securities that are intended to fund a portion of its other postretirement benefit obligations outside of the United States.  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, due 2041, and due 2042, issued by the Company on November 9, 2010, May 13, 2011, and May 31, 2012, 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 liabilities, at September 29, 2012 and December 31, 2011 is approximately $653,300 and $533,900, respectively, compared to its carrying value, excluding the derivative liabilities, of $387,760, and $398,068, 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.