FAIR VALUE MEASUREMENT

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements [Abstract]

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

The Company records financial instruments at fair value with unrealized gains and losses related to certain financial instruments reflected in AOCI on the consolidated balance sheets.  In addition, the Company recognizes certain liabilities at fair value.  The Company applies the market approach for recurring fair value measurements.  Accordingly, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value of financial instruments is determined by reference to various market data and other valuation techniques as appropriate. The Company believes the carrying amounts of cash and cash equivalents, accounts receivable (net of allowance for doubtful accounts), prepaid expenses and other current assets, accounts payable, accrued liabilities, income taxes payable and notes payable approximate fair value due to the short-term nature of these instruments.  The Company estimated the fair value and carrying value of total long-term debt, including the current portion, was $1,512.8 million and $1,482.6 million, respectively, at March 31, 2012.   At December 31, 2011, the Company estimated the fair value and carrying value, including the current portion, was $1,512.5 million and $1,491.4 million respectively.  The interest rate on the $450.0 million Senior Notes, the $300.0 million Senior Notes, and the $250.0 million PPN are fixed rates of 4.1%, 2.8% and 4.1%, respectively, and their fair value is based on the interest rates as of March 31, 2012. The interest rates on variable rate term loan debt and commercial paper are consistent with current market conditions, therefore the fair value of these instruments approximates their carrying values.

The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis at March 31, 2012 and December 31, 2011, which are classified as “Cash and cash equivalents,” “Prepaid expenses and other current assets,” “Other noncurrent assets, net,” “Accrued liabilities,” and “Other noncurrent liabilities” on the consolidated balance sheets.  Financial assets and liabilities that are recorded at fair value as of the balance sheet date are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	March 31, 2012
(in thousands)	Total		Level 1		Level 2		Level 3
Assets
Money market funds	$	7,932	$	7,932	$	—	$	—
Interest rate swaps	5,744		—		5,744		—
Commodity forward purchase contracts	521		—		521		—
Cross currency interest rate swaps	4,160		—		4,160		—
Foreign exchange forward contracts	7,687		—		7,687		—
Corporate convertible bonds	82,340		—		—		82,340
Total assets	$	108,384	$	7,932	$	18,112	$	82,340
Liabilities
Interest rate swaps	$	1,925	$	—	$	1,925	$	—
Cross currency interest rate swaps	216,023		—		216,023		—
Foreign exchange forward contracts	2,628		—		2,628		—
Long term debt	154,801		—		154,801		—
Contingent considerations on acquisitions	1,201		—		—		1,201
DIO equity option contracts	706		—		—		706
Total liabilities	$	377,284	$	—	$	375,377	$	1,907

	December 31, 2011
(in thousands)	Total		Level 1		Level 2		Level 3
Assets
Money market funds	$	10,516	$	10,516	$	—	$	—
Interest rate swaps	5,699		—		5,699		—
Commodity forward purchase contracts	15		—		15		—
Cross currency interest rate swaps	19,838		—		19,838		—
Foreign exchange forward contracts	8,303		—		8,303		—
Corporate convertible bonds	47,850		—		—		47,850
Total assets	$	92,221	$	10,516	$	33,855	$	47,850
Liabilities
Interest rate swaps	$	1,631	$	—	$	1,631	$	—
Commodity forward purchase contracts	259		—		259		—
Cross currency interest rate swaps	199,454		—		199,454		—
Foreign exchange forward contracts	3,898		—		3,898		—
Long term debt	154,512		—		154,512		—
Contingent considerations on acquisitions	2,917		—		—		2,917
DIO equity option contracts	419		—		—		419
Total liabilities	$	363,090	$	—	$	359,754	$	3,336

Derivative valuations are based on observable inputs to the valuation model including interest rates, foreign currency exchange rates, future commodities prices and credit risks.  The commodity contracts, certain interest rate swaps and foreign exchange forward contracts are considered cash flow hedges and certain cross currency interest rate swaps are considered hedges of net investments in foreign operations as discussed in Note 10, Financial Instruments and Derivatives.

The Company uses the income method valuation technique to estimate the fair value of the corporate bonds.  The significant unobservable inputs for valuing the corporate bonds are DIO Corporation’s stock volatility factor of approximately 40% and corporate bond rating which implies an approximately 15% discount rate on the valuation model.  Significant observable inputs used to value the corporate bonds include foreign exchange rates and DIO Corporation’s period-ending market stock price.

The Company has valued the DIO equity option contracts using a Monte Carlo simulation which uses several estimates and probability assumptions by management including the future stock price, the stock price as a multiple of DIO earnings and the probability of the sellers to reduce their shares held by selling into the open market.  The fair value of equity option contracts are reported in “Other noncurrent liabilities,” on the consolidated balance sheets and changes in the fair value are reported in “Other expense (income), net” on the consolidated statements of operations.

Certain purchase agreements for acquisitions completed after January 1, 2009 contain provisions where the seller could receive additional consideration based on the future operating performance of the acquired business.  In accordance with US GAAP, the Company has recorded the fair value of these additional payments on the acquisition date. The fair value was based on a probability-weighted average payout discounted using a market rate of approximately 5%.  The fair value is subject to management’s estimates at the time of the acquisition and is based upon level 3 inputs.  The fair values of these additional payments are reported in “Other noncurrent liabilities,” on the consolidated balance sheets. 

The following table presents a reconciliation of the Company’s level 3 holdings measured at fair value on a recurring basis using unobservable inputs:

(in thousands)	Corporate Convertible Bonds		DIO Equity Options Contracts		Contingent Considerations
Balance at December 31, 2011	$	47,850	$	419	$	2,917
Payments, gross	—		—		(1,781		)
Unrealized gain:
Reported in AOCI	32,001		—		—
Unrealized loss:
Reported in Other expense (income), net	—		271		—
Effects of exchange rate changes	2,489		16		65
Balance at March 31, 2012	$	82,340	$	706	$	1,201

For the period ended March 31, 2012, there were no purchases, issuances or transfers of level 3 financial instruments. The Company paid $1.8 million of contingent considerations.