Note 8 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Text Block]

8. Fair Value of Financial Instruments

On January 1, 2012, the Company adopted Accounting Standards Update (“ASU”) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.”  The adoption of ASU 2011-04 did not have a material impact on the Company’s financial position and results of operations.  For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, outstanding borrowings under the lines of credit, current portion of long-term debt, accounts payable and accrued liabilities, the carrying amounts approximate fair value due to their short maturities.

The following table provides the assets and liabilities carried at fair value measured on a recurring basis at March 31, 2012 (in thousands):

			Fair Value Measurements Using
	Total Carrying Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Restricted investments available for sale	$	2,079	$	0	$	2,079	$	0
Forward exchange contracts – assets		141		0		141		0
Forward exchange contracts – liabilities		266		0		266		0
Contingent purchase price ("CPP") – Palladium		4,397		0		0		4,397

The Company purchases its investments available for sale and restricted investments available for sale through several major financial institutions.  These financial institutions have hired third parties to measure the fair value of these investments.

U.S. Treasury Notes are measured at fair value by obtaining information from a number of live data sources including active market makers and inter-dealer brokers.  These data sources are reviewed based on their historical accuracy for individual issues and maturity ranges.

Corporate Notes and Bonds are measured at fair value by obtaining (a) a bullet (non-call) spread scale that is created for each issuer going out to forty years (these spreads represent credit risk and are obtained from the new issue market, secondary trading and dealer quotes), (b) an option adjusted spread model which is incorporated to adjust spreads of issues that have early redemption features and (c) final spreads are added to the U.S. Treasury curve and a special cash discounting yield/price routine calculates prices from final yields to accommodate odd coupon payment dates.  Evaluators maintain quality by surveying the dealer community, obtaining benchmark quotes, incorporating relevant trade data and updating spreads daily.

The Company’s counterparty (“Counterparty”) to a majority of its forward exchange contracts is a major financial institution.  These forward exchange contracts are measured at fair value by the Counterparty based on a variety of pricing factors, which include the market price of the derivative instrument available in the dealer-market.

The Palladium CPP will be equal to the net present value of €3,000,000 plus up to €500,000 based on an amount calculated in accordance with a formula driven by Palladium’s EBITDA for the twelve months ended December 31, 2012.  The €500,000 CPP will be determined each quarter based on the current quarter’s projection of Palladium’s EBITDA for the twelve months ended December 31 of the current year.

During the three months ended March 31, 2012 there were no transfers between Level 1, Level 2 and Level 3 measurements.  In addition, there were no changes in the valuation technique of assets and liabilities measured on a recurring basis during the three months ended March 31, 2012.