Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company measures assets and liabilities at fair value on a recurring basis in three levels of input. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is:

Level 1 — Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 — Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases and certain intercompany transactions in the normal course of business. Contracts typically have maturities of less than one year. Principal currencies include the euro, the British pound, the Czech koruna, the Japanese yen, and the Chinese yuan. The Company’s foreign currency forward contracts do not qualify as hedges as defined by accounting guidance. Changes in their fair value are recorded in the condensed consolidated statements of income and comprehensive income as foreign currency gains or losses. The changes in fair value generated net losses of $1,068 and $1,379 for the three months ended September 30, 2012 and 2011, respectively, and a net loss and a net gain of $1,619 and $1,943 for the nine months ended September 30, 2012 and 2011, respectively.

As of September 30, 2012, the Company held forward currency contracts to sell (in thousands): (i) 48,700 euros against the U.S. dollar, (ii) 2,280 euros against the Czech koruna, (iii) 800 Australian dollars against the U.S. dollar, (iv) 60,000 Japanese yen against the U.S. dollar, (v) 700 British pounds against the U.S. dollar, (vi) 510 British pounds against the Czech koruna, (vii) 980 U.S. dollars against the Czech koruna, and (viii) 200 British pounds against the euro. As of September 30, 2012, the fair value of the Company’s derivative assets and liabilities representing foreign currency forward contracts was $11 and $1,655, respectively, and were recorded in the condensed consolidated balance sheet as other current assets and liabilities.

As of December 31, 2011, the Company held forward currency contracts to buy 17,500 Czech koruna against the euro and to sell (i) 11,500 euros against the U.S. dollar, (ii) 4,700 Czech koruna against the U.S. Dollar, (iii) 130,000 Japanese yen against the U.S. dollar, (iv) 3,340 euros against the Czech koruna, (v) 3,000 Norwegian kroner against the euro, and (vi) 250 British pounds against the U.S. dollar. As of December 31, 2011, the fair value of the Company’s derivative assets and liabilities representing foreign currency forward contracts was $489 and $191, respectively. These were recorded in the condensed consolidated balance sheet as other current assets and liabilities. The Company’s foreign currency forward contracts are not exchange traded instruments and, accordingly, are classified as being valued using Level 2 inputs which are based on observable inputs such as quoted prices for similar assets and liabilities in active markets.

The Company does not enter into derivative instruments for trading or speculative purposes.

The fair value of the Company’s term loan portions of both the Restated Credit Facility (Term Loan) and the former Senior Credit Facility (as defined in Note C below) is estimated based on the present value of the underlying cash flows discounted using market interest rates. Under this method, the fair value of the Company’s Term Loan approximated its carrying amount as of September 30, 2012, and the fair value of the former Senior Credit Facility approximated its carrying amount as of December 31, 2011. The Company’s Term Loan and former Senior Credit Facility were valued using observable inputs and, accordingly, are classified as being valued using Level 2 inputs.

The fair value of the Convertible Notes exceeded its carrying amount by approximately 131% as of September 30, 2012 and approximately 108% as of December 31, 2011. The Convertible Notes are actively quoted instruments and, accordingly, are classified as being valued using Level 1 inputs. The fair value of the liability component of the Convertible Notes is based on the present value of its associated cash flows using a market interest rate for similar debt instruments without a conversion feature. The liability component of the Convertible Notes uses observable inputs other than quoted prices for similar liabilities in active markets and, accordingly, is classified as being valued using Level 2 inputs.

The estimated fair value of total contingent consideration relating to acquisitions in prior years as of September 30, 2012 and December 31, 2011 was $1,990 and $7,067, respectively, and was valued using a discounted cash flow approach, which includes assumptions for the probabilities of achieving gross sales or gross profit targets and the discount rate applied to the projected payments. The increase in fair value of total contingent consideration for the three months ended September 30, 2012 included increases of $73 and $15 related to prior BioMedical and Distribution & Storage acquisitions, respectively. The decrease in fair value of total contingent consideration for the nine months ended September 30, 2012 of $5,077 included a decrease of $4,236 related to a prior BioMedical acquisition offset by an increase of $459 related to a prior Distribution & Storage acquisition. There was also a $1,300 payment related to a prior Distribution & Storage acquisition during the nine months ended September 30, 2012. The majority of the decrease in fair value was caused by an adjustment to a contingent consideration obligation related to a prior BioMedical segment acquisition as a result of higher forecasted costs and delays of certain BioMedical projects. As noted in the Goodwill and Other Intangible Assets paragraph in Note A above, the Company determined that it would no longer meet the forecasted gross profit target required to satisfy its contingent consideration obligation. Therefore, the fair value of the contingent consideration obligation was determined to be zero.

The changes in fair value of contingent consideration were recorded as selling, general and administrative expenses in the condensed consolidated statements of income and comprehensive income. Based on achieving gross sales targets, the remaining maximum potential payout related to another prior BioMedical acquisition is $3,000. The valuation of contingent consideration is valued utilizing Level 3 inputs with reasonably available assumptions consistent with those made by other market participants.