Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements

Note 17: Fair Value Measurements

A financial instrument is defined as a cash equivalent, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party. The Company’s financial instruments consist primarily of cash equivalents, trade receivables, trade payables, deferred compensation obligations and debt instruments. The book values of these instruments are a reasonable estimate of their respective fair values. In addition, the Company selectively uses derivative financial instruments, including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in foreign currency exchange rates and interest rates.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1	Quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2	Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and 2011.

	December 31, 2012
Financial Assets	Level 1		Level 2		Level 3		Total
Foreign currency forwards(1)	$	—		792		—		792
Trading securities held in deferred compensation plan(2)		5,842		—		—		5,842
Total	$	5,842		792		—		6,634
Financial Liabilities
Foreign currency forwards(1)	$	—		244		—		244
Interest rate swaps(3)		—		533		—		533
Phantom stock plan(4)		—		5,286		—		5,286
Deferred compensation plan(5)		5,842		—		—		5,842
Total	$	5,842		6,063		—		11,905

	December 31, 2011
Financial Assets	Level 1		Level 2		Level 3		Total
Foreign currency forwards(1)	$	—		193		—		193
Trading securities held in deferred compensation plan(2)		6,269		—		—		6,269
Total	$	6,269		193		—		6,462
Financial Liabilities
Foreign currency forwards(1)	$	—		2,029		—		2,029
Interest rate swaps(3)		—		855		—		855
Phantom stock plan(4)		—		5,647		—		5,647
Deferred compensation plan(5)		6,269		—		—		6,269
Total	$	6,269		8,531		—		14,800

(1) Based on calculations that use readily observable market parameters such as spot and forward rates as their basis.

(2) Based on the observable price of publicly traded mutual funds which are classified as trading securities and accounted for using the mark-to-market method.

(3) Measured as the present value of all expected future cash flows based on the LIBOR-based swap yield curves as of December 31, 2012 and 2011, respectively. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties.

(4) Based on the price of the Company’s common stock.

(5) Based on the fair value of the investments in the deferred compensation plan.