Fair Value Measurement

6 Months Ended

Jul. 01, 2012

Fair Value Measurement

Note 9—Fair value measurement

For a description of the fair value hierarchy, see Note 10 to the Company’s 2011 consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2011.

The following tables provide information regarding the financial assets and liabilities carried at fair value measured on a recurring basis as of July 1, 2012 and June 26, 2011:

	Total carrying value at July 1, 2012		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Dollars in thousands)
Investments in marketable securities	$	4,535	$	4,535	$	—	$	—
Derivative assets		572		—		572		—
Derivative liabilities		1,669		—		1,669		—
Contingent consideration liabilities		58,230		—		—		58,230

	Total carrying value at June 26, 2011		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(Dollars in thousands)
Cash and cash equivalents	$	65,000	$	65,000	$	—	$	—
Bonds—foreign government		6,915		6,915		—		—
Investments in marketable securities		4,209		4,209		—		—
Derivative assets		419		—		419		—
Derivative liabilities		19,128		—		19,128		—
Contingent consideration liabilities		9,530		—		—		9,530

The following table provides information regarding changes in Level 3 financial liabilities during the periods ended July 1, 2012 and June 26, 2011:

	Contingent consideration
	2012			2011
	(Dollars in thousands)
Beginning balance	$	9,676		$	—
Initial estimate upon acquisition		56,067			15,400
Payment		(7,000	)		(6,000	)
Revaluations		(442	)		130
Translation adjustment		(71	)		—
Ending balance	$	58,230		$	9,530

The carrying amount of long-term debt reported in the condensed consolidated balance sheet as of July 1, 2012 is $959.9 million. The Company uses a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile to determine the fair value of its debt. The Company’s implied credit rating is a factor in determining the market interest yield curve. The following table provides the fair value of the Company’s debt by fair value hierarchy level as of July 1, 2012:

	Fair value of debt
	(Dollars in millions)
Level 1	$	730.7
Level 2		377.8
Total	$	1,108.5

During the first quarter of 2012, the Company recorded a goodwill impairment charge based on Level 3 inputs. See Note 5 for a discussion of the goodwill impairment.

Valuation Techniques

The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trust, which are available to pay benefits under certain deferred compensation plans and other compensatory arrangements. The investment assets of the trust are valued using quoted market prices.

The Company’s financial assets valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company’s financial liabilities valued based upon Level 2 inputs are comprised of an interest rate swap contract and foreign currency forward contracts. The Company uses forward rate contracts to manage currency transaction exposure and interest rate swaps to manage exposure to interest rate changes. The fair value of the foreign currency forward exchange contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. The fair value of the interest rate swap contract is developed from market-based inputs under the income approach using cash flows discounted at relevant market interest rates. The Company has taken into account the creditworthiness of the counterparties in measuring fair value. The decrease in the Company’s derivative liabilities in 2012 is due to the termination of an interest rate swap agreement. See Note 8, “Financial instruments” for additional information.

The Company’s financial liabilities valued based upon Level 3 inputs are comprised of contingent consideration arrangements pertaining to the Company’s acquisitions. The fair value of contingent consideration is determined using a weighted probability of potential payment scenarios discounted at rates reflective of the Company’s credit rating and expected return on the acquired businesses. The assumptions used to develop the estimated amounts recognized for the contingent consideration arrangements are updated each reporting period. As of July 1, 2012, the Company has recorded approximately $17.5 million of contingent consideration in accrued expenses and the remaining $40.7 million in other liabilities.