Fair Value Measurements

9 Months Ended

Sep. 29, 2012

Fair Value Measurements

Fair Value Measurements

Note 4 — Fair Value Measurements

Current accounting guidance defines fair value as the price that would be received in the sale of an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Guidance requires disclosure of the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date.  Guidance establishes a three-level valuation hierarchy based upon the transparency of inputs utilized in the measurement and valuation of financial assets or liabilities as of the measurement date.  Level 1 inputs include quoted prices for identical instruments and are the most observable.  Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves.  Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing the asset or liability.  The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the table below.

As of September 29, 2012, December 31, 2011 and October 1, 2011, the Company held certain financial assets that are required to be measured at fair value on a recurring basis.  These included derivative hedging instruments related to the purchase of certain raw materials and foreign currencies, investments in trading securities and available-for-sale securities, including an auction rate security.  The Company’s available-for-sale and trading securities principally consist of municipal bonds and mutual funds that are publicly traded.

The following table presents information about the Company’s financial assets and liabilities measured at fair value as of September 29, 2012, December 31, 2011 and October 1, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Estimated Fair Value September 29, 2012
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	37,124	$	37,124	$	—	$	—
Auction rate security	8,130		—		—		8,130
Available-for-sale securities excluding the auction rate security	84,437		—		84,437		—
Foreign currency forward contracts	—		—		—		—
Commodity futures contracts	48		48		—		—
Commodity options contracts	100		100		—		—
Trading securities	48,382		48,382		—		—
Total assets measured at fair value	$	178,221	$	85,654	$	84,437	$	8,130

	Estimated Fair Value December 31, 2011
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	78,612	$	78,612	$	—	$	—
Auction rate security	7,453		—		—		7,453
Available-for-sale securities excluding the auction rate security	57,835		—		57,835		—
Foreign currency forward contracts	205		—		205		—
Commodity futures contracts	203		203		—		—
Commodity options contracts	—		—		—		—
Trading securities	41,768		41,768		—		—
Total assets measured at fair value	$	186,076	$	120,583	$	58,040	$	7,453

	Estimated Fair Value October 1, 2011
	Total			Input Levels Used
	Fair Value			Level 1		Level 2			Level 3
Cash and cash equivalents	$	25,690		$	25,690	$	—		$	—
Auction rate security	8,130			—		—			8,130
Available-for-sale securities excluding the auction rate security	60,802			—		60,802			—
Foreign currency forward contracts	(108		)	—		(108		)	—
Commodity futures contracts	345			345		—			—
Commodity options contracts	—			—		—			—
Trading securities	39,031			39,031		—			—
Total assets measured at fair value	$	133,890		$	65,066	$	60,694		$	8,130

As of the end of third quarter 2012 the Company’s long-term investments include $8,130 ($13,550 original cost) of Jefferson County Alabama Sewer Revenue Refunding Warrants, originally purchased with an insurance-backed AAA rating.  This is an auction rate security that is classified as an available-for-sale security.  Due to adverse events related to Jefferson County and its bond insurance carrier, Financial Guaranty Insurance Company (FGIC), as well as events in the credit markets, the auctions for this auction rate security have failed since 2008.  As such, the Company continues to estimate the fair value of this auction rate security utilizing a valuation model with Level 3 inputs, as defined by guidance.  This valuation model considered, among others items, a limited number of market trades, the credit risk of the collateral underlying the auction rate security, the credit risk of the bond insurer, interest rates, and the amount and timing of expected future cash flows including assumptions about the market expectation of the next successful auction or possible negotiated settlement between the County and debt holders.  The trading range of these inputs was between 60% and 73% of the original par value.  The Company continues to receive all contractual interest payments on this auction rate security on a timely basis, there has been no default, it is insured by FGIC and the Company has the intent and ability to hold this auction rate security until recovery of its amortized cost basis.  Representatives of Jefferson County and the bondholders were in negotiations to reach a settlement agreeable to the bondholders and the insurers, and since a settlement could not be reached, the County filed for bankruptcy. FGIC is also in bankruptcy. Rulings by the bankruptcy court could have adverse effects to the holders of warrants and other debt, and further reduce the market value of this auction rate security resulting in an additional other-than-temporary impairments and charges to net earnings. The Company is not currently able to determine the outcome of this bankruptcy, or the amount and timing of the ultimate net proceeds that it may recover.

The following table presents additional information about the Company’s financial instruments (Jefferson County auction rate security) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 29, 2012 and October 1, 2011:

	2012		2011
Balance at January 1	$	7,453	$	6,775
Unrealized gain in other comprehensive earnings	677		1,355
Balance at September 29 and October 1, respectively	$	8,130	$	8,130

The fair value of the Company’s industrial revenue development bonds at September 29, 2012 and October 1, 2011 were valued using Level 2 inputs which approximates the carrying value of $7,500 for both periods. Interest rates on these bonds reset weekly based on current market conditions.