Fair Value Measurements

9 Months Ended

Sep. 28, 2013

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 28, 2013, December 31, 2012 and September 29, 2012, 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 28, 2013, December 31, 2012 and September 29, 2012, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Estimated Fair Value September 28, 2013
	Total		Input Levels Used
	Fair Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	32,734	$	32,734	$	—	$	—
Auction rate security	10,162		—		—		10,162
Available for sale securities excluding the auction rate security	123,391		—		123,391		—
Foreign currency forward contracts	29		—		29		—
Commodity futures contracts	97		97		—		—
Trading securities	58,968		58,968		—		—
Total assets measured at fair value	$	225,381	$	91,799	$	123,420	$	10,162

Estimated Fair Value December 31, 2012

Total

Input Levels Used

Fair Value

Level 1

Level 2

Level 3

Cash and cash equivalents

63,862

—

Auction rate security

9,485

—

9,485

Available for sale securities excluding the auction rate security

84,568

—

84,568

—

Commodity futures contracts, net

(112

)

(112

)

—

Trading securities

49,378

—

Total assets measured at fair value

207,181

113,128

84,568

9,485

	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

As of September 28, 2013, the Company’s long-term investments include $10,162 ($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 Jefferson County and the debt holders. The trading range of these inputs was between 65.2% and 73.0% of the original par value. Both Jefferson County and FGIC are in bankruptcy. During the second quarter 2013, Jefferson County and the holders of its bonds and warrants reached an agreement whereby Jefferson County would issue replacement securities with a value of approximately 80% of the face value of the original bonds and warrants. The agreement is subject to approval by the bankruptcy court which is scheduled to meet at a future date. Nonetheless, future rulings by the bankruptcy courts 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 with certainty the outcome of this matter, or the amount and timing of the ultimate net proceeds that it may recover. See also the Company’s consolidated financial statements and related notes and Management’s Discussion and Analysis included in the Company’s 2012 Form 10-K and annual report.

The following table presents additional information about the Company’s financial instruments (an auction rate security) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at September 28, 2013 and September 29, 2012:

	2013		2012

Balance at January 1	$	9,485	$	7,453
Unrealized gain in other comprehensive earnings	677		677

Balance at September 28 and September 29, respectively	$	10,162	$	8,130

The fair value of the Company’s industrial revenue development bonds at September 28, 2013 and September 29, 2012 were valued using Level 2 inputs which approximates the carrying value of $7,500 for both periods. Interest rates on these bonds are reset weekly based on current market conditions.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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