

18.		FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include its derivative instruments. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.

Foreign Currency Contracts – The fair value of foreign currency contracts are determined through the use of cash flow models that utilize observable market data inputs to estimate fair value. These observable market data inputs include foreign exchange rate and credit spread curves. In addition to the above, the Company received fair value estimates from the foreign currency contract counterparty to verify the reasonableness of the Company’s estimates. The Company’s foreign currency contracts are categorized in Level 2 of the fair value hierarchy. The fair value of the Company’s foreign currency contracts will be realized as Cost of Sales as the inventory, which the contracts are hedging the cash flows to produce, is sold. Approximately $2.4 million is expected to be realized as additional Cost of Sales over the next twelve months.

Interest Rate Swaps – The fair value of the Company’s interest rate swaps outstanding at January 2, 2015 was determined through the use of a cash flow model that utilized observable market data inputs. These observable market data inputs included LIBOR, swap rates, and credit spread curves. In addition to the above, the Company received a fair value estimate from the interest rate swap counterparty to verify the reasonableness of the Company’s estimate. This fair value calculation was categorized in Level 2 of the fair value hierarchy.

The following tables provide information regarding assets and liabilities recorded at fair value on a recurring basis (in thousands):



	Fair Value Measurements Using
Description	At January 1, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Foreign currency contracts (Note 15)	$	307	$	—	$	307	$	—



	Fair Value Measurements Using
Description	At January 2, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Foreign currency contracts	$	1,568	$	—	$	1,568	$	—
Interest rate swaps	990		—		990		—

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Fair value standards also apply to certain assets and liabilities that are measured at fair value on a nonrecurring basis. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term nature of these items. Refer to Note 9 “Debt” for further discussion regarding the fair value of the Company’s Senior Secured Credit Facilities and Senior Notes.

A summary of the valuation methodologies for assets and liabilities measured on a nonrecurring basis is as follows:

Cost and Equity Method Investments – The Company holds investments in equity and other securities that are accounted for as either cost or equity method investments, which are classified in Other Assets on the Consolidated Balance Sheets. The total carrying value of these investments is reviewed quarterly for changes in circumstance or the occurrence of events that suggest the Company’s investment may not be recoverable. The fair value of cost or equity method investments is not adjusted if there are no identified events or changes in circumstances that may have a material effect on the fair value of the investments. Gains and losses realized on cost and equity method investments are recorded in Other (Income) Expense, Net, unless separately stated. The aggregate recorded amount of cost and equity method investments at January 1, 2016 and January 2, 2015 was $20.6 million and $14.5 million, respectively. The Company’s equity method investment is in a Chinese venture capital fund focused on investing in life sciences companies. This fund accounts for its investments at fair value with the unrealized change in fair value of these investments recorded as income or loss to the fund in the period of change. As of January 1, 2016, the Company owned 6.7% of this fund.

During 2015, 2014 and 2013, the Company recognized impairment charges related to its cost method investments of $1.4 million, $0.0 million and $0.5 million, respectively. The fair value of these investments were determined by reference to recent sales data of similar shares to independent parties in an inactive market. This fair value calculation is categorized in Level 2 of the fair value hierarchy. During 2015, 2014, and 2013, the Company recognized a net gain (loss) on equity method investments of $4.7 million, $1.2 million, and $(0.2) million, respectively. During 2015, the Company recorded a gain and received a $3.6 million cash distribution from its equity method investment, which was classified as a cash flow from operating activities in the Consolidated Statement of Cash Flows as it represented a return on investment. During 2014, the Company sold one of its cost method investments, which resulted in a pre-tax gain of $3.2 million.

Long-Lived Assets – The Company reviews the carrying amount of its long-lived assets to be held and used for potential impairment whenever certain indicators are present as described in Note 1 “Summary of Significant Accounting Policies.” There were no impairment charges recorded during 2015 related to the Company’s long-lived assets. During 2014, the Company recorded a $0.4 million impairment charge related to its Orvin, Switzerland property held for sale. The fair value of these assets were determined based upon recent sales data of similar assets and discussions with potential buyers, and was categorized in Level 2 of the fair value hierarchy. During 2013, the Company wrote off $0.5 million of IPR&D allocated to its QiG segment as these projects were discontinued prior to reaching technological feasibility. Additionally, during 2013, the Company wrote off $0.9 million of inventory and technology related to Greatbatch Medical’s wireless sensing product line held for sale, as an agreement could not be reached with potential buyers. The above impairment charges were recorded in Other Operating Expenses, Net. Refer to Note 13 “Other Operating Expenses, Net” for further discussion.

The following table provides information regarding assets and liabilities recorded at fair value on a nonrecurring basis as of January 1, 2016 and January 2, 2015 respectively (in thousands):



	Fair Value Measurements Using
Description	At January 1, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cost method investment	$	1,100	$	—	$	1,100	$	—



	Fair Value Measurements Using
Description	At January 2, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Assets Held for Sale	$	1,635	$	—	$	1,635	$	—

Fair Value of Other Financial Instruments

Pension Plan Assets – The fair value of the Company’s pension plan assets disclosed in Note 10 “Benefit Plans” are determined based upon quoted market prices in inactive markets or valuation models with observable market data inputs to estimate fair value. These observable market data inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers and reference data. The Company’s pension plan assets are categorized Level 2 of the fair value hierarchy.