Fair Value Measurements

9 Months Ended

Oct. 01, 2011

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 11 – Fair Value Measurements

ASC Topic 820 establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the Company’s own assumptions.

An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis (in thousands) :

				Fair value measurements at reporting date using:
	Total			Level 1		Level 2			Level 3
	Fair Value			Inputs		Inputs			Inputs
October 1, 2011
Assets:
Assets held in rabbi trusts	$	3,985		$	1,064	$	2,921		$	-
Liabilities
Derivative contracts	$	(443	)	$	-	$	(443	)	$	-
December 31, 2010
Assets:
Assets held in rabbi trusts	$	3,943		$	778	$	3,165		$	-

The Company maintains nonqualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and nonqualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money market funds at October 1, 2011 and December 31, 2010 and company-owned life insurance assets. The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.

We have entered into two derivative contracts, focusing on the Israeli Shekel, through July of 2012. The notional amount of the derivative contracts is approximately 60.5 million Shekels and has a fair value of $0.4 million as of October 1, 2011. These are foreign currency collar instruments, wherein the weighted minimal hedged rate is 3.53 Shekels per USD and the maximum hedged rate is 3.64 Shekels per USD. The Company has recorded a net loss on these contracts of $0.5 million and $0.4 million for the fiscal quarter ended and nine fiscal months ended October 1, 2011, respectively. These losses are recorded on the income statement as part of other income (expense).  There were no derivative contracts outstanding during 2010.

In determining fair value of derivative instruments, we consider both the counterparty credit risk and our own credit worthiness. To determine our own credit risk we estimate our own credit rating by benchmarking the price of outstanding debt to publicly-available comparable data from rated agencies. Using the estimated rating, our credit risk was quantified by reference to publicly– traded debt with a corresponding rating. We have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. We do not have any fair value measurements using significant unobservable inputs (Level 3) as of October 1, 2011.

The fair value of the long-term debt at October 1, 2011 and December 31, 2010, is approximately $8.0 million and $10.4 million, respectively. The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, long-term notes receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the combined and consolidated balance sheets approximate their fair values.