Financial Instruments Measured at Fair Value

9 Months Ended

Oct. 01, 2016

Fair Value Disclosures [Abstract]

Financial Instruments Measured At Fair Value [Text Block]

Financial Instruments Measured at Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.  The fair value hierarchy has three levels of inputs that may be used to measure fair value:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

The following table presents assets (liabilities) measured at fair value on a recurring basis at October 1, 2016:

	Balance Sheet Location	Level 1		Level 2			Level 3			Total
Cash equivalents	Other assets	$	3,525	$	—		$	—		$	3,525
Available-for-sale securities	Other assets	37,403		—			—			37,403
Interest rate swaps	Other assets	—		1,373			—			1,373
Foreign exchange contracts	Other current assets	—		1,179			—			1,179
Foreign exchange contracts	Accrued expenses	—		(2,047		)	—			(2,047		)
Contingent consideration	Accrued expenses	—		—			(4,197		)	(4,197		)
		$	40,928	$	505		$	(4,197	)	$	37,236

The following table presents assets (liabilities) measured at fair value on a recurring basis at December 31, 2015:

	Balance Sheet Location	Level 1		Level 2			Level 3			Total
Cash equivalents	Other assets	$	1,559	$	—		$	—		$	1,559
Available-for-sale securities	Other assets	41,178		—			—			41,178
Interest rate swaps	Other assets	—		711			—			711
Foreign exchange contracts	Other current assets	—		2,625			—			2,625
Foreign exchange contracts	Accrued expenses	—		(3,363		)	—			(3,363		)
Contingent consideration	Accrued expenses	—		—			(3,889		)	(3,889		)
		$	42,737	$	(27	)	$	(3,889	)	$	38,821

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill and identifiable intangible assets (see Note C and D). The company tests these assets for impairment if indicators of potential impairment exist. 

During the first nine months of 2016 and 2015, there were no transfers of assets (liabilities) measured at fair value between the three levels of the fair value hierarchy.

Available-For-Sale Securities

The company has an 8.4% equity ownership interest in Marubun Corporation ("Marubun") and a portfolio of mutual funds with quoted market prices, all of which are accounted for as available-for-sale securities.

The fair value of the company's available-for-sale securities is as follows:

	October 1, 2016				December 31, 2015
	Marubun		Mutual Funds		Marubun		Mutual Funds
Cost basis	$	10,016	$	17,535	$	10,016	$	17,389
Unrealized holding gain	3,515		6,337		8,708		5,065
Fair value	$	13,531	$	23,872	$	18,724	$	22,454

The unrealized holding gains or losses on these investments are included in "Accumulated other comprehensive loss" in the shareholders' equity section in the company's consolidated balance sheets.

Derivative Instruments

The company uses various financial instruments, including derivative instruments, for purposes other than trading.  Certain derivative instruments are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are marked-to-market each reporting period with any unrealized gains or losses recognized in earnings.

Interest Rate Swaps

The company occasionally enters into interest rate swap transactions that convert certain fixed-rate debt to variable-rate debt or variable-rate debt to fixed-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. The company uses the hypothetical derivative method to assess the effectiveness of its interest rate swaps designated as fair value hedges on a quarterly basis. The effective portion of the change in the fair value of designated interest rate swaps is recorded as a change to the carrying value of the related hedged debt. The ineffective portion of the interest rate swaps, if any, is recorded in "Interest and other financing expense, net" in the company's consolidated statements of operations. As of October 1, 2016 and December 31, 2015, all outstanding interest rate swaps were designated as fair value hedges.

The terms of our outstanding interest rate swap contracts at October 1, 2016 are as follows:

Maturity Date	Notional Amount	Interest rate due from counterparty	Interest rate due to counterparty
April 2020	50,000	6.000%	6 mo. USD LIBOR + 3.896
June 2018	50,000	6.875%	6 mo. USD LIBOR + 5.301

Foreign Exchange Contracts

The company enters into foreign exchange forward, option, or swap contracts (collectively, the "foreign exchange contracts") to mitigate the impact of changes in foreign currency exchange rates.  These contracts are executed to facilitate the hedging of foreign currency exposures resulting from inventory purchases, sales, and inter-company transactions and generally have terms of no more than six months. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions.  The fair value of the foreign exchange contracts are estimated using market quotes for the applicable foreign exchange rate.  The notional amount of the foreign exchange contracts at October 1, 2016 and December 31, 2015 was $372,460 and $382,025, respectively.

Gains and losses related to non-designated foreign currency exchange contracts are recorded in "Cost of sales" in the company's consolidated statements of operations. Gains and losses related to designated foreign currency exchange contracts are recorded in "Selling, general, and administrative expenses" in the company's consolidated statements of operations and were not material for the third quarter and first nine months of 2016 and 2015.

The effects of derivative instruments on the company's consolidated statements of operations and other comprehensive income are as follows:

	Quarter Ended						Nine Months Ended
	October 1, 2016			September 26, 2015			October 1, 2016			September 26, 2015
Gain (Loss) Recognized in Income
Foreign exchange contracts	$	(2,394	)	$	4,440		$	(1,873	)	$	3,383
Interest rate swaps	(153		)	(144		)	(452		)	(377		)
Total	$	(2,547	)	$	4,296		$	(2,325	)	$	3,006
Gain (Loss) Recognized in Other Comprehensive Income before reclassifications
Foreign exchange contracts	$	(55	)	$	170		$	(588	)	$	607
Interest rate swaps	$	—		$	—		$	—		$	827

Other

The carrying amount of cash and cash equivalents, accounts receivable, net, and accounts payable approximate their fair value due to the short maturities of these financial instruments.