FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 29, 2012

FAIR VALUE MEASUREMENTS

NOTE 8. FAIR VALUE MEASUREMENTS

The guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring fair value, and requires disclosures about assets and liabilities measured at fair value. Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market, and the instruments’ complexity.

Assets and liabilities, recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by the guidance on fair value measurements are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, and are as follows:

Level I – Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level II – Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability. 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 III – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations.

	Fair Values as of the Second Quarter of Fiscal  2012								Fair Values as of Fiscal Year End 2011
(Dollars in thousands)	Level I		Level II		Level III		Total		Level I		Level II		Level III		T otal
Assets
Money market funds(1)	$	3	$	—	$	—	$	3	$	3	$	—	$	—	$	3
Deferred compensation plan assets (2)		11,568		—		—		11,568		10,534		—		—		10,534
Derivative assets (3)		—		375		—		375		—		351		—		351
Total	$	11,571	$	375	$	—	$	11,946	$	10,537	$	351	$	—	$	10,888
Liabilities
Deferred compensation plan liabilities (2)	$	11,568	$	—	$	—	$	11,568	$	10,534	$	—	$	—	$	10,534
Derivative liabilities (3)		—		227		—		227		—		1,968		—		1,968
Contingent consideration liabilities (4)		—		—		4,839		4,839		—		—		4,967		4,967
Total	$	11,568	$	227	$	4,839	$	16,634	$	10,534	$	1,968	$	4,967	$	17,469

(1) These investments are highly liquid investments in money market funds. The fair values are determined using observable quoted prices in active markets. Money market funds are included in Cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets.

(2) The Company maintains a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees. The plan assets and liabilities are invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets. Deferred compensation plan assets and liabilities are included in Other non-current assets and Other non-current liabilities on the Company’s Condensed Consolidated Balance Sheets.

(3) Derivative assets and liabilities included in Level II primarily represent forward currency exchange contracts. The Company typically enters into these contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on certain trade and inter-company receivables and payables. The derivatives are not designated as hedging instruments. The fair values are determined using inputs based on observable quoted prices. Derivative assets and liabilities are included in Other current assets and Other current liabilities, respectively, on the Company’s Condensed Consolidated Balance Sheets.

(4) The Company has nine contingent consideration arrangements that require it to pay the former owners of certain companies it acquired. The undiscounted maximum payment under all nine arrangements is $13.6 million based on future revenues, gross margins or operating income over a 3 year period. The Company estimated the fair value of these liabilities using the expected cash flow approach with inputs being probability-weighted revenue, gross margin or operating income projections, as the case may be, and discount rates ranging from 0.00% to 3.5% for the first two quarters of fiscal 2012 and 0.06% to 3.5% for fiscal year end 2011. As of the second quarter of fiscal 2012 and fiscal year end 2011, of the total contingent consideration liability, $4.5 million was included in Other current liabilities for both periods, and $0.3 million and $0.5 million was included in Other non-current liabilities, respectively, on the Company’s Condensed Consolidated Balance Sheets.

Additional Fair Value Information

The following table provides additional fair value information relating to the Company’s financial instruments outstanding:

	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
As of	Second Quarter of Fiscal 2012				Fiscal Year End of 2011
(Dollars in thousands)
Assets:
Cash and cash equivalents	$	121,937	$	121,937	$	154,621	$	154,621
Forward foreign currency exchange contracts		375		375		351		351
Liabilities:
Credit facility	$	695,000	$	695,000	$	562,300	$	562,300
Forward foreign currency exchange contracts		227		227		1,968		1,968
Promissory note and other		2,357		2,357		2,136		2,136

The fair value of the bank borrowings and promissory notes has been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of notes with a similar maturity and discounting the cash flows at that rate. The fair values do not give an indication of the amount that the Company would currently have to pay to extinguish any of this debt.