Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

9 Months Ended

Sep. 29, 2012

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

Fair Value of Financial Instruments and Non-Financial Assets and Liabilities

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:

Level 1 — Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market is defined as a market in which transactions for the assets or liabilities occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active (markets with few transactions), inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or are corroborated by observable market data correlation or other means (market corroborated inputs).

Level 3 — Unobservable inputs, only used to the extent that observable inputs are not available, that reflects the Company’s assumptions about the pricing of an asset or liability.

In accordance with the fair value hierarchy described above, the table below shows the fair value of the Company’s financial assets and liabilities (in thousands) that are required to be measured at fair value, on a recurring basis, as of September 29, 2012 and December 31, 2011.

	As of September 29, 2012 (1)			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)
	(In Thousands)
Firm commitment (2)	$	2,664		$	—	$	2,664		$	—
Derivative liability:
Foreign exchange contract (2)	(2,664		)	—		(2,664		)	—

	As of December 31, 2011 (1)			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)
	(In Thousands)
Firm commitment (2) (3)	$	3,807		$	—	$	3,807		$	—
Derivative liability:
Foreign exchange contract (2) (3)	(3,954		)	—		(3,954		)	—

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(1) The fair value of the foreign forward exchange contracts are based on indicative price information obtained via a third-party valuation.

(2) As more fully disclosed in Note 11 “Derivative and Other Financial Instruments and Hedging Activities”, the Company entered into the June 2011 FX Forward Contracts on June 30, 2011 and subsequently amended these agreements in January 2012. The firm commitment and foreign exchange contracts related to the June 2011 FX Forward Contracts, which are included in the table above, are recorded within Property, plant and equipment, net and Accounts payable and accrued liabilities in the Company’s September 29, 2012 and December 31, 2011 Consolidated Balance Sheets.

(3) As more fully disclosed in Note 11 “Derivative and Other Financial Instruments and Hedging Activities”, the Company terminated and settled the firm commitment and foreign exchange contracts related to the 2010 FX Forward Contracts on January 19, 2011. The January 19, 2011 fair value of the firm commitment was $0.6 million. The asset was written to fair value as of that date and is included at that amount within Property, plant and equipment, net in the Consolidated Balance Sheet. As more fully disclosed in Note 11 “Derivative and Other Financial Instruments and Hedging Activities”, the Company entered into the January 2011 FX Forward Contracts simultaneously with the termination and settlement of those existing contracts. On July 8, 2011, the Company completed commercial acceptance of the equipment and recognized the related commitment by recording the remaining liability. The July 8, 2011 fair value of the firm commitment was $(0.7) million. The asset was written to fair value as of that date and is included at that amount within Property, plant and equipment, net in the Consolidated Balance Sheet. The net impact of the above activity is a contra-asset of $(0.1) within Property, plant and equipment, net in the Company’s December 31, 2011 Consolidated Balance Sheet. In accordance with ASC 815, the fair value of the January 2011 FX Forward Contracts, which is included in the table above, is recorded within Accounts payable and accrued liabilities in the Company’s December 31, 2011 Consolidated Balance Sheet. The January 2011 FX Forward Contracts expired simultaneously with the final payment on March 23, 2012.

The Company has estimated the fair values of financial instruments using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value for non-traded financial instruments. Accordingly, such estimates are not necessarily indicative of the amounts that the Company would realize in a current market exchange. The carrying value of cash and cash equivalents, accounts receivable, inventories, accounts payable and accrued liabilities and short-term borrowings are reasonable estimates of their fair values.

The majority of the Company’s non-financial instruments, which include goodwill, intangible assets, inventories and property, plant and equipment, are not required to be carried at fair value on a recurring basis. However, in accordance with ASC 350, the Company tests its indefinite-lived intangible assets for impairment at least annually or if certain triggering events occur. As such, the non-financial instrument would be recorded at the lower of its cost or fair value.

The estimated fair value of the Company’s long-term debt as of September 29, 2012 and December 31, 2011 is presented in the following table (in thousands):

	As of September 29, 2012		Quoted Prices in Active Markets for Identical Assets (Level  1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Long-term debt (including current portion)	$	640,815	$	—	$	640,815	$	—

	As of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Long-term debt (including current portion)	$	612,418	$	—	$	612,418	$	—

The carrying amount of the Company’s long-term debt was $603.3 million and $595.4 million as of September 29, 2012 and December 31, 2011, respectively. The fair value of long-term debt is based on quoted market prices or on available rates for debt with similar terms and maturities.

See Note 11 “Derivatives and Other Financial Instruments and Hedging Activities” for additional disclosures related to the Company’s derivative instruments.