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Basis of Presentation and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2013
Basis of Presentation and Summary of Significant Accounting Policies [Abstract] |
Basis of Presentation and Summary of Significant Accounting Policies | 2 Basis of Presentation and Summary of Significant Accounting Policies Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, product returns and allowances, bad debts, inventory valuation, equity investments, goodwill and intangible assets, warranty and installation provisions, income taxes, contingencies, litigation, retirement plan obligations and stock-based compensation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may differ from these estimates under different assumptions or conditions. Risks and Uncertainties The Company is subject to risks common to companies in the analytical instrument industry, including, but not limited to, global economic and financial market conditions, fluctuations in customer demand, development by its competit ors of new technological innovations, levels of debt and debt service requirements, risk of disruption, fluctuations in foreign currency exchange rates, dependence on key personnel, protection and litigation of proprietary technology, shifts in tax able inc ome between tax jurisdictions and compliance with regulations of the U.S. Food and Drug Administration and similar foreign regulatory authorities and agencies. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, most of which are wholly owned. The Company consolidates entities in which it owns or controls fifty percent or more of the voting shares. All material inter-company balances and transactions have been eliminated. Translation of Foreign Currencies For most of the Company's foreign operations, assets and liabilities are translated into U.S. dollars at exchange rates prevailing on the balance sheet date, while revenues and expenses are translated at average exchange rates prevailing during the period. Any resulting translation gains or losses are included in accumulated other comprehensive income in the consolidated balance sheets. The Company's net sales derived from operations outside the United States were 71% in 2013, 2012 and 2011. Gains and losses from foreign currency transactions are included in net income in the consolidated statements of operations and were not material for the years presented. Seasonality of Business The Company typically experiences an increase in sales in the fourth quarter, as a result of purchasing habits for capital goods of customers that tend to exhaust their spending budgets by calendar year end. Cash, Cash Equivalents and Investments Cash equivalents represent highly liquid investments, with original maturities of 90 days or less, primarily in bank deposits, U.S. and U.K. treasury bill money market funds and commercial paper. Investments with longer maturities are classified as i nvestments, and are held primarily in U.S. treasury bills, Canadian government U.S. dollar-denominated treasury bills and commercial paper, bank deposits and corporate debt securities. I nvestments are classified as available-for-sale in accordance with the accounting standards for investments in debt and equity securities. All available-for-sale securities are recorded at fair market value and any unrealized holding gains and losses, to the extent deemed temporary, are included in accumulated other comprehensive income in stockholders' equity, net of the related tax effects. If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary” and marks the investment to market through a charge to the statement of operations. The Compan y classifies its investments exclusive of those categorized as cash equivalents. The Company maintains cash balances in various operating accounts in excess of federally insured limits, and in foreign subsidiary accounts in currencies other than U.S. dollars. As of December 31, 2013 and 2012, $1,738 million out of $1,804 million and $1,489 million out of $1,539 million, respectively, of the Company's total cash, cash equivalents and investments were held by foreign subsidiaries and may be subject to material tax effects on distribution to U.S. legal entities. Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses in the existing accounts receivable. The allowance is based on a number of factors, including historical experience and the customer's credit-worthiness. The allowance for doubtful accounts is reviewed on at least a quarterly basis. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged against the allowance when the Company determines it is probable that the receivable will not be recovered. The Company does not have any off-balance sheet credit exposure related to its customers. The allowance for s ales returns is the best estimate of the amount of future product returns related to current period revenue and is based on historical experience. The following is a summary of the activity of the Company's allowance for doubtful accounts and sales returns for the years ended December 31, 2013, 2012 and 2011 (in thousands):
|  |  | Balance at |  |  |  |  |  | Balance at
|  |  | Beginning |  |  |  |  |  | End of
|  |  | of Period |  | Additions |  | Deductions |  | Period
Allowance for Doubtful Accounts and Sales |  |  |  |  |  |  |  |  |  |  |  |
| Returns: |  |  |  |  |  |  |  |  |  |  |  |
| 2013 |  | $ | 8,240 |  | $ | 4,386 |  | $ | (5,569) |  | $ | 7,057
| 2012 |  | $ | 8,584 |  | $ | 7,298 |  | $ | (7,642) |  | $ | 8,240
| 2011 |  | $ | 6,196 |  | $ | 9,932 |  | $ | (7,544) |  | $ | 8,584
Concentration of Credit Risk The Company sells its products and services to a significant number of large and small customers throughout the world, with net sales to the pharmaceutical industry of approximately 52% in 2013, 53% in 2012 and 52% in 2011. None of the Company's individual customers accounted for more than 2% of annual Company sales in 2013, 2012 or 2011. The Company performs continuing credit evaluations of its customers and generally does not require collateral, but in certain circumstances may require letters of credit or deposits. Historically, the Company has not experienced significant bad debt losses. Inventory The Company values all of its inventories at the lower of cost or market on a first-in, first-out basis (“FIFO”). Income Taxes Deferred income taxes are recognized for temporary differences between the financial statement and income tax basis of assets and liabilities using tax rates in effect for the years in which the differences are expected to reverse. A valuati on allowance is provided to offset any net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. A ppropriate short-term and long-term liabilit ies ha ve also be en recorded to recognize uncertain tax return reporting positions. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense, while the costs of significant improvements are capitalized. Depreciation is provided using the straight-line method over the following estimated useful lives: buildings — fifteen to thirty years; building improvements — five to ten years; leasehold improvements — the shorter of the economic useful life or life of lease; and production and other equipment — three to ten years. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are eliminated from the consolidated balance sheets and related gains or losses are reflected in the consolidated statements of operations. There were no material gains or losses from retirement or sale of assets in 2013, 2012 and 2011. Asset Impairments The Company reviews its long-lived assets for impairment in accordance with the accounting standards for property, plant and equipment. Whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable, the Company evaluates the fair value of the asset, relying on a number of factors, including, but not limited to, operating results, business plans, economic projections and anticipated future cash flows. Any change in the carrying amount of an asset as a result of the Company's evaluation is separately identified in the consolidated statements of operations. Goodwill and Other Intangible Assets The Company tests for goodwill impairment using a fair-value approach at the reporting unit level annually, or earlier, if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Additionally, the Company performs an annual goodwill impairment assessment for its reporting units as of January 1 each year. The goodwill and other intangible assets accounting standards define a reporting unit as an operating segment, or one level below an operating segment, if discrete financial information is prepared and reviewed by management. For goodwill impairment review purposes, the Company has two reporting units, the Waters Division and TA Division. Goodwill is allocated to the reporting units at the time of acquisition. Under the impairment test, if a reporting unit's carrying amount exceeds its estimated fair value, goodwill impairment is recognized to the extent that the carrying amount of goodwill exceeds the implied fair value of the goodwill. The fair value of reporting units was estimated using a discounted cash flows technique, which includes certain management assumptions, such as estimated future cash flows, estimated growth rates and discount rates. The Company's intangible assets include purchased technology; capitalized software development costs; costs associated with acquiring Company patents, trademarks and intellectual properties, such as licenses; debt issuance costs and acquired in-process research and development (“IPR&D”). Purchased intangibles are recorded at their fair market values as of the acquisition date and amortized over their estimated useful lives, ranging from one to fifteen years. Other intangibles are amortized over a period ranging from one to thirteen years. Debt issuance costs are amortized over the life of the related debt. Acquired IPR&D is amortized from the date of completion over its estimated useful life. In addition, acquired IPR&D will be tested for impairment until completion of the acquired programs. Software Development Costs The Company capitalizes internal and external software development costs for products offered for sale in accordance with the accounting standards for the costs of software to be sold, leased, or otherwise marketed. Capitalized costs are amortized to cost of sales over the period of economic benefit, which approximates a straight-line basis over the estimated useful lives of the related software p roducts, generally three to ten years. The Company capitalized $35 million and $34 million of direct expenses that were related to the development of software in 2013 and 2012, respectively. Net capitalized software included in intangible assets totaled $151 million and $138 million at December 31, 2013 and 2012, respectively. S ee Note 7, “Goodwill and Other Intangibles”. The Company capitalizes internal software development costs for internal use in accordance with the accounting standards for goodwill and other intangible assets. Capitalized internal software development costs are amortized over the period of economic benefit, which approximates a straight-line basis over ten years. Net capitalized internal software included in property, plant and equipment totaled $3 million at both December 31, 2013 and 2012. Other Investments The Company accounts for its investments that represent less than twenty percent ownership, and for which the Company does not have significant influence, using the accounting standards for investments in debt and equity securities. Investments for which the Company does not have the ability to exercise significant influence, and for which there is not a readily determinable market value, are accounted for under the cost method of accounting. The Company periodically evaluates the carrying value of its investments accounted for under the cost method of accounting and carries them at the lower of cost or estimated net realizable value. For investments in which the Company owns or controls between twenty and forty-nine percent of the voting shares, or over which it exerts significant influence over operating and financial policies, the equity method of accounting is used. The Company's share of net income or losses of equity investments is included in the consolidated statements of operations and was not material in any period presented. All long-term investments at December 31, 2013 and 2012 are included in other assets and amounted to $3 million for both periods. Fair Value Measurements In accordance with the accounting standards for fair value measurements and disclosures, certain of the Company's assets and liabilities are measured at fair value on a recurring basis as of December 31, 2013 and 2012. Fair values determined by Level 1 inputs utilize observable data, such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair v alues determined by Level 3 inputs utilize unobservable data points for which there is little or no market data, which require the reporting entity to develop its own assumptions. The following table represents the Company's assets and liabilities measured at fair value on a recurring basis at December 31, 2013 (in thousands):
|  |  |  |  |  |  | Quoted Prices |  |  |  |  |  |
|  |  |  |  |  |  | in Active |  | Significant |  |  |
|  |  |  |  |  |  | Markets |  | Other |  | Significant
|  |  |  | Total at |  | for Identical |  | Observable |  | Unobservable
|  |  |  | December 31, |  | Assets |  | Inputs |  | Inputs
|  |  |  | 2013 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury securities |  | $ | 556,539 |  | $ | - |  | $ | 556,539 |  | $ | -
| Foreign government securities |  |  | 139,670 |  |  | - |  |  | 139,670 |  |  | -
| Corporate debt securities |  |  | 629,434 |  |  | - |  |  | 629,434 |  |  | -
| Time deposits |  |  | 74,050 |  |  | - |  |  | 74,050 |  |  | -
| Equity securities |  |  | 147 |  |  | - |  |  | 147 |  |  | -
| Other cash equivalents |  |  | 62,851 |  |  | - |  |  | 62,851 |  |  | -
| Waters 401(k) Restoration Plan assets |  |  | 31,203 |  |  | - |  |  | 31,203 |  |  | -
| Foreign currency exchange contract |  |  |  |  |  |  |  |  |  |  |  |
|  | agreements |  |  | 929 |  |  | - |  |  | 929 |  |  | -
|  | Total |  | $ | 1,494,823 |  | $ | - |  | $ | 1,494,823 |  | $ | -
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
| Foreign currency exchange contract |  |  |  |  |  |  |  |  |  |  |  |
|  | agreements |  | $ | 88 |  | $ | - |  | $ | 88 |  | $ | -
|  | Total |  | $ | 88 |  | $ | - |  | $ | 88 |  | $ | -
The following table represents the Company's assets and liabilities measured at fair value on a recu rring basis at December 31, 2012 (in thousands):
|  |  |  |  |  |  | Quoted Prices |  |  |  |  |  |
|  |  |  |  |  |  | in Active |  | Significant |  |  |
|  |  |  |  |  |  | Markets |  | Other |  | Significant
|  |  |  | Total at |  | for Identical |  | Observable |  | Unobservable
|  |  |  | December 31, |  | Assets |  | Inputs |  | Inputs
|  |  |  | 2012 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets: |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Treasury securities |  | $ | 470,421 |  | $ | - |  | $ | 470,421 |  | $ | -
| Foreign government securities |  |  | 313,237 |  |  | - |  |  | 313,237 |  |  | -
| Corporate debt securities |  |  | 311,607 |  |  | - |  |  | 311,607 |  |  | -
| Time deposits |  |  | 64,037 |  |  | - |  |  | 64,037 |  |  | -
| Equity securities |  |  | 70 |  |  | - |  |  | 70 |  |  | -
| Other cash equivalents |  |  | 44,850 |  |  | - |  |  | 44,850 |  |  | -
| Waters 401(k) Restoration Plan assets |  |  | 24,827 |  |  | - |  |  | 24,827 |  |  | -
| Foreign currency exchange contract |  |  |  |  |  |  |  |  |  |  |  |
|  | agreements |  |  | 1,173 |  |  | - |  |  | 1,173 |  |  | -
|  | Total |  | $ | 1,230,222 |  | $ | - |  | $ | 1,230,222 |  | $ | -
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
| Foreign currency exchange contract |  |  |  |  |  |  |  |  |  |  |  |
|  | agreements |  | $ | 693 |  | $ | - |  | $ | 693 |  | $ | -
|  | Total |  | $ | 693 |  | $ | - |  | $ | 693 |  | $ | -
The fair values of the Company's cash equivalents, investments, 401(k) restoration plan assets and foreign currency exchange contracts are determined through market and observable sources and have been classified as Level 2. These assets and liabilities have been initially valued at the transaction price and subsequently valued, typically utilizing third-party pricing services. The pricing services use many inputs to determine value, including reportable trades, benchmark yields, credit spreads, broker/dealer quotes, current spot rates and other industry and economic events. The Company validates the prices provided by third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources. After completing these validation procedures, the Company did not adjust or override any fair value measurements provided by third-party pricing services as of December 31, 2013 and 2012. Fair Value of Other Financial Instruments The Company's cash, accounts receivable, accounts payable and variable interest rate debt are recorded at cost, which approximates fair value. The carrying value of the Company's fixed interest rate debt was $400 million at both December 31, 2013 and 2012. The fair value of the Company's fixed rate debt is estimated using discounted cash flow models, based on estimated current rates offered for similar debt under current market conditions for the Company. The fair value of the Company's fixed interest rate debt was estimated to be $398 million and $413 million at December 31, 2013 and 2012, respectively, using Level 2 inputs. Derivative Transactions The Company operates on a global basis and is exposed to the risk that its earnings, cash flows and stockholders' equity could be adversely impacted by fluctuations in currency exchange rates. The Company records its derivative transactions in accordance with the accounting standards for derivative instruments and hedging activities, which establish the accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the consolidated balance sheets at fair value as either assets or liabilities. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in earnings when the hedged item affects earnings; ineffective portions of changes in fair value are recognized in earnings. In addition, disclosures required for derivative instruments and hedging activities include the Company's objectives for using derivative instruments, the level of derivative activity the Company engages in, as well as how derivative instruments and related hedged items affect the Company's financial position and performance. The Company currently uses derivative instruments to manage exposures to foreign currency risks. The Company's objectives for holding derivatives are to minimize foreign currency risk using the most effective methods to eliminate or reduce the impact of foreign currency exposures. The Company documents all relationships between hedging instruments and hedged items and links all derivatives designated as fair-value, cash flow or net investment hedges to specific assets and liabilities on the consolidated balance sheets or to specific forecasted transactions. In addition, the Company considers the impact of its counterparties' credit risk on the fair value of the contracts as well as the ability of each party to execute under the contracts. The Company also assesses and documents, both at the hedges' inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows a ssociated with the hedged items. The Company enters into forward foreign exchange contracts, principally to hedge the impact of currency fluctuations on certain inter-company balances and short-term assets and liabilities. Principal hedged currencies include the Euro, Japanese y en, British p ound and Singapore d ollar. The periods of these forward contracts typically range from one to three months and have varying notional amounts, which are intended to be consistent with changes in the underlying exposures. Gains and losses on these forward contracts are recorded in cost of sales in the consolidated statements of operations. At December 31, 2013, 2012 and 2011, the Company held forward foreign exchange contracts with notional amounts totaling $104 million, $134 million and $161 million, respectively. The Company's foreign currency exchange contracts included in the consolidated balance sheets are classi fied as follows (in thousands):
|  |  | December 31, 2013 |  | December 31, 2012
Other current assets |  | $ | 929 |  | $ | 1,173
Other current liabilities |  | $ | 88 |  | $ | 693
The following is a summary of the activity in the statements of operations related to the forward foreign exc hange contracts (in thousands):
|  |  | Year Ended December 31,
|  |  | 2013 |  | 2012 |  | 2011
Realized gains (losses) on closed contracts |  | $ | 8,666 |  | $ | 4,186 |  | $ | (2,233)
Unrealized gains (losses) on open contracts |  |  | 361 |  |  | 1,716 |  |  | (1,035)
| Cumulative net pre-tax gains (losses) |  | $ | 9,027 |  | $ | 5,902 |  |  | (3,268)
Stockholders' Equity In Ma y 20 12, the Company's Board of Directors authorized the Company to repurchase up to $75 0 million of its outstanding common stock over a two-year period. During 2013, 2012 and 2011, the Company repurchased 3.1 million, 3.5 million and 4.5 million shares at a cost of $295 million, $290 million and $364 million, respectively, under the Ma y 20 12 authorization and other previously announced programs. As of December 31, 2013, the Company repurchased 4.3 million shares at a cost of $402 million under the May 2012 repurchase program, leaving $348 million authorized for future purchases. In addition, the Company repurchased $6 million of common stock related to the vesting of restricted stock units during each of the years ended December 31, 2013, 2012 and 2011. The Company believes that it has the financial flexibility to fund these share repurchases given current cash and debt levels, as well as to invest in research, technology and business acquisitions to further grow the Company's sales and profits. Revenue Recognition Sales of products and services are generally recorded based on product shipment and performance of service, respectively. The Company's deferred revenue on the consolidated balance sheets consists of the obligation on instrument service contracts and customer payments received in advance, prior to shipment of the instrument. Revenue is recognized when all of the following revenue recognition criteria are met: persuasive evidence of an arrangement exists; delivery or performance has occurred; the vendor's fee is fixed or determinable; collectibility is reasonably assured and, if applicable, upon acceptance when acceptance criteria with contractual cash holdback are specified. Shipping and handling costs are included in cost of sales, net of amounts invoiced to the customer per the order. Product shipments, including those for demonstration or evaluation, and service contracts are not recorded as revenue until a valid purchase order or master agreement is received, specifying fixed terms and prices. The Company generally recognizes product revenue when legal title has transferred and risk of loss passes to the customer. The Company structures its sales arrangements as shipping point or international equivalent and, accordingly, recognizes revenue upon shipment. In some cases, destination-based shipping terms are included in sales arrangements, in which cases revenue is generally recognized when the products arrive at the customer site. The Company's method of revenue recognition for certain products requiring installation is accounted for in accordance with the multiple-element revenue recognition accounting standards. With respect to the installation obligations, the larger of the contractual cash holdback or the best estimate of selling price of the installation service is deferred when the product is shipped and revenue is recognized as a multiple-element arrangement when installation is complete. The Company determines the best estimate of selling price of installation based upon a number of factors, including hourly service billing rates and estimated installation hours. Instrument service contracts are typically billed at the beginning of the maintenance period. The amount of the service contract is amortized ratably to revenue over the instrument maintenance period. There are no deferred costs associated with the service contract, as the cost of the service is recorded when the service is performed. No revenue is recognized until all revenue recognition criteria have been met. Sales of software are accounted for in accordance with the accounting standards for software revenue recognition. T he Company's software arrangements typically include software licenses and maintenance contracts. Software license revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fe e is fixed or determinable, collection is probable, and there are no significant post-delivery obligations remaining. The revenue associated with the software maintenance contract is recognized ratably over the maintenance term. Unspecified rights to software upgrades are typically sold as part of the maintenance contract on a when-and-if-available basis. The Company uses the residual method to allocate software revenue when a transaction includes multiple elements and vendor specific objective evidence of fair value of undelivered elements exists. Under the residual method, the fair value of the undelivered element (maintenance) is deferred and the remaining portion of the arrangement fee is allocated to the delivered element (software license) and recognized as revenue. Returns and customer credits are infrequent and are recorded as a reduction to sales. Rights of return are not included in sales arrangements. Revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied. Discounts from list prices are recorded as a reduction to sales. Product Warranty Costs The Company accrues estimated product warranty costs at the time of sale, which are included in cost of sales in the consolidated statements of operations. While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component supplie r s, the Company's warranty obligation is affected by product failure rates, material usage and service delivery costs incurred in correcting a product failure. The amount of the accrued warranty liability is based on historical information, such as past experience, product failure rates, number of units repaired and estimated costs of material and labor. The liability is reviewed for re asonableness at least quarterly. The following is a summary of the activity of the Company's accrued warranty liability for the years ended December 31, 2013, 2012 and 2011 (in thousands):
|  |  | Balance at |  |  |  |  |  | Balance at
|  |  | Beginning |  | Accruals for |  | Settlements |  | End of
|  |  | of Period |  | Warranties |  | Made |  | Period
Accrued warranty liability: |  |  |  |  |  |  |  |  |  |  |  |
| 2013 |  | $ | 12,353 |  | $ | 8,466 |  | $ | (7,857) |  | $ | 12,962
| 2012 |  | $ | 13,258 |  | $ | 7,212 |  | $ | (8,117) |  | $ | 12,353
| 2011 |  | $ | 11,272 |  | $ | 10,175 |  | $ | (8,189) |  | $ | 13,258
Advertising Costs All advertising costs are expensed as incurred and are included in selling and administrative expenses in the consolidated statements of operations. Advertising expenses for 2013, 2012 and 2011 were $11 million, $13 million and $11 million, respectively. R esearch and Development Expenses Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, overhead costs, contract services and other outside c osts. Research and development expenses are expensed as incurred. Stock-Based Compensation The Company has two stock-based compensation plans, which are described in Note 12, “Stock-Based Compensation”. Earnings Per Share In accordance with the earnings per share accounting standard s, the Company presents two earnings per share (“EPS”) amounts. Income per basic common share is based on income available to common shareholders and the weighted-average numb er of common shares outstanding during the periods presented. Income per diluted common share includes additional dilution from potential common stock, such as stock issuable pursuant to the exercise of stock options outstanding. Retirement Plans The Company sponsors various retirement plans, which a re described in Note 14, “Retirement Plans”. Comprehensive Income The Company accounts for comprehensive income in accordance with the accounting standards for comprehensive income, which establish the accounting rules for reporting and displaying comprehensive income. These standards require that all components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Subsequent Events The Company did not have any material subsequent events, except for the recent acquisition discussed in Note 6, “Acquisitions”. Recently Adopted Accounting Standards In July 2012, amended accounting guidance was issued for indefinite-lived intangible assets other than goodwill in order to simplify how companies test indefinite-lived intangible assets for impairment. The adoption of this standard in 2013 did not have a material effect on the Company's financial position, results of operations or cash flows. In February 2013, accounting guidance was issued to improve the reporting of reclassifications out of accumulated other comprehensive income. The adoption of this standard in 2013 did not have a material effect on the Company's financial position, results of operations or cash flows. R ecently Issued Accounting Standards In July 2013, amended accounting guidance was issued regarding the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. This guidance is effective prospectively for annual and interim reporting periods beginning after December 15, 2013. The adoption of this standard is not expected to have a material effect on the Company's financial position, results of operations or cash flows.

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