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Financial Instruments | 12 Months Ended
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Dec. 31, 2012
Financial Instruments |
Financial Instruments | (15) Financial Instruments Fair Value The carrying amounts of cash and cash equivalents, short-term investments, trade receivables and trade payables approximate fair value because of the short maturity of these financial instruments. The fair value of the Company's 5.47% senior notes due 2013, 5.85% senior notes due 2016 and 5.05% senior notes due 2020 is based on quoted market prices of similar notes (level 2). The fair value of the Company's variable rate debt approximates its carrying value. The carrying amount and the estimated fair market value of the Company's long-term debt, including the current portion, are as follows:
|  | December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |
|  | (in millions) |
Carrying amount |  | $ | 384.6 |  | $ | 399.4 |
Estimated fair value |  | $ | 420.8 |  | $ | 440.5 |
Financial Instruments The Company measures certain financial assets and liabilities at fair value on a recurring basis, including foreign currency derivatives, deferred compensation plan assets and related liability. There are no cash flow hedges as of December 31, 2012. The fair value of these certain financial assets and liabilities were determined using the following inputs at December 31, 2012 and 2011:
|  | Fair Value Measurements at December 31, 2012 Using: |
--- | --- | --- | ---
|  |  |  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
|  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  | (in millions) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Plan asset for deferred compensation(1) |  | $ | 4.2 |  | $ | 4.2 |  | $ | — |  | $ | — |
Total assets |  | $ | 4.2 |  | $ | 4.2 |  | $ | — |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Plan liability for deferred compensation(2) |  | $ | 4.2 |  | $ | 4.2 |  | $ | — |  | $ | — |
Contingent consideration(2) |  |  | 5.2 |  |  | — |  |  | — |  |  | 5.2 |
Total liabilities |  | $ | 9.4 |  | $ | 4.2 |  | $ | — |  | $ | 5.2 |
|  | Fair Value Measurements at December 31, 2011 Using: |
--- | --- | --- | ---
|  |  |  | Quoted Prices in Active Markets for Identical Assets |  | Significant Other Observable Inputs |  | Significant Unobservable Inputs |
|  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3) |
|  | (in millions) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |
Plan asset for deferred compensation(1) |  | $ | 4.0 |  | $ | 4.0 |  | $ | — |  | $ | — |
Total assets |  | $ | 4.0 |  | $ | 4.0 |  | $ | — |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |
Plan liability for deferred compensation(2) |  | $ | 4.0 |  | $ | 4.0 |  | $ | — |  | $ | — |
Contingent consideration(2) |  |  | 1.1 |  |  | — |  |  | — |  |  | 1.1 |
Total liabilities |  | $ | 5.1 |  | $ | 4.0 |  | $ | — |  | $ | 1.1 |
(1) Included in other, net on the Company's consolidated balance sheet. (2) Included in other noncurrent liabilities on the Company's consolidated balance sheet. The table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period December 31, 2011 to December 31, 2012.
|  |  |  |  |  | Total realized and unrealized gains (losses) included in: |  |  |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
|  | Balance December 31, 2011 |  | Purchases, sales, settlements, net |  | Earnings |  | Comprehensive income |  | Balance December 31, 2012 |
|  | (in millions) |
Contingent consideration |  | $ | 1.1 |  | $ | 5.1 |  | $ | (1.0 | ) | $ | — |  | $ | 5.2 |
In 2010, a contingent liability of $1.9 million was recognized as an estimate of the acquisition date fair value of the contingent consideration in the BRAE acquisition. This liability was classified as Level 3 under the fair value hierarchy as it was based on the weighted probability of achievement of a future performance metric as of the date of the acquisition, which was not observable in the market. During the year ended December 31, 2011 and the year ended December 31, 2012, the estimate of the fair value of the contingent consideration was reduced to $1.1 million and subsequently to $0.2 million, based on the revised probability of achievement of the future performance metric. Failure to meet the performance metric would reduce this liability to zero, while complete achievement would increase this liability to the full remaining purchase price of $4.8 million. In connection with the tekmar Control Systems acquisition in 2012, a contingent liability of $5.1 million was recognized as the estimate of the acquisition date fair value of the contingent consideration. This liability was classified as Level 3 under the fair value hierarchy as it was based on the probability of achievement of a future performance metric as of the date of the acquisition, which was not observable in the market. During the year ended December 31, 2012, the estimate of fair value of contingent consideration was reduced by $0.1 million based on the revised probability of achievement of the future performance metric. Failure to meet the performance metrics would reduce this liability to zero; while complete achievement would increase this liability to the full remaining purchase price of $8.2 million. Short-term investment securities as of December 31, 2012 consist of a certificate of deposit with a remaining maturity of greater than three months at the date of purchase, for which the carrying amount is a reasonable estimate of fair value. Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of certificates of deposit and money market funds, for which the carrying amount is a reasonable estimate of fair value. The Company uses financial instruments from time to time to enhance its ability to manage risk, including foreign currency and commodity pricing exposures, which exist as part of its ongoing business operations. The use of derivatives exposes the Company to counterparty credit risk for nonperformance and to market risk related to changes in currency exchange rates and commodity prices. The Company manages its exposure to counterparty credit risk through diversification of counterparties. The Company's counterparties in derivative transactions are substantial commercial banks with significant experience using such derivative instruments. The impact of market risk on the fair value and cash flows of the Company's derivative instruments is monitored and the Company restricts the use of derivative financial instruments to hedging activities. The Company does not enter into contracts for trading purposes nor does the Company enter into any contracts for speculative purposes. The use of derivative instruments is approved by senior management under written guidelines. The Company has exposure to a number of foreign currency rates, including the Canadian Dollar, the Euro, the Chinese Yuan and the British Pound. To manage this risk, the Company generally uses a layering methodology whereby at the end of any quarter, the Company has generally entered into forward exchange contracts which hedge approximately 50% of the projected intercompany purchase transactions for the next twelve months. The Company primarily uses this strategy for the purchases between Canada and the U.S. The average volume of contracts can vary but generally approximates $5 to $15 million in open contracts at the end of any given quarter. At December 31, 2012, the Company had contracts for notional amounts aggregating approximately $4.5 million. The Company accounts for the forward exchange contracts as an economic hedge. Realized and unrealized gains and losses on the contracts are recognized in other (income) expense in the consolidated statement of operations. These contracts do not subject the Company to significant market risk from exchange movement because they offset gains and losses on the related foreign currency denominated transactions. As of December 31, 2012 and 2011, the Company had no outstanding swaps. The Company recorded income (loss) of approximately $0.1 million, $0.6 million and $0.5 million in 2012, 2011 and 2010, respectively, to other expense (income), net in the consolidated statement of operations from the impact of derivative instruments. Leases The Company leases certain manufacturing facilities, sales offices, warehouses, and equipment. Generally, the leases carry renewal provisions and require the Company to pay maintenance costs. Future minimum lease payments under capital leases and non-cancelable operating leases as of December 31, 2012 are as follows:
|  | Capital Leases |  | Operating Leases |
--- | --- | --- | --- | --- | ---
|  | (in millions) |
2013 |  | $ | 1.5 |  | $ | 9.5 |
2014 |  |  | 1.3 |  |  | 7.4 |
2015 |  |  | 1.4 |  |  | 5.2 |
2016 |  |  | 1.4 |  |  | 2.5 |
2017 |  |  | 1.4 |  |  | 0.7 |
Thereafter |  |  | 4.0 |  |  | 2.3 |
Total |  | $ | 11.0 |  | $ | 27.6 |
Less amount representing interest (at rates ranging from 4.2% to 8.7%) |  |  | 1.2 |  |  |  |
Present value of net minimum capital lease payments |  |  | 9.8 |  |  |  |
Less current installments of obligations under capital leases |  |  | 1.2 |  |  |  |
Obligations under capital leases, excluding current installments |  | $ | 8.6 |  |  |  |
Carrying amounts of assets under capital lease include:
|  | December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |
|  | (in millions) |
Buildings |  | $ | 16.8 |  | $ | 16.5 |
Machinery and equipment |  |  | 1.2 |  |  | 2.1 |
|  |  | 18.0 |  |  | 18.6 |
Less accumulated depreciation |  |  | (3.9 | ) |  | (4.8 | )
|  | $ | 14.1 |  | $ | 13.8 |

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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- Details
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