XML 21 R10.htm IDEA: XBRL DOCUMENT
v3.5.0.2

FAIR VALUE MEASUREMENTS | 9 Months Ended
--- | ---
Sep. 30, 2016
FAIR VALUE MEASUREMENTS [Abstract] |
FAIR VALUE MEASUREMENTS | 3. FAIR VALUE MEASUREMENTS Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: Level 1 – Observable inputs such as quoted market prices in active markets; Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 – Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of September 30, 2016 and December 31, 2015, the Company held certain financial assets that are measured at fair value on a recurring basis. These consisted of securities that are among the Company's investments in a rabbi trust which are intended to fund the Company's Supplemental Executive Retirement Plan ("SERP") obligations. The securities that are held in the rabbi trust are categorized as available-for-sale securities and are included as other assets in the accompanying condensed consolidated balance sheets at September 30, 2016 and December 31, 2015. The gross unrealized gains associated with the investment securities held in the rabbi trust were $0.9 million and $0.7 million at September 30, 2016 and December 31, 2015, respectively. Such unrealized gains are included, net of tax, in accumulated other comprehensive loss. As of September 30, 2016 and December 31, 2015, our available-for-sale securities, which primarily consist of investments held in a rabbi trust of $1.7 million and $3.6 million, respectively, are measured at fair value using quoted prices in active markets for identical assets (Level 1) inputs. The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 1, Level 2 or Level 3 during the nine months ended September 30, 2016 or September 30, 2015. There were no changes to the Company's valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the nine months ended September 30, 2016. There were no financial assets accounted for at fair value on a nonrecurring basis as of September 30, 2016 or December 31, 2015. The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and notes payable, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company's long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities (Level 2 inputs). At September 30, 2016 and December 31, 2015, the estimated fair value of long-term debt was $150.2 million and $188.1 million, respectively, compared to a carrying amount of $146.7 million and $183.5 million, respectively. At September 30, 2016 and December 31, 2015, the carrying value of the debt on the condensed consolidated balance sheet is reflected net of $2.9 million and $3.6 million, respectively, of deferred financing costs as a result of the adoption of new accounting guidance effective January 1, 2016 (see Note 1). The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 2016. Nonfinancial assets and liabilities, such as goodwill and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment upon the occurrence of a triggering event. We review goodwill for impairment on a reporting unit basis annually during the fourth quarter of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. While there were signs of potential improvement at year-end, the Company's actual revenue stream for the three months ended March 31, 2016 was significantly lower than the financial projections utilized in the annual goodwill impairment analysis (performed as of October 1, 2015), and was not projected to rebound to those levels in 2016. The Company determined that current business conditions, and the resulting decrease in the Company's projected undiscounted and discounted cash flows, constituted a triggering event, which required the Company to perform interim impairment tests related to its long-lived assets and goodwill during the first quarter of 2016. The Company's interim test on its long-lived assets indicated that the carrying value of its long-lived assets was recoverable and that no impairment existed as of the March 31, 2016 testing date. The Company's Level 3 fair value analysis related to the interim test for goodwill impairment was supported by a weighting of two generally accepted valuation approaches, the income approach and the market approach, as further described in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. These approaches include numerous assumptions with respect to future circumstances, such as industry and/or local market conditions, which might directly impact each of the reporting units' operations in the future, and are therefore uncertain. These approaches are utilized to develop a range of fair values and a weighted average of these approaches is utilized to determine the best fair value estimate within that range. Detailed below is a table of key underlying assumptions utilized in the fair value estimate calculation for the interim test performed as of March 31, 2016 as compared to those assumptions utilized during the annual valuation performed as of October 1, 2015. Assumptions may vary by reporting unit. The table below shows the range of assumptions utilized across the various reporting units.
|  | Goodwill Impairment Analysis |
|  | Key Assumptions |
|  | 2016 - Interim |  |  | 2015 - Annual |
Income Approach - Discounted Cash Flows (a): |  |  |  |  |  |
Revenue 5-year compound annual growth rate (CAGR) |  |  | (9.0%) - (0.6%) |  |  |  | 2.6% - 2.7% |
2016 EBITDA margins (b) |  |  | 5.1% - 6.6% |  |  |  | 7.2% - 8.4% |
Cost of equity capital |  |  | 11.6% - 14.7% |  |  |  | 12.3% - 16.5% |
Cost of debt capital |  |  | 3.6% - 8.5% |  |  |  | 2.4% - 5.9% |
Weighted average cost of capital |  |  | 10.0% - 14.0% |  |  |  | 11.0% - 15.0% |
Market Approach - Multiples of Guideline Companies (a): |  |  |  |  |  |  |  |
Net operating revenue multiples used |  |  | 0.4 - 0.6 |  |  |  | 0.4 - 0.5 |
Operating EBITDA multiples used (b) |  |  | 5.9 - 6.3 |  |  |  | 5.0 - 5.3 |
Invested capital control premium |  |  | 25% |  |  |  | 25% |
Weighting of Valuation Methods: |  |  |  |  |  |  |  |
Income Approach - Discounted Cash Flows |  |  | 75% |  |  |  | 75% |
Market Approach - Multiples of Guideline Companies |  |  | 25% |  |  |  | 25% |
(a) Ranges noted reflect assumptions and multiples used throughout the North America, Asia and Europe reporting units |
(b) EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by net sales. |  |  |  |  |
The March 31, 2016 interim impairment test related to the Company's goodwill was performed by reporting unit (North America, Asia and Europe). The valuation test, which heavily weights future discounted cash flow projections, indicated impairment of the goodwill associated with all three of the Company's reporting units. As a result, the Company recorded non-cash goodwill impairment charges totaling $104.3 million during the first quarter of 2016. During the second quarter of 2016, the Company finalized its interim impairment test, which resulted in a $2.6 million reduction to the provisional impairment charge recorded during the first quarter of 2016. The Company's goodwill associated with its reporting units originated from several of Bel's prior acquisitions, primarily the Power-One Power Solutions business ("Power Solutions") acquired from ABB Ltd. in 2014 and the Connectivity Solutions business of Emerson Electric Co. ("Connectivity Solutions") acquired in 2014 (which represented $55.5 million and $55.0 million, respectively, of the carrying value of goodwill at the testing date). The carrying value of the Company's goodwill was $121.6 million at December 31, 2015. The remaining goodwill as of September 30, 2016 has a carrying value of $19.2 million. See Note 4, Goodwill and Other Intangible Assets. As further discussed in Note 4, Goodwill and Other Intangible Assets, the Company had also performed an interim impairment analysis of its indefinite-lived intangible assets as of March 31, 2016. Detailed below is a table of key underlying assumptions utilized in the Level 3 fair value estimate calculation of the Company's trademarks for the interim test performed as of March 31, 2016 as compared to those assumptions utilized during the annual valuation performed as of October 1, 2015. Assumptions may vary by individual trademark. The table below shows the range of assumptions utilized across the Company's various trademarks.
|  | Trademark Impairment Analysis |
|  | Key Assumptions |
| 2016 - Interim |  |  | 2015 - Annual |
Revenue 5-year compound annual growth rate (CAGR) |  |  | (0.4%) - 2.7% |  |  |  | 0.2% - 4.0% |
Estimated fair royalty rate |  |  | 0.25% - 1.5% |  |  |  | 0.5% - 2.0% |
Discount rate |  |  | 11.0% - 15.0% |  |  |  | 12.0% - 14.0% |

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration