v2.4.0.6
FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2012
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS:

The Company accounts for its fair value measurements in accordance with accounting guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The fair value hierarchy for disclosure of fair value measurements is as follows:
Level 1
- Quoted prices in active markets for identical assets or liabilities
Level 2
- Quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3
- Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
    
The following table summarizes assets and liabilities measured at fair value on a recurring basis:

 
March 31, 2012
 
 
December 31, 2011
 
 
April 2, 2011
(dollars in millions)
Level 1
 
Level 2
 
Level 3
 
 
Level 1
 
Level 2
 
Level 3
 
 
Level 1
 
Level 2
 
Level 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investments
$
50.2

 
$
—

 
$
—

 
 
$
50.2

 
$
—

 
$
—

 
 
$
175.4

 
$
—

 
$
—

Foreign exchange forward contracts
$
—

 
$
—

 
$
—

 
 
$
0.6

 
$
—

 
$
—

 
 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
$
0.1

 
$
—

 
$
—

 
 
$
—

 
$
—

 
$
—

 
 
$
—

 
$
—

 
$
—

Revolving credit facility
$
236.0

 
$
—

 
$
—

 
 
$
236.0

 
$
—

 
$
—

 
 
$
236.0

 
$
—

 
$
—

Contingent consideration
$
—

 
$
—

 
$
26.8

 
 
$
—

 
$
—

 
$
25.6

 
 
$
—

 
$
—

 
$
—



NOTE 8 – FAIR VALUE MEASUREMENTS: (Continued)

The following summarizes the significant unobservable inputs for our Level 3 fair value measurements at March 31, 2012:

(dollars in millions)
Fair Value
 
Valuation
technique
 
Unobservable
inputs
 
Amount
 
 
 
 
 
 
 
 
Contingent consideration
$
26.8

 
Discounted cash flow
 
Estimated contingent consideration payment
 
$
35

 
 
 
 
 
Discount rate
 
18
%
 
 
 
 
 
Probability assumption
 
100
%

    
At March 31, 2012 and December 31, 2011, we had approximately $50.2 million of cash invested in money market deposit accounts. At April 2, 2011, we had approximately $50.4 million of cash invested in money market deposit accounts and $125.0 million in U.S. Treasury bills.

As of March 31, 2012, December 31, 2011, and April 2, 2011, the fair value of the Company’s outstanding borrowings under the revolving credit facility of $236.0 million approximates book value.

In connection with the Acquisition, the Company acquired open forward foreign exchange contracts which were undesignated hedges used to reduce its risk from cash flows associated with U.S. dollar denominated inventory purchases. As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, primarily exposure to changes in the value of the U.S. dollar in relation to the Canadian dollar, the Company hedges a portion of its foreign currency exposures anticipated over the ensuing twelve-month period. The Company uses foreign exchange contracts that generally have maturities of up to 12 months to provide continuing coverage throughout the hedging period.

As of March 31, 2012, the Company had contracts for the purchase of $18.5 million of U.S. dollars at fixed rates. The fair value of these forward contracts was a liability of $0.1 million. The Company accounts for these foreign exchange contracts as undesignated positions in accordance with accounting standards on derivatives and hedging. As such, these positions are marked to fair value through earnings at each reporting date.

During the first quarter of fiscal 2012, the Company also recorded a $0.6 million loss on the mark-to-market of open foreign currency exchange contracts and a $0.3 million gain on the remeasurement of Bonnie Togs’ foreign denominated payables.

The fair value of the discounted contingent consideration liability was approximately $26.8 million as of March 31, 2012 and $25.6 million as of December 31, 2011. The $1.2 million change in fair value during the first quarter of fiscal 2012, reflects accretion expense of approximately $0.7 million and $0.5 million in accumulated other comprehensive income reflecting a unfavorable foreign currency translation adjustment. The Company determined the fair value of the contingent consideration based upon a probability-weighted discounted cash flow analysis. Changes in the estimated earnout payment, discount rate, or probability assumptions used could materially impact the fair value of the contingent consideration.

NOTE 8 – FAIR VALUE MEASUREMENTS: (Continued)

The fair value of our derivative instruments in our accompanying unaudited condensed consolidated balance sheets were as follows:

 
Asset Derivatives
 
 
Liability Derivatives
 
 
 
 
 
 
 
 
 
(dollars in millions)
Balance sheet
location
 
Fair value
 
 
Balance sheet
location
 
Fair value
 
 
 
 
 
 
 
 
 
March 31, 2012
Prepaid expenses and other current assets
 
$
—

 
 
Other current liabilities
 
$
0.1

December 31, 2011
Prepaid expenses and other current assets
 
$
0.6

 
 
Other current liabilities
 
$
—

April 2, 2011
Prepaid expenses and other current assets
 
$
—

 
 
Other current liabilities
 
$
—



The effect of undesignated derivative instruments on our accompanying unaudited condensed consolidated financial statements was as follows:
 
Loss recognized in earnings
 
 
 
 
 
For the three-month periods ended
(dollars in thousands)
March 31,
2012
 
April 2,
2011
 
 
 
 
Foreign exchange forward contracts
$
600

 
$
—