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Fair Value of Financial Assets and Liabilities
 12 Months Ended
Dec. 31, 2011
Fair Value of Financial Assets and Liabilities [Abstract]  
Fair Value of Financial Assets and Liabilities

Note J—Fair Value of Financial Assets and Liabilities

The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, notes payable, and short-term debt, approximates its fair value because of the short-term maturity of these instruments. At December 31, 2011, the fair value of the Company’s long-term debt was estimated using discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements which are considered to be level two inputs. There have been no transfers in or out of level two for the twelve month period ended December 31, 2011. Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt are as follows:

 

      September 30,       September 30,       September 30,       September 30,  
    December 31, 2011     December 31, 2010  
    Fair Value     Carrying Value     Fair Value     Carrying Value  

Long-term debt and related current maturities

   $ 28,659     $ 28,592     $ 10,738     $ 10,650  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

As a result of being a global company, the Company’s earnings, cash flows and financial position are exposed to foreign currency risk. The Company’s primary objective for holding derivative financial instruments is to manage foreign currency risks. The Company accounts for derivative instruments and hedging activities as either assets or liabilities in the consolidated balance sheet and carry these instruments at fair value. The Company does not enter into any trading or speculative positions with regard to derivative instruments. At December 31, 2011, the Company had one immaterial derivative outstanding.

Foreign currency derivative instruments outstanding are not designated as hedges for accounting purposes. The gains and losses related to mark-to-market adjustments are recognized as other operating (income) expense on the statement of consolidated income during the period in which the derivative instruments were outstanding.

As part of the Purchase Agreement to acquire Electropar, the Company is required to make an additional earn-out consideration payment up to NZ$2 million or $1.5 million US dollar based upon whether Electropar achieved a financial performance target (Earnings Before Interest, Taxes, Depreciation and Amortization) over the 12 months ending July 31, 2011. The fair value of the contingent consideration arrangement is determined by estimating the expected (probability-weighted) earn-out payment discounted to present value and is considered a level three input. Based upon the initial evaluation of the range of outcomes for this contingent consideration, the Company accrued $.4 million for the additional earn-out consideration payment as of the acquisition date in the Accrued expenses and other liabilities line on the consolidated balance sheet, and as part of the purchase price. The amount accrued in the consolidated balance sheet of $1.1 million increased $.6 million due primarily to a $.6 million adjustment for actual results and less than $.1 million increase in the net present value of the liability due to the passage of time. The adjustment of $.6 million was recorded in Costs and expenses in the consolidated statements of income. The earn-out consideration calculation has been finalized as of December 31, 2011.