XML 30 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value of Financial Assets and Liabilities
 3 Months Ended
Mar. 31, 2012
Fair Value of Financial Assets and Liabilities [Abstract]  
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

NOTE G—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 March 31, 2012, 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 three month period ended March 31, 2012. Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt are as follows:

 

                                 
    March 31, 2012     December 31, 2011  
    Fair Value     Carrying Value     Fair Value     Carrying Value  

Long-term debt and related current maturities

   $ 34,303     $ 34,236     $ 28,659     $ 28,592  
   

 

 

    

 

 

    

 

 

    

 

 

  

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 carries these instruments at fair value. The Company does not enter into any trading or speculative positions with regard to derivative instruments. At March 31, 2012, 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 January 31, 2012 Purchase Agreement to acquire Australian Electricity Systems PTY Ltd (AES), the Company may be required to make an additional earn-out consideration payment of AUD $1.1 million or $1.2 million US dollar. This amount represents the fair value of the earn-out consideration based on AES achieving a financial performance target over twelve months ending June 30, 2012. The calculation of the fair value of the earn-out consideration is based upon seven months (June 1, 2011 through January 31, 2012) of actual Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and five months (February 1, 2012 through June 30, 2012) of estimated EBITDA and will be paid based on actual EBITDA for the twelve month period. The fair value of the contingent consideration arrangement is determined by estimating the expected (probability-weighted) earn-out payment which is discounted to present value and is considered a level three input. The discounted cash flow utilized weighted average inputs, including a risk-based discount rate of 11.5%. Based upon our initial evaluation of the range of outcomes for this contingent consideration, we have accrued $1.2 million for the additional earn-out consideration payment as of the acquisition date, and as part of the purchase price. The Company accrued the additional earn-out consideration as of the acquisition date in the Accrued expenses and other liabilities line of the consolidated balance sheet.