XML 57 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value Measurements
 3 Months Ended
Mar. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
4. Fair Value Measurements

The Company records its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date.

The authoritative guidance establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. These levels are: Level 1 (inputs are quoted prices in active markets for identical assets or liabilities); Level 2 (inputs are other than quoted prices that are observable, either directly or indirectly through corroboration with observable market data); and Level 3 (inputs are unobservable, with little or no market data that exists, such as internal financial forecasts). The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table summarizes information regarding the Company’s financial assets and financial liabilities that are measured at fair value (in thousands):

 

Description    Balance at
   March 31,   
2014		     Level 1      Level 2     Level 3  

Financial Assets

          

Non-qualified retirement savings plan assets

    $ 6,102      $ 4,975       $ 1,127      $ —     

Derivatives

      107        —           107        —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total Assets

    $ 6,209      $ 4,975       $ 1,234      $ —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Financial Liabilities

          

Contingent consideration

    $ (4,486 )    $ —         $ —        $ (4,486 ) 

Derivatives

      (68 )      —           (68 )      —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total Liabilities

    $ (4,554 )    $ —         $ (68 )    $ (4,486 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

 

Description    Balance at
December 31,
2013		     Level 1      Level 2     Level 3  

Financial Assets

          

Non-qualified retirement savings plan assets

    $ 6,000      $ 4,944       $ 1,056      $ —     

Derivatives

      1        —           1        —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total Assets

    $ 6,001      $ 4,944       $ 1,057      $ —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Financial Liabilities

          

Contingent consideration

    $ (4,425 )    $ —         $ —        $ (4,425 ) 

Derivatives

      (1 )      —           (1 )      —     
  

 

 

    

 

 

     

 

 

    

 

 

  

Total Liabilities

    $ (4,426 )    $ —         $ (1 )    $ (4,425 ) 
  

 

 

    

 

 

     

 

 

    

 

 

  

The non-qualified retirement savings plan assets consist of cash and several publicly traded stock and bond mutual funds, valued using quoted market prices in active markets classified as Level 1 within the fair value hierarchy, as well as securities that are not actively traded on major exchanges, valued using the NAV of the underlying investments classified as Level 2 within the fair value hierarchy. The Company’s derivatives consist of foreign currency forward contracts, which are accounted for as cash flow hedges, and are valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves and currency rates, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company.

The fair value of contingent consideration was estimated based on the present value of the probability weighted revenue projections for the three fiscal years following the acquisition date of Permalok. The inputs used to measure contingent consideration are classified as Level 3 within the valuation hierarchy. The valuation is not supported by market criteria and reflects the Company’s internal revenue forecasts. The discount rate used in the analysis was 5.3%. Changes in the fair value of the contingent consideration payment are reflected in earnings during the period which the change in the estimated fair value is calculated.

The net carrying amounts of cash and cash equivalents, trade and other receivables, accounts payable, accrued liabilities and note payable to financial institution approximate fair value due to the short-term nature of these instruments. The fair value of our debt is calculated using a coupon rate on borrowings with similar maturities, current remaining average life to maturity, borrower credit quality, and current market conditions, all of which are classified as Level 2 within the valuation hierarchy. The fair value of the Company’s long-term debt, including the current portion, was $3.5 million and the carrying value was $3.6 million at March 31, 2014, and $6.3 million with a carrying value of $6.4 million at December 31, 2013.