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Document and Entity Information	9 Months Ended
Document and Entity Information	Sep. 30, 2011 shares
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Trading Symbol	CFX
Entity Registrant Name	COLFAX CORP
Entity Central Index Key	0001420800
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding	43,602,712

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Oct. 01, 2010	Sep. 30, 2011	Oct. 01, 2010
Net sales	$ 170,294	$ 132,397	$ 515,601	$ 375,336
Cost of sales	109,667	85,300	337,046	243,502
Gross profit	60,627	47,097	178,555	131,834
Selling, general and administrative expense	40,972	29,927	116,920	87,829
Research and development expense	1,439	1,583	4,540	4,731
Restructuring and other related charges	5,299	2,441	7,518	9,515
Asbestos liability and defense cost	4,391	2,202	7,644	4,179
Asbestos coverage litigation expense	3,086	2,339	8,454	10,763
Operating income	5,440	8,605	33,479	14,817
Interest expense	1,218	1,544	4,507	5,075
Income before income taxes	4,222	7,061	28,972	9,742
Provision for income taxes	532	1,210	8,337	2,177
Net income	$ 3,690	$ 5,851	$ 20,635	$ 7,565
Net income per share-basic and diluted	$ 0.08	$ 0.13	$ 0.47	$ 0.17

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2011	Dec. 31, 2010
CURRENT ASSETS:
Cash and cash equivalents	$ 64,447	$ 60,542
Trade receivables, less allowance for doubtful accounts of $2,707 and $2,562	104,789	98,070
Inventories, net	79,183	57,941
Deferred income taxes, net	6,364	6,108
Asbestos insurance asset	32,848	34,117
Asbestos insurance receivable	30,430	46,108
Prepaid expenses	12,156	11,851
Other current assets	14,742	6,319
Total current assets	344,959	321,056
Deferred income taxes, net	48,026	52,385
Property, plant and equipment, net	91,413	89,246
Goodwill	184,119	172,338
Intangible assets, net	33,200	28,298
Long-term asbestos insurance asset	320,737	340,234
Long-term asbestos insurance receivable	7,063	5,736
Other assets	9,370	12,784
Total assets	1,038,887	1,022,077
CURRENT LIABILITIES:
Current portion of long-term debt	10,000	10,000
Accounts payable	53,865	50,896
Accrued asbestos liability	36,709	37,875
Accrued payroll	23,168	21,211
Advance payment from customers	13,583	17,250
Accrued taxes	6,451	6,173
Accrued restructuring liability	4,899	2,180
Other accrued liabilities	63,352	45,925
Total current liabilities	212,027	191,510
Long-term debt, less current portion	65,000	72,500
Long-term asbestos liability	376,626	391,776
Pension and accrued post-retirement benefits	107,029	112,257
Deferred income tax liability	15,927	13,529
Other liabilities	16,782	24,134
Total liabilities	793,391	805,706
Shareholders' equity:
Common stock, $0.001 par value; 200,000,000 shares authorized; 43,602,712 and 43,413,553 issued and outstanding	44	43
Additional paid-in capital	413,013	406,901
Accumulated deficit	(39,423)	(60,058)
Accumulated other comprehensive loss	(128,138)	(130,515)
Total shareholders' equity	245,496	216,371
Total liabilities and shareholders' equity	$ 1,038,887	$ 1,022,077

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2011	Dec. 31, 2010
Trade receivables, allowance for doubtful accounts	$ 2,707	$ 2,562
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, issued	43,602,712	43,413,553
Common stock, outstanding	43,602,712	43,413,553

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2011	Oct. 01, 2010
Cash flows from operating activities:
Net income	$ 20,635	$ 7,565
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and fixed asset impairment charges	17,618	11,242
Stock-based compensation expense	3,885	1,872
Amortization of deferred loan costs	548	508
Deferred income tax expense (benefit)	2,193	(4,377)
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net	1,800	925
Inventories, net	(11,229)	12,327
Accounts payable and accrued expenses, excluding asbestos-related accrued expenses	(1,489)	6,044
Other current assets	(2,088)	509
Asbestos liability and asbestos-related accrued expenses, net of asbestos insurance asset and receivable	17,787	7,386
Changes in other operating assets and liabilities	(7,982)	(8,701)
Net cash provided by operating activities	41,678	35,300
Cash flows from investing activities:
Purchases of fixed assets, net	(10,717)	(9,285)
Acquisitions, net of cash received	(22,299)	(27,011)
Net cash used in investing activities	(33,016)	(36,296)
Cash flows from financing activities:
Payments under term credit facility	(7,500)	(6,250)
Proceeds from borrowings on revolving credit facilities	78,646
Repayments of borrowings on revolving credit facilities	(78,646)
Payments on capital leases		(203)
Proceeds from stock-based awards	2,195	995
Repurchases of common stock		(191)
Net cash used in financing activities	(5,305)	(5,649)
Effect of foreign exchange rates on cash and cash equivalents	548	(540)
Increase (decrease) in cash and cash equivalents	3,905	(7,185)
Cash and cash equivalents, beginning of period	60,542	49,963
Cash and cash equivalents, end of period	$ 64,447	$ 42,778

Organization and Nature of Operations

9 Months Ended

Sep. 30, 2011

Organization and Nature of Operations

1. Organization and Nature of Operations

Colfax Corporation (the “Company” or “Colfax”) is a global supplier of a broad range of fluid-handling products, including pumps, fluid-handling systems and controls, and specialty valves. The Company has a global manufacturing footprint, with production facilities in Europe, North America and Asia, as well as worldwide sales and distribution channels. The Company’s products serve a variety of applications in five strategic end markets: commercial marine, oil and gas, power generation, defense and general industrial. Colfax designs and engineers its products to high quality and reliability standards for use in critical fluid-handling applications where performance is paramount, and it offers customized fluid-handling solutions to meet individual customer needs based on its in-depth technical knowledge of the applications in which its products are used. The Company’s products are marketed principally under the Allweiler, Baric, Fairmount Automation, Houttuin, Imo, LSC, Portland Valve, Tushaco, Warren, and Zenith brand names.

General

9 Months Ended

Sep. 30, 2011

General

2. General

The Condensed Consolidated Financial Statements included in this quarterly report have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements.

The Condensed Consolidated Balance Sheet as of December 31, 2010 is derived from the Company’s audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the SEC’s rules and regulations for interim financial statements. The Condensed Consolidated Financial Statements included herein should be read in conjunction with the audited financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 25, 2011.

The Condensed Consolidated Financial Statements reflect, in the opinion of management, all adjustments, which consist solely of normal recurring adjustments, necessary to present fairly the Company’s financial position and results of operations as of and for the periods indicated. Significant intercompany transactions and accounts are eliminated in consolidation.

The Company makes certain estimates and assumptions in preparing its Condensed Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates.

The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results of operations that may be achieved for the full year. Quarterly results are affected by seasonal variations in the Company’s fluid-handling business. As the Company’s customers seek to fully utilize capital spending budgets before the end of the year, historically shipments have peaked during the fourth quarter. Also, Colfax’s European operations typically experience a slowdown during the July and August holiday season. General economic conditions as well as backlog levels may, however, impact future seasonal variations.

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

+ References

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+ Details

Recently Issued Accounting Pronouncements

9 Months Ended

Sep. 30, 2011

Recently Issued Accounting Pronouncements

3. Recently Issued Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles—Goodwill and Other” (“ASU No. 2011-08”). ASU 2011-08 was intended to reduce the complexity and cost by providing an option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. ASU 2011-08 is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company intends to early adopt ASU 2011-08 in conjunction with its October 1, 2011 Goodwill impairment analysis and is currently evaluating the impact of adoption, but does not expect the adoption to have a material impact on the Company’s Condensed Consolidated Financial Statements.

In October 2009, the Financial Accounting Standards Board issued ASU No. 2009-13, “Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force” (“ASU No. 2009-13”). ASU No. 2009-13 addresses the unit of accounting for arrangements involving multiple deliverables and how arrangement consideration should be allocated to the separate units of accounting. The Company adopted the provisions of ASU No. 2009-13 prospectively beginning January 1, 2011. The adoption of ASU No. 2009-13 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

Acquisitions

9 Months Ended

Sep. 30, 2011

Acquisitions

4. Acquisitions

Charter International plc

On September 12, 2011, Colfax Corporation entered into an agreement with Charter International plc (“Charter”) pursuant to which, subject to certain terms and conditions, Charter will become a wholly owned subsidiary of Colfax (the “Acquisition”). Under the terms of the Acquisition, Charter shareholders will be entitled to receive 730 pence in cash and 0.1241 newly issued shares of Colfax Corporation Common stock in exchange for each share of Charter’s ordinary stock.

In connection with the financing of the proposed Acquisition of Charter, on September 12, 2011, Colfax entered into a securities purchase agreement (the “BDT Purchase Agreement”) with BDT CF Acquisition Vehicle, LLC (the “BDT Investor”) as well as BDT Capital Partners Fund I-A, L.P., and Mitchell P. Rales, Chairman of Colfax’s Board of Directors, and his brother, Steven M. Rales (for the limited purpose of tag-along sales rights provided to the BDT Investor in the event of a sale or transfer of shares of Colfax Common stock by either or both of Mitchell P. Rales and Steven M. Rales). Pursuant to the BDT Purchase Agreement, Colfax has agreed to sell to the BDT Investor (i) 14,756,945 newly issued shares of Colfax Common stock and (ii) 13,877,552 shares of newly created Series A perpetual convertible preferred stock, referred to as the Series A Preferred Stock, for an aggregate of $680 million (representing $24.50 per share of Series A Preferred Stock and $23.04 per share of Common stock). Under the terms of the Series A Preferred Stock, holders are entitled to receive cumulative cash dividends, payable quarterly, at a per annum rate of 6% of the liquidation preference (defined as $24.50, subject to customary antidilution adjustments), provided that the dividend rate shall be increased to a per annum rate of 8% if Colfax fails to pay the full amount of any dividend required to be paid on such shares until the date that full payment is made.

The Series A Preferred Stock is convertible, in whole or in part, at the option of the holders at any time after the date the shares are issued into shares of Colfax Common stock at a conversion rate determined by dividing the liquidation preference by a number equal to 114% of the liquidation preference, subject to certain adjustments. The Series A Preferred Stock is also convertible, in whole or in part, at the option of Colfax on or after the third anniversary of the issuance of the shares at the same conversion rate if, among other things: (i) for the preceding thirty trading days, the closing price of Colfax Common stock on the New York Stock Exchange exceeds 133% of the applicable conversion price and (ii) Colfax has declared and paid or set apart for payment all accrued but unpaid dividends on the Series A Preferred Stock.

On September 12, 2011, Colfax entered into separate securities purchase agreements with Mitchell P. Rales, Chairman of Colfax’s Board of Directors, and his brother Steven M. Rales, each of whom were beneficial owners of 20.9% of Colfax’s Common stock, and Markel Corporation, a Virginia corporation (“Markel”). Thomas S. Gayner, a member of Colfax’s Board of Directors, is President and Chief Investment Officer of Markel. Pursuant to these agreements, Colfax agreed to sell 2,170,139 to each of Mitchell P. Rales and Steven M. Rales and 1,085,070 to Markel of newly issued Colfax Common stock at $23.04 per share, for a total aggregate of $125 million.

On September 12, 2011, Colfax and certain of its subsidiaries entered into a credit agreement (the “Deutsche Bank Credit Agreement”) with Deutsche Bank Securities Inc. and HSBC Securities (USA) Inc. The Deutsche Bank Credit Agreement has three tranches of term loans: (i) a $200 million term A-1 facility, (ii) a $700 million term A-2 facility and (iii) a $900 million term B facility. In addition, the Deutsche Bank Credit Agreement has two revolving credit facilities which total $300 million in commitments (the “Revolver”). The Revolver includes a $200 million letter of credit sub-facility and a $50 million swingline loan sub-facility.

The completion of the Acquisition and the consummation of the transactions contemplated by the BDT Purchase Agreement, the securities purchase agreements with Mitchell P. Rales, Steven M. Rales and Markel Corporation and the Deutsche Bank Credit Agreement depends on a number of conditions being satisfied. These conditions include, among others, the receipt of approval of Charter stockholders of the Acquisition, the receipt of approval of Colfax stockholders of (i) the issuance of securities to the BDT Investor, (ii) the issuance of securities to Mitchell P. Rales, Steven M. Rales and Markel, (iii) the issuance of securities under the terms of the Acquisition and (iv) amendment and restatement of Colfax’s certificate of incorporation to increase the number of authorized shares of the Company’s Common stock and preferred stock and to provide the BDT Investor certain approval rights and director nomination rights in Colfax. The Acquisition is currently expected to close in the first quarter of 2012.

During both the three and nine months ended September 30, 2011, the Company incurred $5.7 million of advisory, legal, audit, valuation and other professional service fees in connection with the Acquisition, which are included in Selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

See Note 14, “Financial Instruments” for a discussion of a foreign exchange option agreement entered into in conjunction with the Acquisition.

Rosscor Holding, B.V.

On February 14, 2011, the Company completed the acquisition of Rosscor Holding, B.V. (“Rosscor”) for $22.3 million, net of cash acquired. Rosscor is a supplier of multiphase pumping technology and certain other highly engineered fluid-handling systems, with its primary operations based in Hengelo, The Netherlands. As a result of this acquisition, the Company has expanded its product offerings in the oil and gas end market to include multiphase pump systems that many of its customers already purchase. The Company accounted for the acquisition using the acquisition method of accounting; accordingly, the Condensed Consolidated Financial Statements include the financial position and results of operations from the date of acquisition. None of the Goodwill recognized is expected to be deductible for income tax purposes.

The following table summarizes the aggregate estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

	February 14,
	2011
	(in thousands)
Trade receivables	$	8,475
Inventories		11,439
Property, plant and equipment		1,121
Goodwill(1)		10,212
Intangible assets		10,726
Accounts payable		(8,851	)
Customer advance payments		(7,466	)
Other assets and liabilities, net		(3,357	)
Net cash consideration	$	22,299

(1)

Goodwill included in the Condensed Consolidated Balance Sheet increased by $11.8 million from $172.3 million as of December 31, 2010 to $184.1 million as of September 30, 2011, of which $10.2 million relates to the acquisition of Rosscor detailed above and the remaining $1.6 million increase represents the effect of foreign currency translation.

The following table summarizes the Intangible assets acquired, excluding Goodwill:

	Intangible		Weighted-Average
	Asset		Amortization
	(in thousands)		Period (years)
Backlog	$	1,828		0.98
Acquired technology		8,898		20.00
Intangible assets	$	10,726		16.76

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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+ Details

Net Income Per Share

9 Months Ended

Sep. 30, 2011

Net Income Per Share

5. Net Income Per Share

Net income per share was computed as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2011		October 1, 2010		September 30, 2011		October 1, 2010
	(In thousands, except share data)
Net income	$	3,690	$	5,851	$	20,635	$	7,565

Weighted-average shares of Common stock outstanding—basic		43,682,698		43,390,849		43,598,692		43,328,091
Net effect of potentially dilutive securities(1)		729,272		228,403		700,465		211,281
Weighted-average shares of Common stock outstanding—diluted		44,411,970		43,619,252		44,299,157		43,539,372

Net income per share—basic and diluted	$	0.08	$	0.13	$	0.47	$	0.17

(1)	Potentially dilutive securities consist of stock options and restricted stock units.

The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the three months ended September 30, 2011 and October 1, 2010 excludes approximately 0.5 million and 1.3 million outstanding stock-based compensation awards, respectively, as their inclusion would be anti-dilutive. The weighted-average computation of the dilutive effect of potentially issuable shares of Common stock under the treasury stock method for the nine months ended September 30, 2011 and October 1, 2010 excludes approximately 0.5 million and 0.9 million outstanding stock-based compensation awards, respectively, as their inclusion would be anti-dilutive.

Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

6. Income Taxes

For all periods presented, the respective effective tax rate represents the estimated annual tax rate for the year applied to the respective period Income before income taxes plus the tax effect of any significant unusual items, discrete items or changes in tax law.

During the three and nine months ended September 30, 2011, Income before income taxes was approximately $4.2 million and $29.0 million, respectively, and the Provision for income taxes was $0.5 million and $8.3 million, respectively. The effective tax rates of 12.6% and 28.8% for the three and nine months ended September 30, 2011, respectively, differ from the United States (“U.S.”) federal statutory tax rate primarily due to international tax rates, which are lower than the U.S. tax rate, and changes in the estimated annual tax rate. The estimated annual tax rate declined primarily due to the impact of changes in anticipated pre-tax income for the year ended December 31, 2011 in various tax jurisdictions that the Company operates in. The cumulative impact of this adjustment during the three months ended September 30, 2011 resulted in an effective tax rate of 12.6%. The change in the estimated annual tax rate resulted in an increase of approximately $0.7 million in Net income for both the three and nine months ended September 30, 2011, or $0.01 and $0.02 per share, respectively.

During the three and nine months ended October 1, 2010, Income before income taxes was approximately $7.1 million and $9.7 million, respectively, and the Provision for income taxes was $1.2 million and $2.2 million, respectively. The effective tax rates of 17.1% and 22.3% for the three and nine months ended October 1, 2010, respectively, differ from the U.S. federal statutory tax rate due to a net decrease in the Company’s liability for unrecognized income tax benefits primarily due to the successful resolution of 2003 German tax audit issues and the effect of international tax rates which are lower than the U.S. tax rate.

The Company is subject to income tax in the U.S. (including state jurisdictions) and international locations. The Company’s significant operations outside the U.S. are located in Germany and Sweden. In Sweden, tax years 2005 to 2010 and in Germany, tax years 2006 to 2010 remain subject to examination. In the U.S., tax years 2005 and beyond generally remain open for examination by U.S. federal and state tax authorities as well as the tax year ending in 2003 that has U.S. tax attributes available that have been carried forward to open tax years or are available to be carried forward to future tax years. During the three and nine months ended September 30, 2011, previously unrecognized tax benefits of $5.2 million were recognized due to the expiration of certain statutes of limitations.

The Company considers each of the four sources of taxable income proscribed in FASB’s Accounting Standard Codification 740 “Income Taxes” when determining the appropriate level of its deferred tax valuation allowance. Unrecognized tax positions related to existing deferred tax assets represent a future source of taxable income considered in the Company’s analysis of the realizability of its deferred tax assets on a more likely than not basis. As a result of the expiration of certain statutes of limitations, as noted above, the Company has adjusted its sources of future taxable income estimate available to utilize its deferred tax asset. This change in estimate caused the Company to increase its valuation allowance by $5.2 million to reflect additional deferred tax assets that may not be realized on a more likely than not basis.

Due to the difficulty in predicting with reasonable certainty when tax audits will be fully resolved and closed, the range of reasonably possible significant increases or decreases in the liability for unrecognized tax benefits that may occur within the next 12 months is difficult to ascertain. Currently, the Company estimates that it is reasonably possible that the expiration of various statutes of limitations and resolution of tax audits may reduce its tax expense in the next 12 months in amounts ranging from zero to $0.5 million.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-SubTopic 10
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-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
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-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

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-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details

Comprehensive (Loss) Income

9 Months Ended

Sep. 30, 2011

Comprehensive (Loss) Income

7. Comprehensive (Loss) Income

	Three Months Ended						Nine Months Ended
	September 30, 2011			October 1, 2010			September 30, 2011			October 1, 2010
	(In thousands)
Net income	$	3,690		$	5,851		$	20,635		$	7,565
Other comprehensive (loss) income:
Foreign currency translation, net of tax		(15,216	)		16,057			(2,470	)		(4,152	)
Unrealized loss on hedging activities		(13	)		(292	)		(146	)		(1,151	)
Amounts reclassified to Net income:
Realized loss on hedging activities		251			490			1,231			1,951
Net pension and other postretirement benefit cost, net of tax		1,161			777			3,762			2,337
Other comprehensive (loss) income		(13,817	)		17,032			2,377			(1,015	)
Comprehensive (loss) income	$	(10,127	)	$	22,883		$	23,012		$	6,550

- Definition

The entire disclosure for comprehensive income. Includes, but is not limited to, the following: 1) the amount of income tax expense or benefit allocated to each component of other comprehensive income, including reclassification adjustments, 2) the reclassification adjustments for each classification of other comprehensive income and 3) the ending accumulated balances for each component of comprehensive income. Components of comprehensive income include: (1) foreign currency translation adjustments; (2) gains (losses) on foreign currency transactions that are designated as, and are effective as, economic hedges of a net investment in a foreign entity; (3) gains (losses) on intercompany foreign currency transactions that are of a long-term-investment nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements; (4) change in the market value of a futures contract that qualifies as a hedge of an asset reported at fair value; (5) unrealized holding gains (losses) on available-for-sale securities and that resulting from transfers of debt securities from the held-to-maturity category to the available-for-sale category; (6) a net loss recognized as an additional pension liability not yet recognized as net periodic pension cost; and (7) the net gain (loss) and net prior service cost or credit for pension plans and other postretirement benefit plans.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 130
-Paragraph 14-26
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e637-108580

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 14
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e681-108580

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e653-108580

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187085-122770

Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
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-Paragraph 16
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e709-108580

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-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 55
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6920433&loc=d3e998-108581

Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 220
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-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e640-108580

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Reclassification Adjustments
-URI http://asc.fasb.org/extlink&oid=6522872

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
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-Paragraph 17
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e716-108580

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e689-108580

+ Details

Inventories, Net

9 Months Ended

Sep. 30, 2011

Inventories, Net

8. Inventories, Net

Inventories, net consisted of the following:

	September 30,			December 31,
	2011			2010
	(in thousands)
Raw materials	$	29,805		$	23,758
Work in process		40,579			32,224
Finished goods		27,126			20,121
		97,510			76,103
Less: customer progress billings		(10,284	)		(10,385	)
Less: allowance for excess, slow-moving and obsolete inventory		(8,043	)		(7,777	)
Inventories, net	$	79,183		$	57,941

Certain prior period amounts in the table above have been reclassified to conform to current year presentation.

Debt

9 Months Ended

Sep. 30, 2011

Debt

9. Debt

Long-term debt consisted of the following:

	September 30,			December 31,
	2011			2010
	(in thousands)
Term credit facility	$	75,000		$	82,500
Total Debt		75,000			82,500
Less: current portion of the term credit facility		(10,000	)		(10,000	)
Long-term debt	$	65,000		$	72,500

The Company is party to a credit agreement (the “Credit Agreement”), led and administered by Bank of America, which is a senior secured structure with a revolving credit facility and term credit facility. During the three months ended April 1, 2011, the Credit Agreement was amended to, among other items, eliminate the $6.0 million commitment of a defaulted lender, which resulted in a reduction of the revolving credit facility’s total capacity from $150.0 million to $144.0 million. The maturity date of the Credit Agreement is May 13, 2013.

The term credit facility bears interest at the London Interbank Offered Rate plus a margin ranging from 2.25% to 2.75% determined by the total leverage ratio calculated at the end of each quarter. As of September 30, 2011 and December 31, 2010, the interest rate was 2.47% and 2.76%, respectively, inclusive of a margin of 2.25% and 2.50%, respectively.

The revolving credit facility contains a $50.0 million letter of credit sub-facility, a $25.0 million swing line loan sub-facility and permits borrowings in dollars, euros and sterling, subject to certain limits. The annual commitment fee on the revolver ranges from 0.4% to 0.5% determined by the Company’s total leverage ratio calculated at the end of each quarter. As of September 30, 2011 and December 31, 2010, the commitment fee was 0.4% and 0.5%, respectively, and there was $14.5 million and $14.1 million outstanding on the letter of credit sub-facility, respectively. As of September 30, 2011, the Company’s availability under the revolving credit facility was $129.5 million.

The Company is also party to additional letter of credit facilities with total capacity of $48.8 million and $7.1 million outstanding as of September 30, 2011.

Substantially all assets and stock of the Company’s domestic subsidiaries and 65% of the shares of certain European subsidiaries are pledged as collateral against borrowings under the Credit Agreement. Certain European assets are pledged against borrowings directly made to the Company’s European subsidiaries. The Credit Agreement contains customary covenants limiting the Company’s ability to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase Company stock, enter into transactions with affiliates, make investments, merge or consolidate with others or dispose of assets. In addition, the Credit Agreement contains financial covenants requiring the Company to maintain a total leverage ratio of not more than 3.25 to 1.0 and a fixed charge coverage ratio of not less than 1.50 to 1.0, measured at the end of each quarter. If the Company does not comply with the various covenants under the Credit Agreement and related agreements, the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the term credit facility and revolving credit facility and foreclose on the collateral. The Company is in compliance with all such covenants as of September 30, 2011.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References + Details

Share-Based Payments

9 Months Ended

Sep. 30, 2011

Share-Based Payments

10. Share-Based Payments

The Company measures and recognizes compensation expense related to share-based payments based on the fair value of the instruments issued. Stock-based compensation expense is generally recognized as a component of Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations, as payroll costs of the employees receiving the awards are recorded in the same line item.

The Company’s Condensed Consolidated Statements of Operations reflect the following amounts related to stock-based compensation:

	Three Months Ended				Nine Months Ended
	September 30, 2011		October 1, 2010		September 30, 2011(1)		October 1, 2010(2)
	(In thousands)
Stock-based compensation expense	$	1,058	$	151	$	3,885	$	1,872
Deferred tax benefits		371		41		1,360		655

(1)	Includes approximately $0.2 million of stock-based compensation expense included in Restructuring and other related charges in the Company’s Condensed Consolidated Statement of Operations related to the accelerated vesting of certain awards as part of the termination benefits of one employee.

(2)

Includes approximately $0.6 million of stock-based compensation expense included in Restructuring and other related charges in the Company’s Condensed Consolidated Statement of Operations related to the accelerated vesting of certain awards due to the departure of the Company’s former Chief Executive Officer.

As of September 30, 2011, the Company had $8.8 million of unrecognized compensation expense related to stock-based awards that will be recognized over a weighted-average period of approximately 2.1 years.

Stock Options

Stock-based compensation expense for stock option awards is based upon the grant-date fair value using the Black-Scholes option pricing model. The Company recognizes compensation expense for stock option awards on a ratable basis over the requisite service period of the entire award. The following table shows the weighted-average assumptions used to calculate the fair value of stock option awards using the Black-Scholes option pricing model, as well as the weighted-average fair value of options granted during the nine months ended September 30, 2011.

	Nine Months Ended
	September 30, 2011

Expected period that options will be outstanding (in years)		4.50
Interest rate (based on U.S. Treasury yields at the time of grant)		2.10	%
Volatility		52.50	%
Dividend yield		—
Weighted-average fair value of options granted	$	9.68

Expected volatility is estimated based on the historical volatility of comparable public companies. The Company considers historical data to estimate employee termination within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. Since the Company has limited option exercise history, it has elected to estimate the expected life of an award based upon the SEC-approved “simplified method” noted under the provisions of Staff Accounting Bulletin No. 107 with the continued use of this method extended under the provisions of Staff Accounting Bulletin No. 110.

Stock option activity for the nine months ended September 30, 2011 is as follows:

	Number of Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value(1) (in thousands)
Outstanding at December 31, 2010		1,540,656		$	12.34
Granted		385,682			21.55
Exercised		(181,834	)		11.86
Forfeited		(101,670	)		11.35
Expired		(5,001	)		20.83
Outstanding at September 30, 2011		1,637,833		$	14.60		5.16	$	9,851
Vested or expected to vest at September 30, 2011		1,429,785		$	15.29		5.17	$	7,632
Exercisable at September 30, 2011		715,580		$	13.14		4.19	$	5,104

(1)

The aggregate intrinsic value is based upon the difference between the Company’s closing stock price at the date of the Condensed Consolidated Balance Sheet and the exercise price of the stock option for in-the-money stock options. The intrinsic value of outstanding stock options fluctuates based upon the trading value of the Company’s common stock.

Restricted Stock Units

The fair value of each grant of restricted stock units is equal to the market value of the Company’s common stock on the date of grant and the compensation expense is recognized ratably over the requisite service period when it is expected that any of the performance criterion will be achieved.

The activity in the Company’s performance-based restricted stock units (“PRSUs”) and restricted stock units (“RSUs”) during the nine months ended September 30, 2011 is as follows:

	PRSUs					RSUs
	Number of Units			Weighted- Average Grant Date Fair Value		Number of Units			Weighted- Average Grant Date Fair Value
Nonvested at December 31, 2010		283,495		$	13.33		83,793		$	11.35
Granted		115,922			21.78		28,311			22.40
Vested		—			—		(47,841	)		13.38
Forfeited		(37,829	)		13.88		—			—
Nonvested at September 30, 2011		361,588		$	15.97		64,263		$	14.71

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
-Paragraph 53
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 50
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 40
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

Warranty Costs

9 Months Ended

Sep. 30, 2011

Warranty Costs

11. Warranty Costs

Estimated expenses related to product warranties are accrued at the time products are sold to customers and included in Cost of sales in the Condensed Consolidated Statements of Operations. Estimates are established using historical information as to the nature, frequency, and average costs of warranty claims.

The activity in the Company’s warranty liability, which is included in Other accrued liabilities in the Company’s Condensed Consolidated Financial Statements consisted of the following:

	Nine Months Ended
	September 30,			October 1,
	2011			2010
	(in thousands)
Warranty liability, beginning of period	$	2,963		$	2,852
Accrued warranty expense		2,278			1,266
Changes in estimates related to pre-existing warranties		684			(553	)
Cost of warranty service work performed		(1,777	)		(723	)
Acquisitions		452			—
Foreign exchange translation effect		22			(67	)
Warranty liability, end of period	$	4,622		$	2,775

Restructuring and Other Related Charges

9 Months Ended

Sep. 30, 2011

Restructuring and Other Related Charges

12. Restructuring and Other Related Charges

The Company initiated a series of restructuring actions beginning in 2009 in response to then current and expected future economic conditions. During the nine months ended September 30, 2011, the Company relocated its Richmond, Virginia corporate headquarters to Fulton, Maryland in order to provide improved access to international travel and to its key advisors and eliminated an executive position in its German operations. The Company also communicated initiatives to improve productivity and reduce structural costs by rationalizing and leveraging its existing assets and back office functions. These initiatives include the consolidation of the Company’s commercial marine end-market operations, reduction in the back office personnel at several distribution centers in Europe, the closure of a small facility that previously produced units sold to certain customers located in the Middle East that the Company ceased supplying to during the year ended December 31, 2010, and the closure of a Portland, Maine production facility and consolidation of the operations with a Warren, Massachusetts facility.

The Company’s Condensed Consolidated Statements of Operations reflect the following amounts related to its restructuring activities:

	Three Months Ended				Nine Months Ended
	September 30, 2011		October 1, 2010		September 30, 2011(1)		October 1, 2010(2)
	(In millions)
Restructuring and other related charges	$	5.3	$	2.4	$	7.5	$	9.5

(1)	Includes $0.2 million of non-cash stock-based compensation expense.

(2)	Includes $0.6 million of non-cash stock-based compensation expense related to the departure of the Company’s former Chief Executive Officer (“CEO”) in January 2010.

A summary of the activity in the Company’s restructuring liability included in Accrued restructuring liability in the Condensed Consolidated Balance Sheets is as follows:

	Nine Months Ended September 30, 2011
	Balance at Beginning of Period		Provisions		Payments			Foreign Currency Translation			Balance at End of Period
Restructuring and other related charges:
Termination benefits(1)	$	2,180	$	6,607	$	(4,088	)	$	(135	)	$	4,564
Facility closure costs(2)		—		438		(285	)		—			153
Other related charges		—		294		(98	)		(14	)		182
	$	2,180		7,339	$	(4,471	)	$	(149	)	$	4,899
Non-cash termination benefits(3)				179
			$	7,518

(1)

Includes severance and other termination benefits, including outplacement services. The Company recognizes the cost of involuntary termination benefits at the communication date or ratably over any remaining expected future service period. Voluntary termination benefits are recognized as a liability and an expense when employees accept the offer and the amount can be reasonably estimated.

(2)	Includes the cost of relocating and training associates and relocating equipment in connection with the closing of the Portland, Maine facility.

(3)	Represents non-cash stock-based compensation expense.

The Company expects to incur an additional $2.0 million of employee termination benefits, facility closure costs, relocation expense and operating lease exit costs during the remainder of 2011 related to its restructuring activities.

- Definition

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

+ References + Details

Net Periodic Benefit Cost-Defined Benefit Plans

9 Months Ended

Sep. 30, 2011

Net Periodic Benefit Cost-Defined Benefit Plans

13. Net Periodic Benefit Cost–Defined Benefit Plans

The following table sets forth the components of net periodic benefit cost of the non-contributory defined benefit pension plans and the Company’s other post-retirement employee benefit plans:

	Three Months Ended						Nine Months Ended
	September 30, 2011			October 1, 2010			September 30, 2011			October 1, 2010
	(In thousands)
Pension Benefits—U.S. Plans:
Service cost	$	—		$	—		$	—		$	—
Interest cost		2,845			3,174			8,537			9,283
Expected return on plan assets		(4,164	)		(4,599	)		(12,493	)		(13,555	)
Amortization		1,313			1,054			3,939			3,157
Net periodic benefit credit	$	(6	)	$	(371	)	$	(17	)	$	(1,115	)

Pension Benefits—Non U.S. Plans:
Service cost	$	304		$	293		$	926		$	897
Interest cost		1,255			1,025			3,742			3,083
Expected return on plan assets		(354	)		(321	)		(1,070	)		(913	)
Amortization		151			87			464			259
Settlement loss(1)		—			—			1,476			—
Net periodic benefit cost	$	1,356		$	1,084		$	5,538		$	3,326

Other Post-Retirement Benefits:
Service cost	$	—		$	—		$	—		$	—
Interest cost		172			168			517			502
Amortization		214			121			640			361
Net periodic benefit cost	$	386		$	289		$	1,157		$	863

(1)	During the nine months ended September 30, 2011, the Company terminated a frozen pension plan of one of its non-U.S. subsidiaries.

Employer contributions to the pension plans during the nine months ended September 30, 2011 were $6.3 million, and the Company expects to contribute an additional $1.8 million during the remainder of 2011.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph a
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph h
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph q
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 8
-Subparagraph m
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 106
-Paragraph 518
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 87
-Paragraph 264
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 03-2
-Paragraph 8
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 30
-Paragraph 26
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Reference 10: http://www.xbrl.org/2003/role/presentationRef
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Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 158
-Paragraph 7, 21, 22
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5, 6, 7, 8
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Implementation Guide (Q and A)
-Number FAS88
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Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-URI http://asc.fasb.org/topic&trid=2235017

+ Details

Financial Instruments

9 Months Ended

Sep. 30, 2011

Financial Instruments

14. Financial Instruments

The carrying values of financial instruments, including Accounts receivable, Accounts payable and Other accrued liabilities approximate their fair values due to their short-term maturities. The estimated fair value of the Company’s debt of $75.0 million and $81.6 million as of September 30, 2011 and December 31, 2010, respectively, was based on current interest rates for similar types of borrowings. The estimated fair values may not represent actual values of the financial instruments that could be realized as of the balance sheet date or that will be realized in the future.

A summary of the Company’s assets and liabilities that are measured at fair value on a recurring basis for each fair value hierarchy level for the periods presented follows:

	September 30, 2011
	Level One		Level Two		Level Three		Total
	(in thousands)
Assets:
Cash equivalents	$	12,376	$	—	$	—	$	12,376
Foreign currency contracts – acquisition-related		—		5,386				5,386
Foreign currency contracts – primarily related to customer sales contracts		—		2		—		2
	$	12,376	$	5,388	$	—	$	17,764

Liabilities:
Interest rate swap	$	—	$	704	$	—	$	704
Foreign currency contracts – primarily related to customer sales contracts		—		115		—		115
	$	—	$	819	$	—	$	819

	December 31, 2010
	Level One		Level Two		Level Three		Total
	(in thousands)
Assets:
Cash equivalents	$	24,925	$	—	$	—	$	24,925
	$	24,925	$	—	$	—	$	24,925

Liabilities:
Interest rate swap	$	—	$	1,789	$	—	$	1,789
Foreign currency contracts		—		257		—		257
	$	—	$	2,046	$	—	$	2,046

There were no transfers in or out of Level One, Two or Three during the nine months ended September 30, 2011.

Cash Equivalents

The Company’s cash equivalents consist of investments in interest-bearing deposit accounts and money market mutual funds which are valued based on quoted market prices. The fair value of these investments approximate cost due to their short-term maturities and the high credit quality of the issuers of the underlying securities.

Derivatives

The Company periodically enters into foreign currency, interest rate swap and commodity derivative contracts. The Company uses interest rate swaps to manage exposure to interest rate fluctuations. Foreign currency contracts are used to manage exchange rate fluctuations and generally hedge transactions between the Euro and the U.S. dollar. Commodity futures contracts are used to manage costs of raw materials used in the Company’s production processes.

The Company’s derivative instruments are measured at fair value on a recurring basis using significant observable inputs and are included in Level Two of the fair value hierarchy.

Interest Rate Swap. The Company’s interest rate swap is valued based on forward curves observable in the market. The notional value of the Company’s interest rate swap was $25 million and $50 million as of September 30, 2011 and December 31, 2010, respectively, whereby it exchanged its LIBOR-based variable-rate interest for a fixed rate of 4.1375%. On June 30, 2011, the notional value decreased from $50 million to $25 million, and it expires on June 29, 2012. The interest rate swap agreement has been designated as a cash flow hedge, and therefore unrealized gains and losses are recognized in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets to the extent that it is effective at offsetting changes in the hedged cash flows. Realized gains and losses are reclassified to Interest expense in the Condensed Consolidated Statements of Operations. There has been no significant ineffectiveness related to this arrangement since its inception. As of September 30, 2011, the Company expects to reclassify $0.7 million of net losses on the interest rate swap from Accumulated other comprehensive loss to Interest expense during the next twelve months.

Foreign Currency Contracts. Foreign currency contracts are measured using broker quotations or observable market transactions in either listed or over-the-counter markets. The Company primarily uses foreign currency contracts to mitigate the risk associated with customer forward sale agreements denominated in currencies other than the applicable local currency. As of September 30, 2011 and December 31, 2010, the Company had foreign currency contracts used primarily to mitigate the risk associated with forward sale agreements with notional values of $6.7 million and $13.1 million, respectively. Additionally, on September 12, 2011 and in conjunction with the Acquisition, the Company entered into a foreign exchange option contract with Deutsche Bank in order to mitigate the potential foreign exchange risk from September 12, 2011 through the expected closing date of the Acquisition. The notional amount of the contract is 1.5 billion GBP, or $2.9 billion, the fair value as of September 30, 2011 is $5.4 million and the settlement date is March 28, 2012. See Note 3, “Acquisitions” for additional discussion regarding the Company’s agreement to acquire Charter International plc. The fair values of the foreign exchange contracts are recorded in either Other current assets, Other assets, Other accrued liabilities or Other liabilities on the Condensed Consolidated Balance Sheets depending upon their respective expiration date. The Company has not elected hedge accounting for these contracts; therefore, changes in the fair value are recognized as a component of Selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

The Company enters into derivative contracts with financial institutions of good standing, and the total credit exposure related to non-performance by those institutions is not material to the operations of the Company. The Company does not enter into derivative contracts for trading purposes.

The Company recognized the following in its Condensed Consolidated Financial Statements related to its derivative instruments:

	Three Months Ended						Nine Months Ended
	September 30, 2011			October 1, 2010			September 30, 2011			October 1, 2010
	(In thousands)
Contract Designated as a Cash Flow Hedge:
Interest Rate Swap:
Unrealized loss	$	(13	)	$	(292	)	$	(146	)	$	(1,151	)
Realized loss		(251	)		(490	)		(1,231	)		(1,951	)
Contracts Not Designated in a Hedge Relationship:
Foreign Currency Contracts – Acquisition-Related:
Unrealized loss, net		(684	)		—			(684	)		—
Foreign Currency Contracts – Primarily Related to Customer Sales Contracts:
Unrealized gain, net		36			701			210			43
Realized gain (loss), net		(545	)		(100	)		155			(838	)

Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies

15. Commitments and Contingencies

Asbestos Liabilities and Insurance Assets

Two of the Company’s subsidiaries are each one of many defendants in a large number of lawsuits that claim personal injury as a result of exposure to asbestos from products manufactured with components that are alleged to have contained asbestos. Such components were acquired from third-party suppliers, and were not manufactured by any of the Company’s subsidiaries nor were the subsidiaries producers or direct suppliers of asbestos. The manufactured products that are alleged to have contained asbestos generally were provided to meet the specifications of the subsidiaries’ customers, including the U.S. Navy.

The subsidiaries settle asbestos claims for amounts the Company considers reasonable given the facts and circumstances of each claim. The annual average settlement payment per asbestos claimant has fluctuated during the past several years. The Company expects such fluctuations to continue in the future based upon, among other things, the number and type of claims settled in a particular period and the jurisdictions in which such claims arise. To date, the majority of settled claims have been dismissed for no payment.

Of the 22,512 pending claims as of September 30, 2011, approximately 3,600 of such claims have been brought in the Supreme Court of New York County, New York; approximately 1,000 of such claims have been brought in the U.S. District Court, Eastern and Western Districts of Michigan; approximately 200 of such claims have been brought in the Superior Court, Middlesex County, New Jersey; and approximately 100 claims have been brought in various federal and state courts in Mississippi. The remaining pending claims have been filed in various other state and federal courts.

Claims activity related to asbestos is as follows(1):

	Nine Months Ended
	September 30, 2011			October 1, 2010
	(Number of Claims)
Claims unresolved, beginning of period		24,764			25,295
Claims filed(2)		2,799			2,952
Claims resolved(3)		(5,051	)		(3,448	)
Claims unresolved, end of period		22,512			24,799

(1)	Excludes claims filed by one legal firm that have been “administratively dismissed.”

(2)	Claims filed include all asbestos claims for which notification has been received or a file has been opened.

(3)	Claims resolved include all asbestos claims that have been settled, dismissed or that are in the process of being settled or dismissed based upon agreements or understandings in place with counsel for the claimants.

The Company has projected each subsidiary’s future asbestos-related liability costs with regard to pending and future unasserted claims based upon the Nicholson methodology. The Nicholson methodology is a standard approach used by experts and has been accepted by numerous courts. It is the Company’s policy to record a liability for asbestos-related liability costs for the longest period of time that it can reasonably estimate.

The Company believes that it can reasonably estimate the asbestos-related liability for pending and future claims that will be resolved in the next 15 years and has recorded that liability as its best estimate. While it is reasonably possible that the subsidiaries will incur costs after this period, the Company does not believe the reasonably possible loss or range of reasonably possible loss is estimable at the current time. Accordingly, no accrual has been recorded for any costs which may be paid after the next 15 years. Defense costs associated with asbestos-related liabilities as well as costs incurred related to litigation against the subsidiaries’ insurers are expensed as incurred.

Each subsidiary has separate insurance coverage acquired prior to Company ownership of each independent entity. In its evaluation of the insurance asset, the Company used differing insurance allocation methodologies for each subsidiary based upon the applicable law pertaining to the affected subsidiary.

For one of the subsidiaries, the Delaware Court of Chancery ruled on October 14, 2009, that asbestos-related costs should be allocated among excess insurers using an “all sums” allocation (which allows an insured to collect all sums paid in connection with a claim from any insurer whose policy is triggered, up to the policy’s applicable limits) and that the subsidiary has rights to excess insurance policies purchased by a former owner of the business. Based upon this ruling mandating an “all sums” allocation, as well as the language of the underlying insurance policies and the assertion and belief that defense costs are outside policy limits, the subsidiary expects to be responsible for approximately 10% of its future asbestos-related costs.

For this subsidiary, during the three months ended October 1, 2010, an insolvent carrier that had written approximately $1.4 million in limits for which the subsidiary had assumed no recovery made a cash settlement offer of approximately $0.7 million. As such, the subsidiary recorded a gain for this amount and a receivable from the insurer.

The subsidiary was notified in 2010 by the primary and umbrella carrier who had been fully defending and indemnifying the subsidiary for 20 years that the limits of liability of its primary and umbrella layer policies had been exhausted. Since then, the subsidiary has sought coverage from certain excess layer insurers whose terms and conditions follow form to the umbrella carrier. Certain first-layer excess insurers have defended and/or indemnified the subsidiary and/or agreed to defend and/or indemnify the subsidiary, subject to their reservations of rights and their applicable policy limits. Litigation between this subsidiary and its excess insurers is continuing and it is anticipated that the trial phase will be completed in 2011. The subsidiary continues to work with its excess insurers to obtain defense and indemnity payments while the litigation is proceeding. Given the uncertainties of litigation, there is a variety of possible outcomes, including but not limited to the subsidiary being required to fund all or a portion of the subsidiary’s defense and indemnity payments until such time a final ruling orders payment by the insurers. While not impacting the results of operations, the funding requirement could range up to $10 million per quarter until final resolution.

In 2003, the other subsidiary filed a lawsuit against a large number of its insurers and its former parent to resolve a variety of disputes concerning insurance for asbestos-related bodily injury claims asserted against it. Although none of these insurance companies contested coverage, they disputed the timing, reasonableness and allocation of payments.

For this subsidiary it was determined by court ruling in 2007, that the allocation methodology mandated by the New Jersey courts will apply. Further court rulings in December of 2009, clarified the allocation calculation related to amounts currently due from insurers as well as amounts the Company expects to be reimbursed for asbestos-related costs incurred in future periods.

In connection with this litigation, the court engaged a special master to review the appropriate information and recommend an allocation formula in accordance with applicable law and the facts of the case. During 2010, the court-appointed special allocation master made its recommendation which, in May 2011, the court accepted with modifications. A final judgment at the trial court level in this litigation was rendered during the three months ended September 30, 2011, but appeals may follow. As a result of this judgment, the Company recorded a provision for $2.1 million during the three months ended September 30, 2011, which is reflected in the Condensed Consolidated Balance Sheet as an increase of $1.4 million in Other accrued liabilities and a reduction of $0.7 million in Asbestos insurance asset. The Company will also make a payment of $5.0 million, which was previously accrued for, to return certain overpayments to the insurers. The subsidiary expects to be responsible for approximately 15% of all future asbestos-related costs.

The Company has established reserves of $413.3 million and $429.7 million as of September 30, 2011 and December 31, 2010, respectively, for the probable and reasonably estimable asbestos-related liability cost it believes the subsidiaries will pay through the next 15 years. It has also established recoverables of $353.6 million and $374.4 million as of September 30, 2011 and December 31, 2010, respectively, for the insurance recoveries that are deemed probable during the same time period. Net of these recoverables, the expected cash outlay on a non-discounted basis for asbestos-related bodily injury claims over the next 15 years was $59.7 million and $55.3 million as of September 30, 2011 and December 31, 2010, respectively. In addition, the Company has recorded a receivable for liability and defense costs previously paid in the amount of $37.5 million and $51.8 million as of September 30, 2011 and December 31, 2010, respectively, for which insurance recovery is deemed probable. The Company has included the reserves for the asbestos liabilities in Accrued asbestos liability and Long-term asbestos liability and the related insurance recoveries in Asbestos insurance asset and Long-term asbestos insurance asset in the Condensed Consolidated Balance Sheets. The receivable for previously paid liability and defense costs is recorded in Asbestos insurance receivable and Long-term asbestos insurance receivable in the Condensed Consolidated Balance Sheets. The Company also has reflected in Other accrued liabilities $22.1 million and $23.3 million as of September 30, 2011 and December 31, 2010, respectively, for overpayments by certain insurers and unpaid legal costs related to defending itself against asbestos-related liability claims and legal action against the Company’s insurers.

The expense related to these liabilities and legal defense was $4.4 million and $7.6 million for the three and nine months ended September 30, 2011, respectively, and $2.2 million and $4.2 million for the three and nine months ended October 1, 2010, respectively. Legal costs related to the subsidiaries’ action against their asbestos insurers were $3.1 million and $8.5 million for the three and nine months ended September 30, 2011, respectively, and $2.3 million and $10.8 million for the three and nine months ended October 1, 2010, respectively.

Management’s analyses are based on currently known facts and a number of assumptions. However, projecting future events, such as new claims to be filed each year, the average cost of resolving each claim, coverage issues among layers of insurers, the method in which losses will be allocated to the various insurance policies, interpretation of the effect on coverage of various policy terms and limits and their interrelationships, the continuing solvency of various insurance companies, the amount of remaining insurance available, as well as the numerous uncertainties inherent in asbestos litigation could cause the actual liabilities and insurance recoveries to be higher or lower than those projected or recorded which could materially affect the Company’s financial condition, results of operations or cash flow.

General Litigation

On June 3, 1997, one of the Company’s subsidiaries was served with a complaint in a case brought by Litton Industries, Inc. (“Litton”) in the Superior Court of New Jersey which alleges damages in excess of $10.0 million incurred as a result of losses under a government contract bid transferred in connection with the sale of its former Electro-Optical Systems business. In 2004, this case was tried and the jury rendered a verdict of $2.1 million for the plaintiffs. After appeals by both parties, the Supreme Court of New Jersey upheld the plaintiffs’ right to a refund of their attorney’s fees and costs of trial, but remanded the issue to the trial court to reconsider the amount of fees using a proportionality analysis of the relationship between the fee requested and the damages recovered. The date for the new trial on additional claims allowed by the Appellate Division of the New Jersey Superior Court and the recalculation of attorney’s fees has not been set. The court issued a schedule for summary judgment motions. After the summary judgment motions have been briefed, the court is expected to issue a ruling. The subsidiary intends to continue to defend this matter vigorously. As of both September 30, 2011 and December 31, 2010, $9.5 million was included in Other liabilities in the Company’s Condensed Consolidated Balance Sheets related to this matter.

The Company is also involved in various other pending legal proceedings arising out of the ordinary course of the Company’s business. None of these legal proceedings are expected to have a material adverse effect on the financial condition, results of operations or cash flow of the Company. With respect to these proceedings and the litigation and claims described in the preceding paragraphs, management of the Company believes that it will either prevail, has adequate insurance coverage or has established appropriate reserves to cover potential liabilities. Any costs that management estimates may be paid related to these proceedings or claims are accrued when the liability is considered probable and the amount can be reasonably estimated. There can be no assurance, however, as to the ultimate outcome of any of these matters, and if all or substantially all of these legal proceedings were to be determined adverse to the Company, there could be a material adverse effect on the financial condition, results of operations or cash flow of the Company.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 9, 10, 11, 12
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Topic 210
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+ Details