Financial Instruments And Fair Value Measurements

12 Months Ended

Sep. 28, 2013

Financial Instruments And Fair Value Measurements [Abstract]

Financial Instruments And Fair Value Measurements

4. Financial Instruments and Fair Value Measurements

As part of the overall risk management, the Company uses derivative instruments to reduce exposure to changes in interest rates attributed to the Company's floating-rate borrowings. For those derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. To the extent hedging relationships are found to be effective, as determined by FASB guidance, changes in fair value of the derivatives are offset by changes in the fair value of the related hedged item are recorded to Accumulated other comprehensive loss. Management believes hedge effectiveness is evaluated properly in preparation of the financial statements.

Cash Flow Hedging Strategy

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.

In November 2010, the Company entered into two separate interest rate swap transactions to manage cash flow variability associated with $1 billion of the outstanding variable rate term loan debt (the "2010 Swaps"). The first agreement had a notional amount of $500 million and became effective in November 2010. The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 0.8925% and expires in November 2013. The second agreement had a notional amount of $500 million and became effective in December 2010. The agreement swaps three month variable LIBOR contracts for a fixed three year rate of 1.0235% and expires in November 2013. In August 2011, the Company began utilizing 1-month LIBOR contracts for the underlying senior secured credit facility. The Company's change in interest rate selection caused the Company to lose hedge accounting on both of the interest rate swaps. The Company recorded changes in fair value in the Consolidated Statement of Operations and will amortize the previously recorded unrealized losses of $1 million, net of tax as of fiscal year-end 2013 to Interest expense through the end of the respective swap agreements.

In February 2013, the Company entered into an interest rate swap transaction to protect $1 billion of outstanding variable rate term loan debt from future interest rate volatility. The agreement swapped the greater of a three-month variable LIBOR contract or 1.00% for a fixed three-year rate of 2.355%, with an effective date in May 2016 and expiration in May 2019. In June 2013, the Company elected to settle this derivative instrument and received $16 million as a result of this settlement. The offset is included in Accumulated other comprehensive loss and Deferred income taxes and will be amortized to Interest expense from May 2016 through May 2019, the original term of the swap agreement.

		Liability Derivatives
Derivatives not designated as hedging
instruments under FASB guidance	Balance Sheet Location	2013			2012
Interest rate swaps – 2010 Swaps	Other long-term liabilities	$	1	$	7

The effect of the derivative instruments on the Consolidated Statement of Operations are as follows:

Derivatives not designated as hedging
instruments under FASB guidance	Statement of Operations Location		2013			2012
Interest rate swaps – 2010 Swaps	Other expense (income)	$	(6	)	$	-
	Interest expense	$	4		$	4

The Fair Value Measurements and Disclosures section of the ASC defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value. This section also establishes a three-level hierarchy (Level 1, 2, or 3) for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. This section also requires the consideration of the counterparty's or the Company's nonperformance risk when assessing fair value.

The Company's interest rate swap fair values were determined using Level 2 inputs as other significant observable inputs were not available.

The Company's financial instruments consist primarily of cash and cash equivalents, long-term debt, interest rate swap agreements and capital lease obligations. The fair value of our long-term indebtedness exceeded book value by $164 million and $195 million as of fiscal 2013 and fiscal 2012, respectively. The Company's long-term debt fair values were determined using Level 2 inputs as other significant observable inputs were not available.

Redeemable Common Stock

The Company had entered into agreements with former employees that required the Company to redeem [certain common stock held by such former employees] at pre-determined dates. Redemption of this common stock was based on the fair value of the stock on the fixed redemption date and this redemption was out of the control of the Company. At fiscal year-end 2011 and 2012, this redeemable common stock was recorded at its fair value in temporary equity and changes in the fair value were recorded in additional paid in capital each period. Under the 2006 Equity Incentive Plan, the exercise price for option awards is the fair market value of common stock on the date of grant. Historically, the fair market value of a share of common stock was determined by the Board of Directors by applying industry-appropriate multiples to EBITDA. This valuation took into account a level of net debt that excluded cash required for working capital purposes. The categorization of the framework used to price these liabilities is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. Upon completion of the initial public offering, the redemption requirement terminated resulting in the Company reclassifying the shares into equity on the Consolidated Balance Sheets. The fair value as of the end of fiscal 2012 was $23 million.

Non-recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under the circumstances and events described in Note 1 and Note 10. The assets are adjusted to fair value only when the carrying values exceed the fair values. The categorization of the framework used to price the assets is considered a Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 1 and 10 for additional discussion).

Included in the following table are the major categories of assets measured at fair value on a non-recurring basis along with the impairment loss recognized on the fair value measurement for the year then ended.

				As of the end of fiscal 2013
		Level 1		Level 2		Level 3
		Quoted Prices in Active		Significant Other
		Markets for Identical		Observable		Significant
		Assets or Liabilities		Inputs	Unobservable Inputs			Total		Impairment Loss
Indefinite-lived trademarks	$	-	$	-	$	207	$	207	$	-
Goodwill		-		-		1,634		1,634		-
Definite lived intangibles		-		-		649		649		5
Property, plant, and equipment		-		-		1,266		1,266		-
Total	$	-	$	-	$	3,756	$	3,756	$	5

				As of the end of fiscal 2012
		Level 1		Level 2		Level 3
		Quoted Prices in Active		Significant Other
		Markets for Identical		Observable		Significant
		Assets or Liabilities		Inputs	Unobservable Inputs			Total		Impairment Loss
Indefinite-lived trademarks	$	-	$	-	$	220	$	220	$	-
Goodwill						1,626		1,626		-
Definite lived intangibles		-		-		737		737		17
Property, plant, and equipment		-		-		1,216		1,216		3
Total	$	-	$	-	$	3,799	$	3,799	$	20

				As of the end of fiscal 2011
		Level 1		Level 2	Level 3
		Quoted Prices in Active		Significant Other
		Markets for Identical		Observable		Significant
		Assets or Liabilities		Inputs	Unobservable Inputs			Total		Impairment Loss
Indefinite-lived trademarks	$	-	$	-	$	220	$	220	$	-
Goodwill		-		-		1,595		1,595		165
Property, plant, and equipment		-		-		1,250		1,250		35
Total	$	-	$	-	$	3,065	$	3,065	$	200

Valuation of Goodwill and Indefinite Lived Intangible Assets

ASC Topic 350 requires the Company to test goodwill for impairment at least annually. The Company conducts the impairment test on the first day of the fourth fiscal quarter, unless indications of impairment exist during an interim period. When assessing its goodwill for impairment, the Company utilizes a discounted cash flow analysis in combination with a comparable company market approach to determine the fair value of their reporting units and corroborate the fair values. The Company utilizes a relief from royalty method to value their indefinite lived trademarks and uses the forecasts that are consistent with those used in the reporting unit analysis. The Company has five reporting units more fully discussed in Note 1. In fiscal 2013 and fiscal 2012 the Company performed their annual impairment test and determined no impairment existed. In fiscal 2011, the Company recorded a goodwill impairment charge of $165 million in Restructuring and impairment charges on the Consolidated Statement of Operations. The Company did not recognize any impairment charges on the indefinitive lived intangible assets in any of the years presented.

Valuation of Property, Plant and Equipment and Definite Lived Intangible Assets

The Company periodically realigns their manufacturing operations which results in facilities being closed and shut down and equipment transferred to other facilities or equipment being scrapped or sold. The Company utilizes appraised values to

corroborate the fair value of the facilities and has utilized a scrap value based on prior facility shut downs to estimate the fair value of the equipment, which has approximated the actual value that was received. When impairment indicators exist, the Company will also perform an undiscounted cash flow analysis to determine the recoverability of the Company's long-lived assets. The Company did not incur an impairment charge related to property, plant and equipment in fiscal 2013. The Company wrote-down their property, plant, and equipment with a carrying value of $1,219 million to its fair value of $1,216 million, which resulted in an impairment charge of $3 million during fiscal 2012. The Company wrote-down their property, plant, and equipment with a carrying value of $1,285 million to its fair value of $1,250 million, which resulted in an impairment charge of $35 million during fiscal 2011. The Company recognized an impairment charge of $5 million and $17 million on definite long-lived assets related to the decision to exit certain businesses during fiscal 2013 and fiscal 2012, respectively.