FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. There is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets/Liabilities Measured at Fair Value on a Recurring Basis

In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.



	Fair Value Measurement Using
	Quoted Prices in Active Markets for Identical Instruments		Significant Other Observable Inputs			Significant Unobservable Inputs			Total
Type of Instruments	(Level 1)		(Level 2)			(Level 3)			Balance
(In millions)
Assets at April 3, 2015:
Available-for-sale corporate debt securities	$	—	$	—		$	80.0		$	80.0
Derivative assets	—		1.0			—			1.0
Total assets measured at fair value	$	—	$	1.0		$	80.0		$	81.0

Liabilities at April 3, 2015:
Derivative liabilities	$	—	$	(0.2	)	$	—		$	(0.2	)
Contingent consideration	—		—			(6.3		)	(6.3		)
Total liabilities measured at fair value	$	—	$	(0.2	)	$	(6.3	)	$	(6.5	)

Assets at September 26, 2014:
Available-for-sale corporate debt securities	$	—	$	—		$	75.6		$	75.6
Derivative assets	—		1.5			—			1.5
Total assets measured at fair value	$	—	$	1.5		$	75.6		$	77.1

Liabilities at September 26, 2014:
Contingent consideration	$	—	$	—		$	(7.5	)	$	(7.5	)
Total liabilities measured at fair value	$	—	$	—		$	(7.5	)	$	(7.5	)

Available-for-sale corporate debt securities are included under short-term investment and other assets, derivative assets are included under prepaid expenses and other current assets, derivative liabilities are included under accrued liabilities and contingent consideration is included under accrued liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets.

The Company has elected to use the income approach to value its derivative instruments using standard valuation techniques and Level 2 inputs, such as currency spot rates, forward points and credit default swap spreads. The Company’s derivative instruments are short-term in nature, typically one month to thirteen months in duration.

The fair value of the Company’s Level 3 available-for-sale corporate debt securities is based on the income approach by using the discounted cash flow model with key assumptions that include discount rates corresponding to the terms and risks associated with the loans to CPTC. If the estimated discount rates used were to increase or decrease, the fair value of the debt securities would decrease or increase, respectively. However, the Company does not increase the fair value of these securities above their par values as ORIX Capital Markets, LLC (“ORIX”), the loan agent, has the option to purchase these loans from the Company under the original terms and conditions at par value.

The Company measures the fair value of its Level 3 contingent consideration liabilities based on the income approach by using a discounted cash flow model with key assumptions that include estimated sales units or revenues of the acquired business or completion of certain milestone targets during the earn-out period, volatility, and estimated discount rates corresponding to the periods of expected payments. If the estimated sales units, revenues or probability of completing certain milestones were to increase or decrease during the respective earn-out period, the fair value of the contingent consideration would increase or decrease, respectively. If the estimated discount rates were to increase or decrease, the fair value of contingent consideration would decrease or increase, respectively. Changes in volatility may result in an increase or decrease in the fair value of contingent consideration.

The following table presents the reconciliation for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3):



(In millions)	Available-For-Sale Corporate Debt Securities		Contingent Consideration
Balance at September 26, 2014	$	75.6	$	(7.5	)
Additions⁽¹⁾	4.4		—
Settlements ⁽²⁾	—		1.1
Change in fair value recognized in earnings	—		0.1
Balance at April 3, 2015	$	80.0	$	(6.3	)


(1)	Amounts reported under available-for-sale corporate debt securities include accrued interest.


(2)	Amounts reported under contingent consideration represent cash payments to settle contingent consideration liabilities.

There were no transfers of assets or liabilities between fair value measurement levels during either the three and six months ended April 3, 2015, or the three and six months ended March 28, 2014. Transfers between fair value measurement levels are recognized at the end of the reporting period.

Fair Value of Other Financial Instruments

The fair values of certain of the Company’s financial instruments, including bank deposits included in cash and cash equivalents, restricted cash, accounts receivable, net of allowance for doubtful accounts, notes receivable, accounts payable, and short-term borrowings approximate their carrying amounts due to their short maturities.

As of both April 3, 2015 and September 26, 2014, the fair value of current maturities of long-term debt approximated its carrying value of $50.0 million, due to its short-term maturity. The fair value of the long-term debt payable in installments through fiscal year 2018 approximated its carrying value of $362.5 million and $387.5 million, at April 3, 2015 and September 26, 2014, respectively, because it is carried at a market observable interest rate that resets periodically and is categorized as level 2 in the fair value hierarchy.