Fair Value

Fair value is defined 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. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. The definition of the fair value hierarchy is as follows:

Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level 3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.

Our derivatives are valued using various pricing models or discounted cash flow analyses that incorporate observable market data, such as interest rate yield curves and currency rates, and are classified as Level 2 within the valuation hierarchy. Our Level 3 fair value liabilities represent contingent consideration recorded for acquisitions to be paid if various financial targets are met. The amounts recorded were calculated for each payment scenario in each period using an estimate of the probability of the future cash outflows. The varying contingent payments were then discounted to the present value at the weighted average cost of capital. Fair value is assessed on a quarterly basis, or whenever events or circumstances change that indicates an adjustment is required. The assessment includes an evaluation of the performance of the acquired business compared to previous expectations, changes to future projections and the probability of achieving the earn out targets.

The following table presents the fair values and classification of our financial assets and liabilities measured on a recurring basis, all of which are classified as Level 2.



	Classification	April 2, 2016		October 3, 2015
Foreign currency contracts	Other current assets	$	2,008	$	127
Foreign currency contracts	Other assets	317		39
	Total assets	$	2,325	$	166
Foreign currency contracts	Other accrued liabilities	$	2,454	$	2,184
Foreign currency contracts	Other long-term liabilities	175		572
Interest rate swaps	Other accrued liabilities	383		756
Interest rate swaps	Other long-term liabilities	45		268
	Total liabilities	$	3,057	$	3,780

Our only financial instrument for which the carrying value differs from its fair value is long-term debt. At April 2, 2016, the fair value of long-term debt was $1,098,526 compared to its carrying value of $1,103,776. The fair value of long-term debt is classified as Level 2 within the fair value hierarchy and was estimated based on quoted market prices.