FAIR VALUE

9 Months Ended

Sep. 28, 2013

FAIR VALUE

FAIR VALUE

(15) FAIR VALUE

Fair value is 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. In the absence of active markets for identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair value hierarchy:

· Level 1 — Quoted prices for identical instruments in active markets.

· Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

· Level 3 — Significant inputs to the valuation model are unobservable.

There were no changes during the three and nine months ended September 28, 2013 and September 29, 2012 to the valuation techniques we use to measure asset and liability fair values on a recurring basis.  There were no transfers between the three levels of the fair value hierarchy for the three and nine months ended September 28, 2013 and September 29, 2012.

The following section describes the valuation methodologies we use to measure different financial instruments at fair value on a recurring basis.

Derivative Financial Instruments

Our financial derivative assets and liabilities include FX forward contracts, FX embedded derivatives and commodity contracts, valued using valuation models based on observable market inputs such as forward rates, interest rates, our own credit risk and the credit risk of our counterparties, which comprise investment-grade financial institutions. Based on these inputs, the derivative assets and liabilities are classified within Level 2 of the valuation hierarchy. We have not made any adjustments to the inputs obtained from the independent sources. Based on our continued ability to enter into forward contracts, we consider the markets for our fair value instruments active. We primarily use the income approach, which uses valuation techniques to convert future amounts to a single present amount.

As of September 28, 2013, there had been no significant impact to the fair value of our derivative liabilities due to our own credit risk, as the related instruments are collateralized under our senior credit facilities. Similarly, there has been no significant impact to the fair value of our derivative assets based on our evaluation of our counterparties’ credit risks.

Investments in Equity Securities

Our available-for-sale securities include equity investments traded in active international markets. They are measured at fair value using closing stock prices from active markets and are classified within Level 1 of the valuation hierarchy. These assets had a fair market value of $2.1 and $3.6 at September 28, 2013 and December 31, 2012, respectively.

Certain of our investments in equity securities that are not readily marketable are accounted for under the fair value option, with such values determined by multidimensional pricing models. These models consider market activity based on modeling of securities with similar credit quality, duration, yield and structure. A variety of inputs are used, including benchmark yields, reported trades, non-binding broker/dealer quotes, issuer spread and reference data including market research publications. Market indicators, industry and economic events are also considered. We have not made any adjustments to the inputs obtained from the independent sources. At September 28, 2013 and December 31, 2012, these assets had a fair value of $1.7 and $7.5, respectively, which are estimated using various valuation models, including the Monte-Carlo simulation model.

Assets and liabilities measured at fair value on a recurring basis include the following as of September 28, 2013:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Other current assets — FX embedded derivatives, FX forward contracts and commodity contracts	$	—	$	1.2	$	—
Other assets — Investments in equity securities and FX embedded derivatives	2.1		0.8		1.7
Accrued expenses — FX embedded derivatives and FX forward contracts	—		6.6		—
Other long-term liabilities — FX embedded derivatives	—		0.6		—

Assets and liabilities measured at fair value on a recurring basis include the following as of December 31, 2012:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Other current assets — FX embedded derivatives, FX forward contracts and commodity contracts	$	—	$	0.7	$	—
Other assets — Investments in equity securities	3.6		—		7.5
Accrued expenses — FX forward contracts and FX embedded derivatives	—		1.3		—
Other long-term liabilities — FX embedded derivatives	—		9.8		—

The table below presents a reconciliation of our investment in equity securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 28, 2013 and September 29, 2012, including net unrealized losses recorded to earnings.

	Nine months ended
	September 28, 2013			September 29, 2012
Balance at beginning of period	$	7.5		$	7.8
Cash consideration received	(5.2		)	—
Unrealized losses recorded to earnings	(0.6		)	(0.2		)
Balance at end of period	$	1.7		$	7.6

Indebtedness and Other

The estimated fair values of other financial liabilities (excluding capital leases) not measured at fair value on a recurring basis as of September 28, 2013 and December 31, 2012 were as follows:

	September 28, 2013				December 31, 2012
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Senior notes	$	1,100.0	$	1,202.9	$	1,100.0	$	1,217.8
Term loan	475.0		475.0		475.0		475.0
Other indebtedness	36.2		36.2		34.7		34.7

The following methods and assumptions were used in estimating the fair value of these financial instruments:

· The fair value of the senior notes and term loan was determined using Level 2 inputs within the fair value hierarchy and was based on quoted market prices for the same or similar instruments or on current rates offered to us for debt with similar maturities, subordination and credit default expectations.

· The fair value of our other indebtedness approximates carrying value due primarily to the short-term nature of the related instruments.

Certain of our non-financial assets and liabilities are subject to impairment analysis, including long-lived assets, indefinite-lived intangible assets and goodwill. We review the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually for indefinite-lived intangible assets and goodwill. Any resulting asset impairment would require that the instrument be recorded at its fair value. As of September 28, 2013, we did not have any significant non-financial assets or liabilities that are required to be measured at fair value on a recurring or non-recurring basis.

The carrying amount of cash and equivalents and receivables reported in our condensed consolidated balance sheets approximates fair value due to the short maturity of those instruments.