Fair Value Measurements

6 Months Ended

Dec. 31, 2015

FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.


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 in which all significant inputs are observable in active markets.


Level 3:	Valuations derived from valuation techniques in which one or more significant inputs are not observable.

The following tables summarize the valuation of our financial instruments carried at fair value by the above pricing categories (in millions):



	December 31, 2015
	Level 1		Level 2		Level 3		Total
Measured at fair value on a recurring basis:
Assets:
Investment securities	$	14.9	$	—	$	—	$	14.9
Foreign currency forward contracts	—		4.8		—		4.8
Funds associated with Israeli post-employment benefits	—		17.2		—		17.2
Total assets	$	14.9	$	22.0	$	—	$	36.9
Liabilities:
Contingent consideration	$	—	$	—	$	17.9	$	17.9
Interest rate swap agreements	—		0.3		—		0.3
Foreign currency forward contracts	—		3.9		—		3.9
Total liabilities	$	—	$	4.2	$	17.9	$	22.1

Measured at fair value on a non-recurring basis:
Assets:
Indefinite-lived intangible assets	$	—	$	—	$	1,813.8	$	1,813.8
Assets held for sale, net	—		—		37.5		37.5
Total assets	$	—	$	—	$	1,851.3	$	1,851.3



	June 27, 2015
	Level 1		Level 2		Level 3		Total
Measured at fair value on a recurring basis:
Assets:
Investment securities	$	12.7	$	—	$	—	$	12.7
Foreign currency forward contracts	—		12.4		—		12.4
Funds associated with Israeli post-employment benefits	—		17.3		—		17.3
Total assets	$	12.7	$	29.7	$	—	$	42.4
Liabilities:
Foreign currency forward contracts	$	—	$	4.6	$	—	$	4.6
Total liabilities	$	—	$	4.6	$	—	$	4.6



	June 28, 2014
	Level 1		Level 2		Level 3		Total
Assets:
Investment securities	$	20.7	$	—	$	—	$	20.7
Foreign currency forward contracts	—		3.1		—		3.1
Funds associated with Israeli post-employment benefits	—		19.3		—		19.3
Total assets	$	20.7	$	22.4	$	—	$	43.1
Liabilities:
Contingent consideration	$	—	$	—	$	17.4	$	17.4
Interest rate swap agreements	—		8.3		—		8.3
Foreign currency forward contracts	—		0.8		—		0.8
Total liabilities	$	—	$	9.1	$	17.4	$	26.5

The table below presents a reconciliation for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in millions):



	Six Months Ended		Fiscal Year Ended
	December 31, 2015		June 27, 2015			June 28, 2014
Contingent Consideration
Beginning balance:	$	—	$	17.4		$	22.2
Net realized losses	—		0.9			1.1
Purchases or additions	17.9		—			0.8
Settlements	—		(18.3		)	(6.7		)
Ending balance:	$	17.9	$	—		$	17.4

Net realized gains (losses) in the table above were recorded in Administrative expense. There were no transfers between Level 1, 2, and 3 during the six months ended December 31, 2015 or the fiscal years ended June 27, 2015, and June 28, 2014. Our policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period. See Note 7 for information on our investment securities. See Note 8 for a discussion of derivatives.

Israeli post-employment benefits represent amounts we have deposited in funds managed by financial institutions designated by management to cover post-employment benefits for its Israeli employees as required by Israeli law. The funds are recorded in Other non-current assets and values are determined using prices for recently traded financial instruments with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves, that are observable at commonly quoted intervals.

Contingent consideration represents milestone payment obligations obtained through product acquisitions which are valued using estimates based on probability-weighted outcomes, sensitivity analysis, and discount rates reflective of the risk involved. The estimates are updated quarterly and the liabilities are adjusted to fair value depending on a number of assumptions, including the competitive landscape and regulatory approvals that may impact the future sales of a product.

As of December 31, 2015 and June 27, 2015, our fixed rate long-term debt consisted of public bonds, a private placement note, and retail bonds that were assumed with the Omega acquisition. As of December 31, 2015, the public bonds and private placement note had a carrying value of $3.9 billion and fair value of $3.8 billion, based on quoted market prices (Level 1). At June 27, 2015, the public bonds and private placement note had a carrying value and fair value of $3.9 billion, based on quoted market prices (Level 1). As of December 31, 2015 our retail bonds had a carrying value of $798.3 million (excluding a premium of $82.5 million) and a fair value of $859.8 million. As of June 27, 2015, our retail bonds had a carrying value of $820.9 million (excluding a premium of $97.1 million) and a fair value of $902.4 million. The fair value for both periods was based on interest rates offered for borrowings of a similar nature and remaining maturities (Level 2). As of June 28, 2014, our fixed rate long-term debt consisted of private placement senior notes with registration rights with a carrying value of $2.3 billion and a fair value of $2.4 billion. The fair value at June 28, 2014 was determined by discounting the future cash flows of the financial instruments to their present value, using interest rates offered for borrowings of a similar nature and remaining maturities (Level 2).

Certain assets are required to be recorded at fair value on a non-recurring basis even when events and circumstances indicate that the carrying value may not be recoverable. The non-recurring fair values included in the table above represent only those assets whose carrying values were adjusted to fair value as of the respective balance sheet dates. See Note 3 for a more detailed discussion of the impaired indefinite-lived intangible assets and the valuation methods used. See Note 9 for information on our assets and liabilities held for sale.

The carrying amounts of our other financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, short-term debt and variable rate long-term debt, approximate their fair value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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