Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Fair Value Measurements

7.       Fair Value Measurements

The company’s financial instruments include cash and cash equivalents, money market funds in a rabbi trust, accounts receivable, accounts payable, contingent consideration obligations, commercial paper, notes payable, foreign currency forward contracts and long-term debt.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels:

Level 1 - Inputs are quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 - Inputs include observable inputs other than quoted prices in active markets.

Level 3 - Inputs are unobservable inputs for which there is little or no market data available.

The carrying amount and the estimated fair value for assets and liabilities measured on a recurring basis were:

	2012
	Carrying		Fair Value Measurements
September 30 (millions)	Amount		Level 1		Level 2		Level 3
Assets:
Money market funds held in rabbi trusts	$	0.9	$	0.9	$	—	$	—
Foreign currency forward contracts	9.5		—		9.5		—
Liabilities:
Foreign currency forward contracts	15.8		—		15.8		—
Contingent consideration obligations	24.3		—		—		24.3

	2011
	Carrying		Fair Value Measurements
December 31 (millions)	Amount		Level 1		Level 2		Level 3
Assets:
Money market funds held in rabbi trusts	$	0.9	$	0.9	$	—	$	—
Foreign currency forward contracts	10.4		—		10.4		—
Liabilities:
Foreign currency forward contracts	3.3		—		3.3		—
Contingent consideration obligations	25.1		—		—		25.1

Money market funds held in rabbi trusts are classified within level 1 because they are valued using quoted prices in active markets. The carrying value of foreign currency forward contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date, and is classified within level 2.

Contingent consideration liabilities are classified within level 3 because fair value is measured based on the probability-weighted present value of the consideration expected to be transferred. The consideration expected to be transferred is based on the company’s expectations of various financial measures. The ultimate payment of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Changes in the fair value of contingent consideration obligations for the nine months ended September 30, 2012 were as follows:

(millions)
Contingent consideration, December 31, 2011	$	25.1
Liabilities recognized at acquisition date	2.6
Loss (gain) recognized in earnings	(2.6		)
Settlements	(0.7		)
Foreign currency translation	(0.1		)
Contingent consideration, September 30, 2012	$	24.3

The carrying values of accounts receivable and accounts payable approximate fair value because of their short maturities. The carrying value of cash and cash equivalents, commercial paper and notes payable approximate fair value because of their short maturities, and as such are classified within level 1.

The fair value of long-term debt is based on quoted market prices for the same or similar debt instruments and as such is classified within level 1. The carrying amount and the estimated fair value of long-term debt, including current maturities, held by the company were:

	September 30, 2012				December 31, 2011
	Carrying		Fair		Carrying		Fair
(millions)	Amount		Value		Amount		Value
Long-term debt (including current maturities)	$	5,392.5	$	6,023.7	$	6,619.8	$	6,885.3