FAIR VALUE

The Company uses a three-tier hierarchy to assess the inputs used to measure the fair value of financial assets and liabilities.



Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or
	Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
	Inputs other than quoted prices that are observable for the asset or liability
Level 3	Unobservable inputs for the asset or liability

The Company uses the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The fair value of the Company's accounts receivable and accounts payable approximated book value as of September 29, 2012 and December 31, 2011, respectively, due to their short-term nature. See Note 8 of Notes to Condensed Consolidated Financial Statements for disclosure of the approximate fair value of the Company's debt at September 29, 2012 and December 31, 2011.

The following table sets forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 29, 2012 and December 31, 2011 (in millions):



	September 29, 2012		December 31, 2011		Classification
Assets:
Prepaid Expenses and Other Current Assets:
Derivative Currency Contracts	$	5.6	$	0.5	Level 2
Derivative Commodity Contracts	8.7		2.6		Level 2
Investments	3.2		—		Level 2
Other Noncurrent Assets:
Derivative Currency Contracts	3.8		0.1		Level 2
Derivative Commodity Contracts	0.4		1.0		Level 2
Liabilities:
Other Accrued Expenses:
Deferred Contingent Purchase Price	$	0.4	$	2.0	Level 3
Hedging Obligations Current:
Derivative Currency Contracts	4.4		13.6		Level 2
Derivative Commodity Contracts	1.7		12.5		Level 2
Hedging Obligations:
Interest Rate Swap	38.4		42.0		Level 2
Derivative Currency Contracts	1.2		11.7		Level 2
Derivative Commodity Contracts	—		1.4		Level 2
Other Noncurrent Liabilities:
Deferred Contingent Purchase Price	20.4		21.5		Level 3

The Company’s derivative contracts are valued at fair value using the market or income approaches. The Company measures the fair value of foreign exchange contracts using Level 2 inputs based on observable spot and forward rates in active markets. The Company measures the fair value of commodity contracts using Level 2 inputs through observable market transactions in active markets provided by financial institutions. The Company measures the fair value of interest rate swaps using Level 2 inputs in an income approach for valuation based on expected interest rate yield curves over the remaining duration of the interest rate swaps. During the nine months ended September 29, 2012, there were no transfers between classification Levels 1, 2 or 3.

The table below sets forth a summary of changes in fair market value of the Company’s Level 3 liabilities for the three and nine months ended September 29, 2012 and October 1, 2011 (in millions):



	Three Months Ended					Nine Months Ended
	September 29, 2012			October 1, 2011		September 29, 2012			October 1, 2011
Beginning Balance	$	23.2		$	25.9	$	23.5		$	11.0
Valuation Adjustments	0.3			—		0.9			(1.8		)
Acquisitions	0.4			—		0.4			16.7
Payments	(3.1		)	—		(4.0		)	—
Ending Balance	$	20.8		$	25.9	$	20.8		$	25.9

The Level 3 liabilities described above are comprised entirely of the deferred contingent purchase price of the Company’s acquisitions and are measured using Level 3 inputs. The contingent consideration, payable in cash, is based upon sales or earnings before interest and income taxes for the acquired businesses for the applicable contingency period. The fair value of the contingent consideration is a Level 3 input; the measurement of which is derived using a probability weighted discounted cash flow analysis. The Company has estimated that the maximum contingent amount will be paid under all agreements so the key assumption is the estimated timing of the payments. The discounted cash flow utilized risk-based discount rates ranging from approximately 5.0% to 8.0%.

See Note 8 of Notes to Condensed Consolidated Financial Statements for the disclosure on the Company's fair value of debt

- 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.

+ References

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+ Details