FAIR VALUES

3 Months Ended

Mar. 31, 2012

FAIR VALUES [Abstract]

FAIR VALUES

FAIR VALUES

        ASC Subtopic 820-10 defines fair value 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. ASC Subtopic 820-10 outlines a valuation framework, creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements, and details the disclosures that are required for items measured at fair value. We are permitted to choose to measure many financial instruments and certain other items at fair value, although we did not elect the fair value measurement option for any of our financial assets or liabilities. Our financial assets and liabilities are to be measured using inputs from the three levels of the fair value hierarchy, which are as follows:

• Level 1 - inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;
• Level 2 - inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and
• Level 3 - unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing assets or liabilities based on the best information available.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

        We have certain financial assets and liabilities that are required to be measured at fair value. These include:

• the assets and liabilities of The Jones Group Inc. Deferred Compensation Plan (the "Rabbi Trust"), which represent deferred employee compensation invested in mutual funds and which fall within Level 1 of the fair value hierarchy;
• deferred director fees, which represent phantom units of our common stock that have a fair value based on the market price of our common stock and which fall within Level 1 of the fair value hierarchy;
• foreign currency forward contracts, which have fair values calculated by comparing foreign exchange forward rates to the contract rates discounted at our incremental borrowing rate, which fall within Level 2 of the fair value hierarchy;
• interest rate swap and cap contracts, which have fair values calculated by comparing current yield curves and LIBOR rates to the stated contract rates adjusted for estimated risk of counterparty nonperformance, which fall within Level 2 of the fair value hierarchy;
• long-term debt that is hedged by interest rate swaps as a fair-value hedge, calculated by comparing current yield curves and LIBOR rates to the stated contract rates of the associated interest rate swaps, which falls within Level 2 of the fair value hierarchy; and
• consideration liabilities recorded as a result of the acquisition of Moda Nicola International, LLC ("Moda") and Stuart Weitzman Holdings, LLC ("SWH"), which have fair values based on our projections of financial results and cash flows for the acquired business and a discount factor based on our weighted average cost of capital, and which fall within Level 3 of the fair value hierarchy.

        In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis at April 2, 2011, December 31, 2011 and March 31, 2012.

(In millions)
Description	Classification		Total Value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
April 2, 2011:
Rabbi Trust assets	Prepaid expenses and other current assets	$	9.6	$	9.6	$	-	$	-
Interest rate cap	Other long-term assets		1.2		-		1.2		-
	Total assets	$	10.8	$	9.6	$	1.2	$	-
Rabbi Trust liabilities	Accrued employee compensation and benefits	$	9.6	$	9.6	$	-	$	-
Canadian Dollar - U.S. Dollar forward contracts	Accrued expenses and other current liabilities		0.8		-		0.8		-
Interest rate swaps	Other long-term liabilities		2.4		-		2.4		-
Deferred director fees	Accrued expenses and other current liabilities		1.1		1.1		-		-
Acquisition consideration	Current portion of acquisition consideration payable		21.9		-		-		21.9
5.125% Senior Notes due 2014	Long-term debt		258.4		-		258.4		-
Hedged portion of 6.875% Senior Notes due 2019	Long-term debt		151.3		-		151.3		-
Acquisition consideration	Acquisition consideration payable, net of current portion		192.0		-		-		192.0
	Total liabilities	$	637.5	$	10.7	$	412.9	$	213.9
December 31, 2011:
Rabbi Trust assets	Prepaid expenses and other current assets	$	7.5	$	7.5	$	-	$	-
Interest rate swaps	Other long-term assets		5.5		-		5.5		-
Interest rate cap	Other long-term assets		0.2		-		0.2		-
Canadian Dollar - U.S. Dollar forward contracts	Prepaid expenses and other current assets		0.1		-		0.1		-
	Total assets	$	13.3	$	7.5	$	5.8	$	-
Rabbi Trust liabilities	Accrued employee compensation and benefits	$	7.5	$	7.5	$	-	$	-
Deferred director fees	Accrued expenses and other current liabilities		0.2		0.2		-		-
Acquisition consideration	Current portion of acquisition consideration payable		192.7		-		-		192.7
5.125% Senior Notes due 2014	Long-term debt		263.0		-		263.0		-
Acquisition consideration	Acquisition consideration payable, net of current portion		17.7		-		-		17.7
	Total liabilities	$	481.1	$	7.7	$	263.0	$	210.4
March 31, 2012:
Rabbi Trust assets	Prepaid expenses and other current assets	$	8.5	$	8.5	$	-	$	-
Interest rate swaps	Other long-term assets		5.9		-		5.9		-
Interest rate cap	Other long-term assets		0.1		-		0.1		-
	Total assets	$	14.5	$	8.5	$	6.0	$	-
Rabbi Trust liabilities	Accrued employee compensation and benefits	$	8.5	$	8.5	$	-	$	-
Interest rate swaps	Other long-term liabilities		0.3		-		0.3		-
Canadian Dollar - U.S. Dollar forward contracts	Accrued expenses and other current liabilities		0.1		-		0.1		-
Deferred director fees	Accrued expenses and other current liabilities		0.2		0.2		-		-
Acquisition consideration	Current portion of acquisition consideration payable		226.9		-		-		226.9
5.125% Senior Notes due 2014	Long-term debt		262.6		-		262.6		-
Hedged portion of 6.875% Senior Notes due 2019	Long-term debt		151.3		-		151.3		-
Acquisition consideration	Acquisition consideration payable, net of current portion		5.8		-		-		5.8
	Total liabilities	$	655.7	$	8.7	$	414.3	$	232.7

        The following table presents the changes in Level 3 contingent consideration liability for the fiscal three months ended April 2, 2011 and March 31, 2012.

(In millions)		Acquisition of Moda			Acquisition of SWH			Total Acquisition Consideration Payable
Beginning balance, January 1, 2011	$	22.9		$	191.0		$	213.9
Payments		-			(8.7	)		(8.7	)
Total adjustments included in earnings		(0.2	)		8.9			8.7
Balance, April 2, 2011	$	22.7		$	191.2		$	213.9
Beginning balance, January 1, 2012	$	14.8		$	195.6		$	210.4
Payments		-			(2.3	)		(2.3	)
Total adjustments included in earnings		(3.1	)		27.7			24.6
Balance, March 31, 2012	$	11.7		$	221.0		$	232.7

        The following table represents quantitative information about the Level 3 contingent consideration liability measurements at March 31, 2012.

(In millions)		Fair Value at March 31, 2012	Valuation technique	Unobservable inputs	Range (Weighted Average)
Acquisition of Moda	$	11.7	Discounted projection of financial results	Net sales growth	-31% - +26% (7.4%)
				Gross margin multiplier	1.75 - 1.50 (1.71)
				Discount rate	11.7%
Acquisition of SWH	$	221.0	Discounted projection of financial results and future cash flow	EBITDA (1) growth	-15% - +26% (5.5%)
				EBITDA (1) multiplier	8.0 - 9.0 (8.5)
				Discount rate	11.7%

(1) - Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") as defined in the acquisition agreement.

        The valuation processes for the contingent consideration liabilities are based on the associated acquisition agreements. Our inputs include probability-weighted projections of financial results and cash flows for the acquired business and a discount rate based on our weighted average cost of capital. We internally calculate the estimated liability using projected financial information provided by the operating divisions.

        The significant unobservable inputs used in the fair value measurement of the Moda contingent consideration liability are net sales growth, a gross margin multiplier (as defined in the acquisition agreement) and a discount factor. An increase in the net sales or gross margin multiplier inputs would increase the fair value of the liability, while an increase in the discount rate would decrease the fair value of the liability. There is no interrelationship between the unobservable inputs. Changes in the fair value of the Moda contingent consideration liability are reported as adjustments to SG&A expenses in the domestic wholesale sportswear segment.

        The significant unobservable inputs used in the fair value measurement of the SWH contingent consideration liability are probability-weighted projected EBITDA growth, the EBITDA multiplier (as defined in the acquisition agreement) and a discount rate. An increase to the EBITDA growth or multiplier would increase the fair value of the liability, while an increase in the discount rate would decrease the fair value of the liability. The EBITDA multiplier is based on the achieved level of EBITDA. There is no interrelationship between the discount rate to the other unobservable inputs. Changes in the fair value of the contingent consideration liability for SWH are reported as adjustments to interest expense.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

        In accordance with the fair value hierarchy described above, the following table shows the fair value of our non-financial assets and liabilities that were required to be measured at fair value on a nonrecurring basis at April 2, 2011 and March 31, 2012, and the total losses recorded as a result of the remeasurement process.

(In millions)			Fair Value Measurements Using
Description		Carrying Value		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total losses recorded for the fiscal three months
At April 2, 2011:
Property and equipment	$	-	$	-	$	-	$	-	$	1.2
Transportation equipment		0.6		0.6		-		-		0.4
At March 31, 2012:
Property and equipment		-		-		-		-		0.4

        During the fiscal quarters ended April 2, 2011 and March 31, 2012, property and equipment utilized in our retail operations with a carrying amount of $1.2 million and $0.4 million, respectively, were written down to a fair value of zero, primarily as a result of our decision to close underperforming retail locations. These losses were recorded as SG&A expenses in the domestic retail segment. We consider long-term assets utilized in a retail location to be impaired when a pattern of operating losses at the location indicate that future operating losses are probable and that the resulting cash flows will not be sufficient to recover the carrying value of the associated long-term assets. During the fiscal quarter ended April 2, 2011, we determined that certain transportation equipment with a carrying value of $1.0 million had a fair value of $0.6 million based on quoted market prices. The loss of $0.4 million was recorded as SG&A expenses in the licensing, other and eliminations segment.

Financial Instruments

        As a result of our global operating and financing activities, we are exposed to changes in interest rates and foreign currency exchange rates which may adversely affect results of operations and financial condition. In seeking to minimize the risks and/or costs associated with such activities, we manage exposure to changes in interest rates and foreign currency exchange rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The instruments eligible for utilization include forward, option and swap agreements. We do not use financial instruments for trading or other speculative purposes. At March 31, 2012, we had outstanding foreign exchange contracts to exchange Canadian Dollars for a total notional value of US$15.2 million at a weighted-average exchange rate of 1.00 maturing through November 2012.

        At March 31, 2012, April 2, 2011 and December 31, 2011, the fair values of cash and cash equivalents, receivables and accounts payable approximated their carrying values due to the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures were valued using market comparable inputs. These inputs include broker quotes, quoted market prices, interest rates and exchange rates for the same or similar instruments. The fair value and related carrying amounts for items not disclosed elsewhere are as follows:

(In millions)	March 31, 2012					April 2, 2011				December 31, 2011
	Fair Value Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Notes, including hedged items recorded at fair value	1	$	822.4	$	750.2	$	809.4	$	749.9	$	821.7	$	692.6
Other long-term debt, including current portion	2		10.1		9.0		0.3		0.3		9.8		8.2
Note receivable from GRI	2		10.0		10.0		10.0		10.0		10.0		10.0
Other notes receivable	2		1.7		1.5		-		-		-		-

        Financial instruments expose us to counterparty credit risk for nonperformance and to market risk for changes in interest and currency rates. We manage exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor the amount of credit exposure. Our financial instrument counterparties are substantial investment or commercial banks with significant experience with such instruments.