FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 10: FAIR VALUE MEASUREMENTS

Fair value is defined 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. We are required to consider and reflect the assumptions of market participants in fair value calculations. These factors include nonperformance risk (the risk that an obligation will not be fulfilled) and credit risk, both of the reporting entity (for liabilities) and of the counterparty (for assets). 

We use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques), and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability.  These valuation approaches incorporate inputs, such as observable, independent market data, that we believe are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. 

The FASB has established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows: 

▪ Level 1—quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.

▪ Level 2—observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

▪ Level 3—unobservable for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.

We have classified assets and liabilities measured at fair value based on the lowest level of input that is significant to the fair value measurement. For the periods presented, we had no transfers of assets or liabilities between levels within the fair value hierarchy. The timing of any such transfers would be determined at the end of each reporting period.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables set forth, by level within the fair value hierarchy, our non-pension financial assets and liabilities that were measured at fair value on a recurring basis as of September 28, 2014 and December 29, 2013:

	September 28, 2014								December 29, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)								(in millions)
Assets
Derivatives:
Commodity contracts	$	15.1	$	—	$	—	$	15.1	$	0.2	$	4.9	$	—	$	5.1
Foreign exchange contracts	—		—		—		—		—		1.2		—		1.2
Bond securities	19.4		—		—		19.4		19.8		—		—		19.8
Insurance contracts	—		70.2		—		70.2		—		65.8		—		65.8
Total	$	34.5	$	70.2	$	—	$	104.7	$	20.0	$	71.9	$	—	$	91.9
Liabilities
Derivatives:
Commodity contracts	$	81.6	$	49.4	$	—	$	131.0	$	15.1	$	5.4	$	—	$	20.5
Foreign exchange contracts	—		0.3		—		0.3		—		0.2		—		0.2
Total	$	81.6	$	49.7	$	—	$	131.3	$	15.1	$	5.6	$	—	$	20.7

The following are descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value on a recurring basis:

▪ Derivatives—Derivatives classified within Level 1 are valued using quoted market prices. In some cases where quoted market prices are not available, we value the derivatives using market based pricing models that utilize the net present value of estimated future cash flows to calculate fair value, in which case the measurements are classified within Level 2. These valuation models make use of market-based observable inputs, including exchange traded prices and rates, yield curves, credit curves, and measures of volatility.

▪ Bond securities—Bond securities are valued at quoted market prices and are classified within Level 1.

▪ Insurance contracts—Insurance contracts are valued at their cash surrender value using the daily asset unit value (AUV) which is based on the quoted market price of the underlying securities and classified within Level 2.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. During the nine months ended September 28, 2014, we had no significant assets or liabilities that were measured and recorded at fair value on a nonrecurring basis.

Other Financial Instruments

We determine the fair value of public debt using Level 2 inputs based on quoted market prices. The carrying amount of all other debt approximates fair value as those instruments are based on variable interest rates. The following table presents the fair value and carrying value of long-term debt, including the current portion of long-term debt as of September 28, 2014 and December 29, 2013.

	September 28, 2014				December 29, 2013
	Fair Value		Carrying Value		Fair Value		Carrying Value
	(in millions)
Long-term debt, including current portion	$	3,124.0	$	3,045.4	$	3,120.2	$	3,020.1

The carrying amounts of cash and cash equivalents, accounts receivable, notes payable and accounts payable approximate their fair values because of the relatively short-term maturity of these instruments.