Fair Value Measurements and Fair Value Of Financial Instruments

9 Months Ended

Sep. 27, 2014

Fair Value Measurements and Fair Value of Financial Instruments Disclosure

Fair Value Measurements and Fair Value of Financial Instruments [Text Block]

Note 12.Fair Value Measurements and Fair Value of Financial Instruments

Fair Value Measurements

The company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2014. The company’s financial assets and liabilities carried at fair value are primarily comprised of investments in money market funds; derivative contracts, insurance contracts, mutual funds holding publicly traded securities and other investments in unit trusts held as assets to satisfy outstanding deferred compensation and retirement liabilities; and acquisition-related contingent consideration.

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities that the company has the ability to access.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves.

Level 3: Inputs are unobservable data points that are not corroborated by market data.

The following table presents information about the company’s financial assets and liabilities measured at fair value on a recurring basis as of September 27,2014:

			September 27,			Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)				2014		(Level 1)		(Level 2)		(Level 3)
Assets
	Cash equivalents			$	22.6	$	22.6	$	—	$	—
	Bank time deposits				9.2		9.2		—		—
	Investments in mutual funds, unit trusts and other    similar instruments				9.8		9.8		—		—
	Insurance contracts				99.3		—		99.3		—
	Derivative contracts				23.1		—		23.1		—
		Total Assets		$	164.0	$	41.6	$	122.4	$	—
Liabilities
	Derivative contracts			$	12.7	$	—	$	12.7	$	—
	Contingent consideration				32.7		—		—		32.7
		Total Liabilities		$	45.4	$	—	$	12.7	$	32.7

		The following table presents information about the company’s financial assets and liabilities measured at fair
value on a recurring basis as of December 31, 2013:
			December 31,			Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)				2013		(Level 1)		(Level 2)		(Level 3)
Assets
	Cash equivalents			$	4,859.9	$	4,859.9	$	—	$	—
	Investments in mutual funds, unit trusts and other    similar instruments				9.8		9.8		—		—
	Insurance contracts				74.5		—		74.5		—
	Auction rate securities				4.5		—		—		4.5
	Derivative contracts				3.8		—		3.8		—
		Total Assets		$	4,952.5	$	4,869.7	$	78.3	$	4.5
Liabilities
	Derivative contracts			$	6.5	$	—	$	6.5	$	—
	Contingent consideration				5.1		—		—		5.1
		Total Liabilities		$	11.6	$	—	$	6.5	$	5.1

The company determines the fair value of its insurance contracts by obtaining the cash surrender value of the contracts from the issuer. The fair value of derivative contracts is the estimated amount that the company would receive/pay upon liquidation of the contracts, taking into account the change in interest rates and currency exchange rates. The company determined the fair value of the auction rate securities by obtaining indications of value from brokers/dealers. The company determines the fair value of acquisition-related contingent consideration based on assessment of the probability that the company would be required to make such future payment. Changes to the fair value of contingent consideration are recorded in selling, general and administrative expense.

In the second quarter of 2014, the company sold all of the auction rate securities and realized a net gain of $1.4 million. There was no significant activity within the auction rate securities during 2013. The following table provides a rollforward of the fair value, as determined by Level 3 inputs, of the contingent consideration.

			Three Months Ended						Nine Months Ended
		September 27,			September 28,			September 27,			September 28,
(In millions)			2014			2013			2014			2013
Contingent Consideration
	Beginning Balance		$	32.0		$	33.7		$	5.1		$	20.1
	Acquisition			0.8			—			29.9			—
	Payments			(4.2)			(0.7)			(10.3)			(0.7)
	Change in fair value included in earnings			4.4			(0.1)			8.0			13.5
	Currency translation			(0.3)			—			—			—
	Ending Balance		$	32.7		$	32.9		$	32.7		$	32.9

The notional amounts of derivative contracts outstanding, consisting of currency exchange contracts and interest rate swaps, totaled $3.74 billion and $2.03billion at September 27,2014 and December 31, 2013, respectively.

While certain derivatives are subject to netting arrangements with counterparties, the company does not offset derivative assets and liabilities within the consolidated balance sheet. The following tables present the fair value of derivative instruments in the consolidated balance sheet and statement of income.

				Fair Value – Assets					Fair Value – Liabilities
			September 27,			December 31,		September 27,			December 31,
(In millions)				2014		2013			2014		2013
Derivatives Designated as Hedging Instruments
	Interest rate swaps (a)			$	—	$	—		$	5.7	$	5.2
Derivatives Not Designated as Hedging Instruments
	Currency exchange contracts (b)				23.1		3.8			7.0		1.3
(a)		The fair value of the interest rate swaps is included in the consolidated balance sheet under the caption other long-term liabilities.
(b)		The fair value of the currency exchange contracts is included in the consolidated balance sheet under the captions other current assets or other accrued expenses.

				Gain (Loss) Recognized
				Three Months Ended						Nine Months Ended
			September 27,			September 28,			September 27,			September 28,
(In millions)					2014			2013			2014			2013
Derivatives Designated as Fair Value Hedges
	Interest rate swaps - effective portion			$	1.1		$	—		$	3.2		$	—
	Interest rate swaps - ineffective portion				(2.3)			—			(0.5)			—
Derivatives Not Designated as Fair Value Hedges
	Currency exchange contracts
		Included in cost of revenues		$	7.0		$	1.5		$	11.2		$	2.0
		Included in other expense, net			75.9			(26.8)			76.1			(12.0)

Gains and losses recognized on currency exchange contracts and the effective portion of interest rate swaps are included in the consolidated statement of incometogether with the corresponding, offsetting losses and gains on the underlying hedged transactions. Gains and losses recognized on the ineffective portion of interest rate swaps are included in other expense, net in the accompanying statement of income.

Fair Value of Other Financial Instruments

The carrying value and fair value of the company’s notes receivable and debt obligations are as follows:

			September 27, 2014				December 31, 2013
			Carrying		Fair		Carrying		Fair
(In millions)			Value		Value		Value		Value
Notes Receivable			$	8.1	$	8.1	$	7.6	$	7.6
Debt Obligations:
	Senior notes		$	12,108.6	$	12,396.6	$	10,195.4	$	10,304.8
	Term loan			1,875.0		1,875.0		—		—
	Commercial paper			462.5		462.5		250.0		250.0
	Other			31.0		31.0		41.9		41.9
			$	14,477.1	$	14,765.1	$	10,487.3	$	10,596.7
		The fair value of debt obligations was determined based on quoted market prices and on borrowing rates
available to the company at the respective period ends which represent level 2 measurements.