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HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(in thousands, except per share data)
78
Note 8 – Fair Value Measurements
ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic 820”) provides a framework for
measuring fair value in generally accepted accounting principles.
ASC Topic 820 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 Topic 820 establishes
a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market
data obtained from independent sources (observable inputs) and (2) an entity’ s own assumptions about market
participant assumptions developed based on the best information available in the circumstances (unobservable
inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs
(Level 3). The three levels of the fair value hierarchy under ASC Topic 820 are described as follows:
• Level 1— Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the
measurement date.
• Level 2— Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly. Level 2 inputs include quoted prices for similar assets or 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; and inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
• Level 3— Inputs that are unobservable for the asset or liability.
The following section describes the valuation methodologies that we used to measure different financial
instruments at fair value.
Investments and notes receivable
There are no quoted market prices available for investments in unconsolidated affiliates and notes receivable;
however, we believe the carrying amounts are a reasonable estimate of fair value.
Debt
The fair value of our debt as of December 28, 2013 and December 29, 2012 was estimated at $485.2 million
and $533.3 million, respectively. Factors that we considered when estimating the fair value of our debt include
market conditions, prepayment and make-whole provisions, liquidity levels in the private placement market,
variability in pricing from multiple lenders and term of debt.
Derivative contracts
Derivative contracts are valued using quoted market prices and significant other observable and unobservable
inputs. We use derivative instruments to minimize our exposure to fluctuations in foreign currency exchange rates.
Our derivative instruments primarily include foreign currency forward agreements related to intercompany loans
and certain forecasted inventory purchase commitments with suppliers.
The fair values for the majority of our foreign currency derivative contracts are obtained by comparing our
contract rate to a published forward price of the underlying market rates, which is based on market rates for
comparable transactions and are classified within Level 2 of the fair value hierarchy.