Henry Schein 2014 Annual Report Download - page 95

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HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(in thousands, except per share data)
81
Note 8 – Fair Value Measurements – (Continued)
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.
Redeemable noncontrolling interests
Some minority shareholders in certain of our subsidiaries have the right, at certain times, to require us to
acquire their ownership interest in those entities at fair value based on third-party valuations. The primary factor
affecting the future value of redeemable noncontrolling interests is expected earnings and, if such earnings are not
achieved, the value of the redeemable noncontrolling interests might be impacted. The noncontrolling interests
subject to put options are adjusted to their estimated redemption amounts each reporting period with a
corresponding adjustment to Additional paid-in capital. Future reductions in the carrying amounts are subject to a
“floor” amount that is equal to the fair value of the redeemable noncontrolling interests at the time they were
originally recorded. The recorded value of the redeemable noncontrolling interests cannot go below the floor level.
These adjustments do not impact the calculation of earnings per share. The values for Redeemable noncontrolling
interests are classified within Level 3 of the fair value hierarchy. The details of the changes in Redeemable
noncontrolling interests are presented in Note 6.
The following table presents our assets and liabilities that are measured and recognized at fair value on a
recurring basis classified under the appropriate level of the fair value hierarchy as of December 27, 2014 and
December 28, 2013:
  December 27, 2014
Level 1 Level 2 Level 3 Total
Assets:
Derivative contracts ................................................... $ - $ 2,472 $ - $ 2,472
Total assets ............................................................ $ - $ 2,472 $ - $ 2,472
Liabilities:
Derivative contracts ................................................... $ - $ 1,307 $ - $ 1,307
Total liabilities ....................................................... $ - $ 1,307 $ - $ 1,307
Redeemable noncontrolling interests ............................... $ - $ - $ 564,527 $ 564,527
  December 28, 2013
Level 1 Level 2 Level 3 Total
Assets:
Derivative contracts ................................................... $ - $ 1,235 $ - $ 1,235
Total assets ............................................................ $ - $ 1,235 $ - $ 1,235
Liabilities:
Derivative contracts ................................................... $ - $ 1,142 $ - $ 1,142
Total liabilities ....................................................... $ - $ 1,142 $ - $ 1,142
Redeemable noncontrolling interests ............................... $ - $ - $ 497,539 $ 497,539