6.	Fair Value Measurements

The Company applies the provisions of ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value each reporting period and its nonfinancial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and liabilities are categorized within the valuation hierarchy based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:

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Level 1—Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.

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Level 2—Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.

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Level 3—Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The Company has an equity investment in a publicly-traded company and mutual funds, both of which are valued using quoted market prices, representing Level 1 assets. The Company has a payment obligation to the participants under its DCP and the deferred compensation plan assumed in the Gen-Probe acquisition. This aggregate liability is recorded at fair value based on the underlying value of certain hypothetical investments under the DCP and actual investments under the plan assumed from Gen-Probe as designated by each participant for their benefit. Since the value of the DCP obligation is based on market prices, the liability is classified within Level 1. In addition, the Company had contingent consideration liabilities related to its acquisitions that were recorded at fair value and were based on Level 3 inputs (see Note 3). As of September 29, 2012, the Company also had $0.3 million in money market funds that were classified as cash and cash equivalents. Money market funds were classified within Level 1 of the fair value hierarchy and were valued using quoted market prices for identical assets.

Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following:


			Fair Value Measurements at September 28, 2013
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Marketable securities:
Equity security	$	18,087	$	18,087	$	—	$	—
Mutual funds		6,861		6,861		—		—

Total	$	24,948	$	24,948	$	—	$	—

Liabilities:
Deferred compensation liabilities	$	38,611	$	38,611	$	—	$	—
Contingent consideration		3,780		—		—		3,780

Total	$	42,391	$	38,611	$	—	$	3,780


			Fair Value Measurements at September 29, 2012
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	315	$	315	$	—	$	—
Marketable securities:
Equity security		6,029		6,029		—		—
Mutual funds		6,995		6,995		—		—

Total	$	13,339	$	13,339	$	—	$	—

Liabilities:
Deferred compensation liabilities	$	32,082	$	32,082	$	—	$	—
Contingent consideration		86,368		—		—		86,368

Total	$	118,450	$	32,082	$	—	$	86,368

Changes in the fair value of recurring fair value measurements, which solely consisted of contingent consideration liabilities, using significant unobservable inputs (Level 3) during the years ended September 28, 2013 and September 29, 2012 were as follows:


	2013			2012			2011
Beginning balance	$	86,368		$	103,790		$	29,500
Contingent consideration liabilities recorded at fair value at acquisition		525			—			86,600
Fair value adjustments		11,310			38,466			(8,016	)
Payments made		(94,423	)		(55,888	)		(4,294	)

Ending balance	$	3,780		$	86,368		$	103,790

Refer to Note 3 for a description of the valuation of contingent consideration and related sensitivities of the estimates.

The contingent consideration liability at September 28, 2013 is related to Interlace, representing the remaining amounts withheld from payments made to the former shareholders of Interlace for legal indemnification provisions. As of the end of the second quarter of fiscal 2013, the Interlace contingent liability was no longer being remeasured as the final measurement period lapsed. The withheld amount is being used to pay qualifying legal charges.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company remeasures the fair value of certain assets and liabilities upon the occurrence of certain events. Such assets are comprised of cost-method equity investments and long-lived assets, including property, plant and equipment, intangible assets and goodwill. During fiscal 2013 and 2012, the Company recorded goodwill impairment charges of $1.1 billion and $5.8 million, respectively, related to its Molecular Diagnostics and MammoSite reporting units, respectively. These adjustments fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. The fair value measurements using a discounted cash flow technique, and the amount and timing of future cash flows within the analysis were based on the Company’s most recent operational budgets, long-range strategic plans and other estimates at the time such remeasurement was made.

The Company holds certain cost-method equity investments in non-publicly traded securities aggregating $12.6 million and $16.0 million at September 28, 2013 and September 29, 2012, respectively, which are included in other long-term assets on the Company’s Consolidated Balance Sheets. These investments are generally carried at cost. Since the inputs utilized for the Company’s periodic impairment assessment are not based on observable market data, these cost method investments are classified within Level 3 of the fair value hierarchy. To determine the fair value of these investments, the Company uses all available financial information related to the entities, including information based on recent or pending third-party equity investments in these entities. In certain instances, a cost method investment’s fair value is not estimated as there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and to do so would be impractical. During fiscal 2013 and 2011, the Company recorded other-than-temporary impairment charges of $6.4 million and $2.4 million, respectively, related to certain of its cost-method equity investments to adjust their carrying amounts to fair value.

The following chart depicts the level of inputs within the fair value hierarchy used to estimate the fair value of equipment, intangible assets, goodwill and cost-method equity investments measured on a nonrecurring basis for which the Company recorded impairment charges:


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Market for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
Fiscal 2013:
Goodwill	$	277,840			$	277,840	$	(1,117,369	)
Equipment		1,363				1,363		(4,993	)
Cost-method equity investments		1,483				1,483		(6,438	)

							$	(1,128,800	)

Fiscal 2012:
Equipment	$	—			$	—	$	(6,452	)
Goodwill		—				—		(5,826	)

							$	(12,278	)

Fiscal 2011:
Cost-method equity investments	$	345			$	345	$	(2,445	)

The above fair value amounts represent only those individual assets remeasured and not the consolidated balances. Refer to Note 5 for disclosure of the nonrecurring fair value measurement related to debt extinguishment losses recorded in fiscal 2013, 2012 and 2011. Refer to Note 4 for disclosure of the nonrecurring fair value measurement related to assets held-for-sale in the fourth quarter of fiscal 2013.

Disclosure of Fair Value of Financial Instruments

The Company’s financial instruments mainly consist of cash and cash equivalents, accounts receivable, marketable securities, cost-method equity investments, insurance contracts, DCP liability, accounts payable and debt obligations. The carrying amounts of the Company’s cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these instruments. The Company’s marketable securities are recorded at fair value. The carrying amount of the insurance contracts are recorded at the cash surrender value, as required by U.S. generally accepted accounting principles, which approximates fair value, and the related DCP liability is recorded at fair value. The Company believes the carrying amounts of its cost-method investments approximate fair value.

Amounts outstanding under our Credit Agreement aggregating $2.24 billion aggregate principal are subject to variable rates of interest based on current market rates, and as such, we believe the carrying amount of these obligations approximates fair value. The Company’s Senior Notes had a fair value of approximately $1.05 billion as of September 28, 2013 based on their trading price, representing a Level 1 measurement. The fair value of the Company’s Convertible Notes is based on the trading prices of the respective notes at the dates noted and represent Level 1 measurements. Refer to Note 5 for the various components of the Company’s debt respective carrying amounts.

The estimated fair values of the Company’s Convertible Notes as of September 28, 2013 and September 29, 2012 are as follows:


	2013		2012
2007 Notes	$	405,000	$	771,600
2010 Notes		510,800		505,600
2012 Notes		518,800		490,700
2013 Notes		385,700		—

	$	1,820,300	$	1,767,900