Fair Value

12 Months Ended

Dec. 30, 2012

Fair Value

NOTE 3—Fair Value

The company groups its financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

• Level 1—Valuation is based upon quoted market price for identical instruments traded in active markets.

• Level 2—Valuation is based on quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

• Level 3—Valuation is generated from model-based techniques that use significant assumptions not observable in the market. Valuation techniques include use of discounted cash flow models and similar techniques.

The assets and liabilities measured at fair value on a recurring basis include securities and derivatives. Financial instruments classified as Level 1 are securities traded on an active exchange as well as U.S. Treasury, and other U.S. government and agency-backed securities that are traded by dealers or brokers in active over-the-counter markets. Derivatives are classified as Level 2 financial instruments. The only financial instruments classified as Level 3 are auction rate securities. All auction rate securities were sold in the fourth quarter of 2012.

The fair value of securities is based on quoted market prices at the date of measurement, except the 2011 fair values for auction rate securities. The auction rate security market was no longer active and as a result there was no observable market data for these assets. Fair value estimates were based on judgments regarding current economic conditions, liquidity discounts and interest rate risks. These estimates involved significant uncertainties and judgments and could not be determined with precision.

A discounted cash flow (DCF) calculation was performed to determine the 2011 estimated fair value of the auction rate securities. The assumptions used in preparing the DCF model included estimates for the amount and timing of future interest and principal payments and the rate of return required by investors to own these securities in the current environment. In making these assumptions, relevant factors that were considered included: the formula applicable to each security which defines the interest rate paid to investors in the event of a failed auction; forward projections of the interest rate benchmarks specified in such formulas; the likely timing of principal repayments; the probability of full repayment considering guarantees by third parties and additional credit enhancements provided through other means. The estimate of the rate of return required by investors to own these securities also considers the current reduced liquidity for auction rate securities. The inputs for the DCF are based upon publicly available data as well as the company’s own estimates. The primary unobservable input to the valuation was the maturity assumption which ranged from four to twenty-four years depending on the individual auction rate security. The maturity assumptions were based on the terms of the underlying instrument and the potential for restructuring the auction rate security.

All of the company’s derivatives are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the company measures fair value using prices obtained from the counterparties with whom the company has traded. The counterparties price the derivatives based on models that use primarily market observable inputs, such as yield curves and option volatilities. Accordingly, the company classifies these derivatives as Level 2.

The company is exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the company’s exposure to credit risk with these institutions. This credit risk is generally limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. The company considers the risk of counterparty default to be minimal.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 30, 2012.

	Fair Value Measurements
	Total			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In millions)
Foreign Currency Derivatives
Assets	$	7.9		$	—	$	7.9		$	—
Liabilities		(0.9	)		—		(0.9	)		—
	$	7.0		$	—	$	7.0		$	—
Securities
Marketable securities	$	2.7		$	2.7	$	—		$	—
	$	2.7		$	2.7	$	—		$	—

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 25, 2011.

	Fair Value Measurements
	Total			Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(In millions)
Foreign Currency Derivatives
Assets	$	0.9		$	—	$	0.9		$	—
Liabilities		(6.4	)		—		(6.4	)		—
	$	(5.5	)	$	—	$	(5.5	)	$	—
Securities
Market able securities	$	2.7		$	2.7	$	—		$	—
Auction rate securities		29.8			—		—			29.8
	$	32.5		$	2.7	$	—		$	29.8

The following table summarizes the changes in level 3 securities measured at fair value on a recurring basis for the year ended December 30, 2012.

	Auction Rate Securities
	(In millions)
Balance at beginning of period	$	29.8
Total realized and unrealized gains or (losses)
Included in net income		(12.9	)
Reversal of unrealized loss in OCI		6.0
Accretion of impairments included in net income		0.4
Sales		(23.3	)
Purchases, issuances and settlements		—
Balance at end of period	$	—

Long term debt is carried at amortized cost. However, the company is required to estimate the fair value of long term debt under the Financial Instrument Topic of the FASB ASC. The carrying amount of the revolving facility is considered to approximate fair value as the interest rate on the loan is in line with current market rates. See Note 7 for more information on the credit facility.

	December 30, 2012				December 25, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)
Long-Term Debt:
Revolving Credit Facility	$	250.0	$	250.0	$	300.0	$	300.0