Defined Benefit Pension Plans

The company sponsors two U.S. and one Canadian pension plans to provide retirement benefits to certain employees. The benefits provided under these plans are based primarily on years of service and compensation levels.

Measurement Dates and Assumptions

A fiscal year end measurement date is utilized to value plan assets and obligations for all of the company's defined benefit pension plans.

The weighted average actuarial assumptions used in measuring the net periodic benefit cost and plan obligations of continuing operations were as follows:



	2014		2013		2012
Net periodic benefit cost
Discount rate	4.8	%	4.2	%	5.5	%
Long-term rate of return on plan assets	6.5	%	6.2	%	6.5	%
Plan obligations
Discount rate	4.3	%	4.8	%	4.2	%

The discount rate is determined by utilizing a yield curve based on high-quality fixed-income investments that have a AA bond rating to discount the expected future benefit payments to plan participants. Compensation increase assumptions are based upon historical experience and anticipated future management actions. Compensation changes for participants in the U.S. plans no longer have an impact on the benefit cost or plan obligations as the participants in the U.S. salaried plan will no longer accrue additional benefits. In determining the long-term rate of return on plan assets, the company assumes that the historical long-term compound growth rates of equity and fixed-income securities and other plan investments will predict the future returns of similar investments in the plan portfolio. Investment management and other fees paid out of plan assets are factored into the determination of asset return assumptions.

Net Periodic Benefit Cost and Funded Status

The components of the net periodic benefit cost for continuing operations were as follows:



In millions	2014			2013			2012
Components of defined benefit net periodic (benefit) cost
Service cost	$	9		$	11		$	9
Interest cost	74			70			73
Expected return on assets	(91		)	(92		)	(86		)
Amortization of :
Prior service cost	1			1			1
Net actuarial loss	4			4			3
Settlement loss	1			6			1
Net periodic (benefit) cost	$	(2	)	$	—		$	1

In 2014, the company recognized $1 million of settlement losses associated with plan settlements resulting from the payment of lump-sum benefits to plan participants.

In 2013, the company recognized $1 million of settlement losses associated with settlement of two of the company's defined benefit pension plans in Canada. The losses resulted from recognition of the unamortized actuarial losses associated with these two plans. The company also recognized a $4 million loss related to the payout of the surplus assets associated with these plans, which were in an overfunded position. The remaining $1 million of settlement losses were associated with plan settlements resulting from the payment of lump-sum benefits to plan participants.

In 2012, the company recognized $1 million of settlement losses associated with plan settlements resulting from the payment of lump-sum benefits to plan participants. In 2012, the disposition of the North American fresh bakery business resulted in the recognition of a $36 million net settlement loss as a result of the assumption of the related plan liabilities by the buyer. The settlement loss was recognized as part of the gain on disposition of this business.

The net periodic benefit cost of the defined benefit pension plans in 2014 decreased by $2 million from 2013, driven by a decrease in settlement losses and service cost, partially offset by higher interest expense and a decrease in asset returns.

The net periodic benefit cost of the defined benefit pension plans in 2013 was virtually unchanged from 2012 as an increase in settlement losses and amortization expense was offset by an increase in asset returns and lower interest expense.

The amount of prior service cost and net actuarial loss that is expected to be amortized from accumulated other comprehensive income and reported as a component of net periodic benefit cost in continuing operations during 2015 is $1 million and $4 million, respectively.

The funded status of defined benefit pension plans at the respective year-ends was as follows:



In millions	2014			2013
Projected benefit obligation
Beginning of year	$	1,562		$	1,680
Service cost	9			11
Interest cost	74			70
Plan amendments/other	—			1
Benefits paid	(76		)	(81		)
Actuarial loss (gain)	116			(123		)
Settlements	—			4
End of year	$	1,685		$	1,562
Fair value of plan assets
Beginning of year	$	1,439		$	1,515
Actual return on plan assets	194			(3		)
Employer contributions	8			8
Benefits paid	(76		)	(81		)
End of year	1,565			1,439
Funded status	$	(120	)	$	(123	)
Amounts recognized on the consolidated balance sheets
Other noncurrent assets	$	—		$	1
Accrued liabilities	(4		)	(5		)
Pension obligation	(116		)	(119		)
Net liability recognized	$	(120	)	$	(123	)
Amounts recognized in accumulated other comprehensive income
Unamortized prior service cost	$	6		$	7
Unamortized actuarial loss, net	237			228
Total	$	243		$	235

The underfunded status of the plans decreased from $123 million in 2013 to $120 million in 2014, due to a $126 million increase in plan assets, partially offset by a $123 million increase in plan obligations resulting from $116 million of actuarial losses driven by a decrease in the discount rate. The increase in plan assets was the result of improved investment performance during the year.

The accumulated benefit obligation is the present value of pension benefits (whether vested or unvested) attributed to employee service rendered before the measurement date and based on employee service and compensation prior to that date. The accumulated benefit obligation differs from the projected benefit obligation in that it includes no assumption about future compensation levels. The accumulated benefit obligations of the company's pension plans as of the measurement dates in 2014 and 2013 were $1.685 billion and $1.562 billion, respectively.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were:



In millions	2014		2013
Projected benefit obligation	$	1,677	$	1,555
Accumulated benefit obligation	1,677		1,555
Fair value of plan assets	1,557		1,431

Plan Assets, Expected Benefit Payments and Funding

The fair value of pension plan assets as of June 28, 2014 was determined as follows:



			Fair Value Measurement at Reporting Date, Using:
	Total Fair Value			Quoted Prices in Active Market for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
In millions	2014			(Level 1)		(Level 2)		(Level 3)
Equity securities
U.S. securities - pooled funds	$	84		$	84	$	—	$	—
Non-U.S. securities - pooled funds	100			100		—		—
Total equity securities	184			184		—		—
Fixed income securities
Government bonds	134			134		—		—
Corporate bonds	643			—		643		—
U.S. pooled funds	134			—		134		—
Non-U.S. pooled funds	5			—		5		—
Bond fund	413			—		413		—
Total fixed income securities	1,329			134		1,195		—
Real estate	32			—		32		—
Cash and equivalents	5			5		—		—
Other	15			—		15		—
Total fair value of assets	$	1,565		$	323	$	1,242	$	—

The fair value of pension plan assets as of June 29, 2013 was determined as follows:



			Fair Value Measurement at Reporting Date, Using:
				Quoted Prices in Active Market for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
In millions	2013			(Level 1)		(Level 2)		(Level 3)
Equity securities
U.S. securities - pooled funds	$	85		$	85	$	—	$	—
Non-U.S. securities - pooled funds	102			102		—		—
Total equity securities	187			187		—		—
Fixed income securities
Government bonds	256			256		—		—
Corporate bonds	503			—		503		—
U.S. pooled funds	122			—		122		—
Non-U.S. pooled funds	5			—		5		—
Bond fund	324			—		324		—
Total fixed income securities	1,210			256		954		—
Real estate	23			—		23		—
Cash and equivalents	6			6		—		—
Other	13			—		13		—
Total fair value of assets	$	1,439		$	449	$	990	$	—

In 2014, management reevaluated the classification of its securities and revised the 2013 fair value hierarchy table above to correct errors in the presentation of certain investments. The classification of the following has been corrected from Level 1 to Level 2: Corporate bonds ($503 million), U.S. pooled funds ($122 million), Non-U.S. pooled funds ($5 million), Bond fund ($324 million), Real estate ($23 million), and Other ($13 million). The Corporate bonds and the Bond fund may include treasury securities. These corrections did not impact the total fair value of assets.

Level 1 assets were valued using quoted market prices of the identical underlying security in an active market. The fair value of the Level 2 assets is primarily based on market-observable inputs to quoted market prices, benchmark yields and broker/dealer quotes. The company did not have any Level 3 assets, which would include assets for which values are determined by non-observable inputs. See Note 15 - Financial Instruments for additional information as to the fair value hierarchy.

The percentage allocation of pension plan assets based on a fair value basis as of the respective year-end measurement dates is as follows:



	2014		2013
Asset category
Equity securities	12	%	13	%
Debt securities	85		84
Real estate	2		2
Cash and other	1		1
Total	100	%	100	%

The overall investment objective is to manage the plan assets so that they are sufficient to meet the plan's future obligations while maintaining adequate liquidity to meet current benefit payments and operating expenses. The actual amount for which these obligations will be settled depends on future events and actuarial assumptions. These assumptions include the life expectancy of the plan participants. The resulting estimated future obligations are discounted using an interest rate curve that represents a return that would be required from high quality corporate bonds. The company has adopted a liability driven investment (LDI) strategy which consists of investing in a portfolio of assets whose performance is driven by the performance of the associated pension liability. This means that plan assets managed under an LDI strategy may underperform general market returns, but should provide for lower volatility of funded status as its return is designed to match the pension liability movement. Over time, as pension obligations become better funded, the company will further de-risk its investments and increase the allocation to fixed income.

As noted in the above table, on an aggregate fair value basis, the plan is currently at 85% fixed income securities and 12% equity securities. Fixed income securities can include, but are not limited to, direct bond investments, pooled or indirect bond investments and cash. Other investments can include, but are not limited to, international and domestic equities, real estate, commodities and private equity. Derivative instruments may also be used in concert with either fixed income or equity investments to achieve desired exposure or to hedge certain risks. Derivative instruments can include, but are not limited to, futures, options, swaps or swaptions. The assets are managed by professional investment firms and performance is evaluated against specific benchmarks. The responsibility for the investment strategies typically lies with an investment committee, which is composed of representatives appointed by the company.

Pension assets at the 2014 and 2013 measurement dates do not include any direct investment in the company's debt or equity securities. Substantially all pension benefit payments are made from assets of the pension plans. It is anticipated that the future benefit payments will be as follows: $74 million in 2015, $78 million in 2016, $81 million in 2017, $84 million in 2018, $86 million in 2019 and $473 million from 2020 to 2024. The company expects to contribute approximately $5 million to its pension plans in 2015.

Defined Contribution Plans

The company sponsors defined contribution plans, which cover certain salaried and hourly employees. The company's cost is determined by the amount of contributions it makes to these plans. The amounts charged to expense for contributions made to these defined contribution plans related to continuing operations totaled $16 million in 2014, $25 million in 2013 and $21 million in 2012.

Multi-Employer Plans

The company participates in a multi-employer plan that provides defined benefits to certain employees covered by collective bargaining agreements. Such plans are usually administered by a board of trustees composed of the management of the participating companies and labor representatives.

The company previously contributed to several multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that covered various union-represented employees but currently only contributes to one of these plans. The risks of participating in these multiemployer plans are different from single-employer plans. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligation of the plan may be borne by the remaining participating employers. If the company stops participating in a plan, the company may be required to pay that plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. None of the contributions to the pension funds for continuing operations was in excess of 5% of the total plan contributions for plan years 2014, 2013 and 2012. There are no contractually required minimum contributions to the plans as of June 28, 2014.

The net pension cost of these plans is equal to the annual contribution determined in accordance with the provisions of negotiated labor contracts. The contributions for plans related to continuing operations were $1 million in 2014, $1 million in 2013 and $2 million in 2012. Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to the employees of the company. The future cost of these plans is dependent on a number of factors including the funded status of the plans and the ability of the other participating companies to meet ongoing funding obligations.

The company's participation in these multiemployer plans for fiscal 2014 is outlined below. The EIN/Pension Plan Number column provides the Employer Identification Number (EIN) and the three digit plan number, if applicable. Unless otherwise noted, the most recent PPA zone status available in 2014 and 2013 is for the plan's year beginning January 1, 2014 and 2013, respectively. The zone status is based on information that the company has received from the plan and is certified by plans' actuaries. Among other factors, plans in the red zone are generally less than 65 percent funded. The FIP/RP Status Pending/Implemented column indicates plans for which a financial improvement plan (FIP) or rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreements to which the plans are subject. There have been no significant changes that affect the comparability of contributions from year to year.

In addition to regular contributions, the company could be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) if a MEPP has unfunded vested benefits.



		PPA Zone Status		FIP/RP Status	Contributions (in millions)						2014 Surcharge Imposed		Expiration Date of Collective Bargaining Agreement
	EIN/Pension Plan Number	2014	2013	Pending/ Implemented	2014		2013		2012		2014 Surcharge Imposed		Expiration Date of Collective Bargaining Agreement
Pension Fund Plan Name
Bakery and Confectionary Union & Industry International Pension Fund	52-6118572/001	Red	Red	Nov 2012	$	1	$	1	$	2	10	%	Oct 2014