Methods and Assumptions Used in Estimating Fair Value |
The below methods and assumptions were used by the Company in estimating the fair values of its financial instruments. There were no transfers of assets or liabilities between levels in any period presented.
| | | | | | | | | | | | | | | Financial Instrument | | Fair Value Level | | Methods and Assumptions | Deferred compensation plan assets and liabilities | | Level 1 | | The fair value of the Company’s nonqualified deferred compensation plan for certain executives and other highly compensated employees is based on the fair values of associated assets and liabilities, which are held in mutual funds and are based on the quoted market values of the securities held within the mutual funds. | Pension plan assets | | Level 1 | | The fair values of the Company’s Level 1 pension plan assets, which are equity securities and fixed income investment vehicles, are valued using the quoted market prices of those securities which are actively traded on national exchanges. | Pension plan assets | | Level 2 | | The fair values of the Company’s Level 2 pension plan assets, which are investments that are pooled with other investments in a commingled fund, are valued using the net asset value produced by the fund manager. The assets within the commingled funds have a readily determinable fair market value. | Commodity derivative instruments | | Level 2 | | The fair values of the Company’s commodity derivative instruments are based on current settlement values at each balance sheet date, which represent the estimated amounts the Company would have received or paid upon termination of these instruments. The Company’s credit risk related to the commodity derivative instruments is managed by requiring high standards for its counterparties and periodic settlements. The Company considers nonperformance risk in determining the fair values of commodity derivative instruments. | Long-term debt | | Level 2 | | The carrying amounts of the Company’s variable rate debt approximate the fair values due to variable interest rates with short reset periods. The fair values of the Company’s fixed rate debt are based on estimated current market prices. | Acquisition related contingent consideration | | Level 3 | | The fair value of the Company’s acquisition related contingent consideration is based on internal forecasts and the WACC derived from market data. |
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Deferred Compensation Plan Commodity Hedging Agreements and Acquisition Related Contingent Consideration |
The following tables summarize the carrying amounts and the fair values by level of the Company’s deferred compensation plan assets and liabilities, pension plan assets, commodity derivative instruments, long-term debt and acquisition related contingent consideration:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | (in thousands) | | Carrying Amount | | Total Fair Value | | Fair Value Level 1 | | Fair Value Level 2 | | Fair Value Level 3 | Assets: | | | | | | | | | | | Deferred compensation plan assets | | $ | 51,257 | | | $ | 51,257 | | | $ | 51,257 | | | $ | — | | | $ | — | | Pension plan assets | | 261,942 | | | 261,942 | | | 242,639 | | | 19,303 | | | — | | Commodity derivative instruments | | 4,808 | | | 4,808 | | | — | | | 4,808 | | | — | | Liabilities: | | | | | | | | | | | Deferred compensation plan liabilities | | 51,257 | | | 51,257 | | | 51,257 | | | — | | | — | | Long-term debt | | 598,817 | | | 575,900 | | | — | | | 575,900 | | | — | | Acquisition related contingent consideration | | 541,491 | | | 541,491 | | | — | | | — | | | 541,491 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | (in thousands) | | Carrying Amount | | Total Fair Value | | Fair Value Level 1 | | Fair Value Level 2 | | Fair Value Level 3 | Assets: | | | | | | | | | | | Deferred compensation plan assets | | $ | 60,461 | | | $ | 60,461 | | | $ | 60,461 | | | $ | — | | | $ | — | | Pension plan assets | | 328,250 | | | 328,250 | | | 313,893 | | | 14,357 | | | — | | Commodity derivative instruments | | 7,714 | | | 7,714 | | | — | | | 7,714 | | | — | | Liabilities: | | | | | | | | | | | Deferred compensation plan liabilities | | 60,461 | | | 60,461 | | | 60,461 | | | — | | | — | | Long-term debt | | 723,443 | | | 772,600 | | | — | | | 772,600 | | | — | | Acquisition related contingent consideration | | 542,105 | | | 542,105 | | | — | | | — | | | 542,105 | |
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Summary of Reconciliation of Acquisition Related Contingent Consideration Liability |
A summary of the Level 3 activity is as follows: | | | | | | | | | | | | | | | | | Fiscal Year | (in thousands) | | 2022 | | 2021 | Beginning balance - Level 3 liability | | $ | 542,105 | | | $ | 434,694 | | Payments of acquisition related contingent consideration | | (36,515) | | | (39,097) | | Reclassification to current payables | | 3,600 | | | 200 | | Increase in fair value | | 32,301 | | | 146,308 | | Ending balance - Level 3 liability | | $ | 541,491 | | | $ | 542,105 | |
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