Fair value measurement

12 Months Ended

Dec. 30, 2012

Fair Value Disclosures [Abstract]

Fair value measurement

Fair value measurement

The company measures and records in the accompanying consolidated financial statements certain assets and liabilities at fair value. ASC Topic 820, “Fair Value Measurement,” establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the company’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 – Quoted market prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using estimates and assumptions developed by the company, which reflect those that a market participant would use.

The financial instruments measured at fair value in the accompanying consolidated balance sheets consist of the following:

Company Owned Assets
In thousands of dollars
Fair value measurement as of Dec. 30, 2012
	Level 1		Level 2		Level 3		Total
Assets:
Employee compensation related investments	$	23,043	$	—	$	—	$	23,043
Sundry investments	29,090		—		—		29,090
Total Assets	$	52,133	$	—	$	—	$	52,133
Liabilities:
Contingent consideration payable	$	—	$	—	$	26,170	$	26,170
Total Liabilities	$	—	$	—	$	26,170	$	26,170

In thousands of dollars
Fair value measurement as of Dec. 25, 2011
	Level 1		Level 2		Level 3		Total
Assets:
Employee compensation related investments	$	17,224	$	—	$	—	$	17,224
Sundry investments	26,162		—		—		26,162
Total Assets	$	43,386	$	—	$	—	$	43,386
Liabilities:
Contingent consideration payable	$	—	$	—	$	15,808	$	15,808
Total Liabilities	$	—	$	—	$	15,808	$	15,808

Under certain acquisition agreements entered into during 2011 and 2012, the company has agreed to pay the sellers earn-outs based on the financial performance of the acquired businesses. Contingent consideration payable in the table above represents the estimated fair value of future earn-outs payable under such agreements. The fair value of the contingent payments was measured based on the present value of the consideration expected to be transferred. The discount rate is a significant unobservable input in such present value computations. Discount rates ranged between 10% and 29% depending on the risk associated with the cash flows. For the year ended Dec. 30, 2012, the contingent consideration was increased by $18.2 million as a result of new acquisitions and adjustments to fair value. The increase was partially offset by payments of $7.8 million.

The following tables set forth by level within the fair value hierarchy the fair values of the company’s pension plan assets:

Pension Plan Assets/Liabilities
In thousands of dollars
Fair value measurement as of Dec. 30, 2012(a)
	Level 1			Level 2			Level 3			Total
Assets:
Fixed income
U.S. government-related securities	$	—		$	100,140		$	—		$	100,140
Mortgage backed securities	—			71,641			—			71,641
Other government bonds	—			30,317			—			30,317
Corporate bonds	—			136,640			797			137,437
Corporate stock	722,619			818			—			723,437
Real estate	—			—			97,385			97,385
Interest in common/collective trusts
Equities	—			604,003			—			604,003
Fixed income	12,630			180,990			—			193,620
Interest in reg. invest. companies	104,196			24,222			—			128,418
Interest in 103-12 investments	—			84,956			—			84,956
Partnership/joint venture interests	—			—			130,995			130,995
Hedge funds	—			77,520			158,924			236,444
Derivative contracts	33			54,924			500			55,457
Total	$	839,478		$	1,366,171		$	388,601		$	2,594,250
Liabilities:
Derivative liabilities	$	(21	)	$	(56,339	)	$	(2,008	)	$	(58,368	)
Liability to purchase U.S. government and other securities	—			(26,882		)	—			(26,882		)
Total	$	(21	)	$	(83,221	)	$	(2,008	)	$	(85,250	)
Cash and other	36,295			7,021			—			43,316
Total net fair value of plan assets	$	875,752		$	1,289,971		$	386,593		$	2,552,316

(a) The company uses a Dec. 31 measurement date for its retirement plans.

In thousands of dollars
Fair value measurement as of Dec. 25, 2011(a)
	Level 1			Level 2			Level 3			Total
Assets:
Fixed income
U.S. government-related securities	$	—		$	50,582		$	—		$	50,582
Mortgage backed securities	—			165,651			1,271			166,922
Other government bonds	—			38,246			1,441			39,687
Corporate bonds	—			135,635			2,070			137,705
Corporate stock	613,976			999			—			614,975
Real estate	—			—			93,620			93,620
Interest in common/collective trusts
Equities	—			434,693			—			434,693
Fixed income	24,632			348,736			—			373,368
Interest in reg. invest. companies	92,840			19,927			—			112,767
Interest in 103-12 investments	—			79,432			—			79,432
Partnership/joint venture interests	—			—			128,121			128,121
Hedge funds	—			76,801			156,016			232,817
Derivative contracts	—			53,591			235			53,826
Total	$	731,448		$	1,404,293		$	382,774		$	2,518,515
Liabilities:
Derivative liabilities	$	(15	)	$	(54,139	)	$	(2,517	)	$	(56,671	)
Liability to purchase U.S. government and other securities	—			(71,876		)	—			(71,876		)
Total	$	(15	)	$	(126,015	)	$	(2,517	)	$	(128,547	)
Cash and other	18,135			665			—			18,800
Total net fair value of plan assets	$	749,568		$	1,278,943		$	380,257		$	2,408,768

(a) The company uses a Dec. 31 measurement date for its retirement plans.

Items included in “Cash and other” in the table above primarily consist of amounts categorized as cash and cash equivalents and pending purchases and sales of securities.

Valuation methodologies used for assets and liabilities measured at fair value are as follows:

U.S. government-related securities are treasury bonds, bills and notes that are primarily obligations to the U.S. Treasury. Values are obtained from industry vendors who use various pricing models or quotes for identical or similar securities. Mortgage-backed securities are typically not actively quoted. Values are obtained from industry vendors who use various pricing models or use quotes for identical or similar securities. Investments categorized in Level 3 are thinly traded with values derived using unobservable inputs.

Other government and corporate bonds are mainly valued based on institutional bid evaluations using proprietary models, using discounted cash flow models or models that derive prices based on similar securities. Corporate bonds categorized in Level 3 are primarily from distressed issuers for whom the values represent an estimate of recovery in a potential or actual bankruptcy situation.

Corporate stock is valued primarily at the closing price reported on the active market on which the individual securities are traded.

Investments in direct real estate have been valued by an independent qualified valuer in the U.K. using a valuation approach that capitalizes any current or future income streams at an appropriate multiplier. Investments in real estate funds are mainly valued utilizing the net asset valuations provided by the underlying private investment companies.

Interest in common/collective trusts and interest in 103-12 investments are valued using the net asset value as provided monthly by the fund family or fund company. Shares in the common/collective trusts are generally redeemable upon request. The investments classified in Level 1 are money market funds with a constant net asset value.

Two of these investments are fixed income funds which use individual subfunds to efficiently add a representative sample of securities in individual market sectors to the portfolio. These funds are generally redeemable with a short-term written or verbal notice. Also included is a fund that invests in a select portfolio of large cap domestic stocks perceived to have superior growth characteristics. Shares in this fund are generally redeemable on any business day, upon two-day notice. There are no unfunded commitments related to these types of funds.

Interest in registered investment companies is valued using the published net asset values as quoted through publicly available pricing sources. The investments in Level 2 are proprietary funds of the individual fund managers and are not publicly quoted.

Investments in partnerships and joint venture interests are valued based on an assessment of each underlying investment, considering items such as expected cash flows, changes in market outlook and subsequent rounds of financing. These investments are included in Level 3 of the fair value hierarchy because exit prices tend to be unobservable and reliance is placed on the above methods. Most of the partnerships are general leveraged buyout funds, others include a venture capital fund, a fund formed to invest in special credit opportunities, an infrastructure fund and a real estate fund. Interest in partnership investments cannot be redeemed. Instead, distributions are received as the underlying assets of the funds are liquidated. It is estimated that the underlying assets of the funds will be liquidated within approximately the next 10 to 12 years. There are future funding commitments of $40 million as of Dec. 30, 2012 and $33 million as of Dec. 25, 2011.

Investments in hedge funds are valued at the net asset value as reported by the fund managers. Within this category is a fund of hedge funds whose objective is to produce a return that is uncorrelated with market movements. Other funds categorized as hedge funds were formed to invest in mortgage and credit trading opportunities. Shares in the hedge funds are generally redeemable twice a year or on the last business day of each quarter with at least 60 days written notice subject to potential 5% holdback. There are no unfunded commitments related to the hedge funds.

Derivatives primarily consist of forward and swap contracts. Forward contracts are valued at the spot rate, plus or minus forward points between the valuation date and maturity date. Swaps are valued at the mid-evaluation price using discounted cash flow models. Items in Level 3 are valued based on the market values of other securities for which they represent a synthetic combination.

Liability to purchase U.S. government and other securities relates to buying and selling contracts in federal agency securities that have not yet been opened up for public trading. In these instances the investment manager has sold the securities prior to owning them, resulting in a negative asset position. These securities are valued in the same manner as those noted above in U.S. government-related securities.

The company reviews appraised valued, audited financial statements and additional information to evaluate fair value estimates from its investment managers or fund administrator. The tables below set forth a summary of changes in the fair value of the company’s pension plan assets and liabilities, categorized as Level 3, for the fiscal year ended Dec. 30, 2012 and Dec. 25, 2011:

Pension Plan Assets/Liabilities
In thousands of dollars
For the year ended Dec. 30, 2012
				Actual Return on Plan Assets
	Balance at beginning of year			Relating to assets still held at report date			Relating to assets sold during the period			Purchases, sales, and settlements		Transfers in and/or out of Level 3(1)			Balance at end of year
Assets:
Fixed income
Mortgage-backed securities	$	1,271		$	—		$	—		$	—	$	(1,271	)	$	—
Other government bonds	1,441			—			—			—		(1,441		)	—
Corporate bonds	2,070			83			(589		)	—		(767		)	797
Real estate	93,620			(4,788		)	—			8,553		—			97,385
Partnership/joint venture interests	128,121			(1,817		)	(20,781		)	25,472		—			130,995
Hedge funds	156,016			9,590			(8,271		)	1,589		—			158,924
Derivative contracts	235			265			—			—		—			500
Total	$	382,774		$	3,333		$	(29,641	)	$	35,614	$	(3,479	)	$	388,601
Liabilities:
Derivative liabilities	$	(2,517	)	$	16		$	(4	)	$	—	$	497		$	(2,008	)

(1) The company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

Pension Plan Assets/Liabilities (continued)
In thousands of dollars
For the year ended Dec. 25, 2011
				Actual Return on Plan Assets
	Balance at beginning of year			Relating to assets still held at report date			Relating to assets sold during the period			Purchases, sales, and settlements			Transfers in and/or out of Level 3(1)			Balance at end of year
Assets:
Fixed income
Mortgage-backed securities	$	—		$	(11	)	$	—		$	1,282		$	—		$	1,271
Other government bonds	1,526			65			—			(150		)	—			1,441
Corporate bonds	5,896			(133		)	7			205			(3,905		)	2,070
Real estate	90,344			(503		)	—			3,779			—			93,620
Partnership/joint venture interests	117,698			20,706			—			(10,283		)	—			128,121
Hedge funds	163,349			(1,632		)	(150		)	(7,151		)	1,600			156,016
Derivative contracts	104			(265		)	(76		)	(28		)	500			235
Total	$	378,917		$	18,227		$	(219	)	$	(12,346	)	$	(1,805	)	$	382,774
Liabilities:
Derivative liabilities	$	(453	)	$	(8	)	$	(733	)	$	1,183		$	(2,506	)	$	(2,517	)

(1) The company’s policy is to recognize transfers in and transfers out as of the beginning of the reporting period.

The fair value of the company’s total long-term debt, determined based on the bid and ask quotes for the related debt (Level 2), totaled $1.6 billion and $1.9 billion at Dec. 30, 2012 and Dec. 25, 2011, respectively. Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment).

The following table summarizes the non-financial assets measured at fair value on nonrecurring basis in the accompanying consolidated balance sheet as of Dec. 30, 2012:

Non-Financial Assets
In thousands of dollars
Fair value measurement as of Dec. 30, 2012
	Level 1		Level 2		Level 3		Total
Asset held for sale - Quarter 4	$	—	$	—	$	17,508	$	17,508
Goodwill - Quarter 4	$	—	$	—	$	29,610	$	29,610

The quantitative test of goodwill during 2012 was based on a valuation that considered discounted cash flows and market-based information. Significant unobservable inputs in the discounted cash flows method included the ending year growth rate of 2% and the discount rate applied to the cash flows of 15.5%. If the growth rate and discount rate were to change by 1%, the impact to the valuation would have been approximately $2 million and $3 million, respectively.