Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments (Thousands of Dollars) [Abstract]

Fair Value of Financial Instruments

(6) Fair Value of Financial Instruments

The Company measures certain financial instruments at fair value. The fair value hierarchy consists of three levels: Level 1 fair values are based on quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Accounting standards permit entities to measure many financial instruments and certain other items at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The Company has elected the fair value option for certain available-for-sale investments. At September 30, 2012, September 25, 2011 and December 25, 2011, these investments totaled $23,403, $20,095 and $19,657 respectively, and are included in prepaid expenses and other current assets in the consolidated balance sheet. The Company recorded net gains of $1,082 and $1,847 on these investments in other (income) expense, net for the quarter and nine months ended September 30, 2012, respectively, related to the change in fair value of such investments. For the quarter and nine months ended September 25, 2011, the Company recorded net (losses) gains of $(24) and $499, respectively, on these investments in other (income) expense, net, related to the change in fair value of such investments.

At September 30, 2012, September 25, 2011 and December 25, 2011, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets:

		Fair Value Measurements Using:
	Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
	--------	--------	--------	--------
September 30, 2012
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Assets:
Available-for-sale securities	$ 23,415	12	18,403	5,000
Derivatives	22,088	-	19,699	2,389
	--------	-------	---------	-------
Total assets	$ 45,503	12	38,102	7,389
	=====	====	======	====
Liabilities:
Derivatives	$  2,312	-	2,312	-
	=====	====	======	====
September 25, 2011
--------------------------
Assets:
Available-for-sale securities	$ 20,119	24	20,095	-
Derivatives	35,346	-	32,466	2,880
	--------	-------	---------	-------
Total assets	$ 55,465	24	52,561	2,880
	=====	====	======	====
Liabilities:
Derivatives	$  7,262	-	7,262	-
	=====	====	======	====
December 25, 2011
--------------------------
Assets:
Available-for-sale securities	$ 19,669	12	19,657	-
Derivatives	29,500	-	25,776	3,724
	--------	-------	---------	-------
Total assets	$ 49,169	12	45,433	3,724
	=====	====	======	====
Liabilities:
Derivatives	$  1,908	-	1,908	-
	=====	====	======	====

For a portion of the Company’s available-for-sale securities, the Company is able to obtain quoted prices from stock exchanges to measure the fair value of these securities. Certain other available-for-sale securities held by the Company are valued at the net asset value which is quoted on a private market that is not active; however, the unit price is predominantly based on underlying investments which are traded on an active market. In 2012 the Company purchased an available-for-sale investment which invests in hedge funds which contain financial instruments that are valued using certain estimates which are considered unobservable in that they reflect the investment manager’s own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that these estimates are the best information available for use in the fair value of this investment. The Company’s derivatives consist primarily of foreign currency forward contracts. The Company uses current forward rates of the respective foreign currencies to measure the fair value of these contracts. The Company’s derivatives also include interest rate swaps used to effectively adjust the interest rates on a portion of the Company’s long-term debt from fixed to variable. The fair values of the interest rate swaps are measured based on the present value of future cash flows using the swap curve as of the valuation date. The remaining derivative instruments consist of warrants to purchase common stock of an unrelated company. The Company uses the Black-Scholes model to value these warrants. One of the inputs used in the Black-Scholes model, historical volatility, is considered an unobservable input in that it reflects the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. There were no changes in these valuation techniques during 2012.

The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company’s financial instruments which use significant unobservable inputs (Level 3):

	2012	2011
	-----------	-----------
Balance at beginning of year	$ 3,724	9,155
Purchases	5,000	-
Loss from change in fair value	(1,335)	(6,275)
	--------	--------
Balance at end of third quarter	$ 7,389	2,880
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