Contingent Liabilities

9 Months Ended

Sep. 29, 2019

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities

CONTINGENT LIABILITIES

Newspaper and Mail Deliverers–Publishers’ Pension Fund

In September 2013, the Newspaper and Mail Deliverers-Publishers’ Pension Fund (the “NMDU Fund”) assessed a partial withdrawal liability against the Company in the gross amount of approximately $26 million for the plan years ending May 31, 2012, and 2013 (the “Initial Assessment”), an amount that was increased to a gross amount of approximately $34 million in December 2014, when the NMDU Fund issued a revised partial withdrawal liability assessment for the plan year ending May

31, 2013 (the “Revised Assessment”). The NMDU Fund claimed that when City & Suburban Delivery Systems, Inc., a retail and newsstand distribution subsidiary of the Company and the largest contributor to the NMDU Fund, ceased operations in 2009, it triggered a decline of more than 70% in contribution base units in each of these two plan years.

The Company disagreed with both the NMDU Fund’s determination that a partial withdrawal occurred and the methodology by which it calculated the withdrawal liability, and the parties engaged in arbitration proceedings to resolve the matter. In June 2016, the arbitrator issued an interim award and opinion that supported the NMDU Fund’s determination that a partial withdrawal had occurred, and concluded that the methodology used to calculate the Initial Assessment was correct. However, the arbitrator also concluded that the NMDU Fund’s calculation of the Revised Assessment was incorrect. In July 2017, the arbitrator issued a final award and opinion reflecting the same conclusions, which both the Company and NMDU Fund challenged in federal district court. In March 2018, the court determined that a partial withdrawal had occurred, but supported the Company’s position that the NMDU Fund’s calculation of the withdrawal liability was improper. The Company appealed the court’s decision with respect to the determination that a partial withdrawal had occurred, and the NMDU Fund appealed the court’s decision with respect to the calculation of the withdrawal liability. Oral arguments were held in May 2019.

Due to requirements of the Employee Retirement Income Security Act of 1974 that sponsors make payments demanded by plans during arbitration and any resultant appeals, the Company had been making payments to the NMDU fund since September 2013 based on the NMDU Fund’s demand. As a result, through September 29, 2019, we have paid $21.6 million relating to the Initial Assessment since the receipt of the initial demand letter. We also paid $5.0 million related to the Revised Assessment, which was refunded in July 2016 based on the arbitrator’s ruling.

On September 16, 2019, the Company and the NMDU Fund reached an agreement to settle this matter. As a result of the settlement, the Company recognized a gain of approximately $2.0 million, and as of September 29, 2019, the Company had no contingent liability related to this matter. In addition, each party withdrew its appeal of the March 2018 court decision.

Other

We are involved in various legal actions incidental to our business that are now pending against us. These actions are generally for amounts greatly in excess of the payments, if any, that may be required to be made. Although the Company cannot predict the outcome of these matters, it is possible that an unfavorable outcome in one or more matters could be material to the Company’s consolidated results of operations or cash flows for an individual reporting period. However, based on currently available information, management does not believe that the ultimate resolution of these matters, individually or in the aggregate, is likely to have a material effect on the Company’s financial position.

Letters of Credit Commitment

We have issued letters of credit totaling $42.4 million and $48.8 million as of September 29, 2019, and December 30, 2018, respectively, in connection with the leasing of floors in the Company Headquarters. We expect the letters of credit to expire subsequent to the repurchase of the Condo Interest in December 2019. Approximately $47 million and $54 million of marketable securities were designated as collateral for the letters of credit, as of September 29, 2019, and December 30, 2018, respectively.