Fair Value Measurements

3 Months Ended

Mar. 27, 2022

FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon the sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The transaction would be in the principal or most advantageous market for the asset or liability, based on assumptions that a market participant would use in pricing the asset or liability. The fair value hierarchy consists of three levels:

Level 1–quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2–inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3–unobservable inputs for the asset or liability.

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of March 27, 2022, and December 26, 2021:


(In thousands)	March 27, 2022								December 26, 2021
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Short-term AFS securities (1)
U.S. Treasury securities	$	28,268	$	—	$	28,268	$	—	$	149,548	$	—	$	149,548	$	—
Corporate debt securities	22,536		—		22,536		—		107,334		—		107,334		—
Certificates of deposit	—		—		—		—		55,551		—		55,551		—
Municipal securities	1,984		—		1,984		—		3,997		—		3,997		—
U.S. governmental agency securities	—		—		—		—		3,500		—		3,500		—
Commercial paper	—		—		—		—		21,145		—		21,145		—
Total short-term AFS securities	$	52,788	$	—	$	52,788	$	—	$	341,075	$	—	$	341,075	$	—
Long-term AFS securities (1)
Corporate debt securities	$	161,428	$	—	$	161,428	$	—	$	241,055	$	—	$	241,055	$	—
U.S. Treasury securities	54,684		—		54,684		—		119,146		—		119,146		—
U.S. governmental agency securities	27,954		—		27,954		—		39,246		—		39,246		—
Municipal securities	8,749		—		8,749		—		13,933		—		13,933		—
Total long-term AFS securities	$	252,815	$	—	$	252,815	$	—	$	413,380	$	—	$	413,380	$	—
Liabilities:
Deferred compensation (2)(3)	$	16,467	$	16,467	$	—	$	—	$	21,101	$	21,101	$	—	$	—
Contingent consideration	$	5,858	$	—	$	—	$	5,858	$	7,450	$	—	$	—	$	7,450

(1) We classified these investments as Level 2 since the fair value is based on market observable inputs for investments with similar terms and maturities.

(2) The deferred compensation liability, included in Other liabilities—other in our Condensed Consolidated Balance Sheets, consists of deferrals under The New York Times Company Deferred Executive Compensation Plan (the “DEC”), which previously enabled certain eligible executives to elect to defer a portion of their compensation on a pre-tax basis. The deferred amounts are invested at the executives’ option in various mutual funds. The fair value of deferred compensation is based on the mutual fund investments elected by the executives and on quoted prices in active markets for identical assets. Participation in the DEC was frozen effective December 31, 2015.

(3) The Company invests the assets associated with the deferred compensation liability in life insurance products. Our investments in life insurance products are included in Miscellaneous assets in our Condensed Consolidated Balance Sheets, and were $50.8 million as of March 27, 2022, and $52.5 million as of December 26, 2021. The fair value of these assets is measured using the net asset value per share (or its equivalent) and has not been classified in the fair value hierarchy.

Level 3 Liabilities

The contingent consideration liability is related to the 2020 acquisition of substantially all the assets and certain liabilities of Serial Productions, LLC (the “Serial acquisition”) and represents contingent payments based on the achievement of certain operational targets, as defined in the acquisition agreement, over the five years following the acquisition. The Company estimated the fair value using a probability-weighted discounted cash flow model. The estimate of the fair value of contingent consideration requires subjective assumptions to be made regarding probabilities assigned to operational targets and the discount rate. As the fair value is based on significant unobservable inputs, this is a Level 3 liability.

The following table presents changes in the contingent consideration balances for the quarters ended March 27, 2022 and March 28, 2021:


	For the Quarters Ended
(In thousands)	March 27, 2022		March 28, 2021
Balance at the beginning of the period	$	7,450	$	8,431

Payments	(1,724)		—
Fair value adjustments (1)	132		(703)
Contingent consideration at the end of the period	$	5,858	$	7,728

(1) Fair value adjustments are included in General and administrative expenses in our Condensed Consolidated Statements of Operations.

The remaining contingent consideration balances as of March 27, 2022, and December 26, 2021, of $5.9 million and $7.5 million, respectively, are included in Accrued expenses and other, for the current portion of the liability, and Other non-current liabilities, for the long-term portion of the liability, in our Condensed Consolidated Balance Sheets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details