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Company-Sponsored Employee Benefit Plans (Company-Sponsored Employee Benefit Plans [Member])
12 Months Ended
Jun. 30, 2012
Company-Sponsored Employee Benefit Plans [Member]
 
Employee Benefit Plans

 

13. COMPANY-SPONSORED EMPLOYEE BENEFIT PLANS

 

Sysco has company-sponsored defined benefit and defined contribution retirement plans for its employees. Also, the company provides certain health care benefits to eligible retirees and their dependents.

 

Sysco maintains a qualified pension plan (Retirement Plan) that pays benefits to employees at retirement, using formulas based on a participant’s years of service and compensation.

 

The company’s defined contribution 401(k) plan provides that under certain circumstances the company may make matching contributions of up to 50% of the first 6% of a participant’s compensation. Sysco’s expense related to this plan was $17.2 million in fiscal 2012, $19.8 million in fiscal 2011, and $22.8 million in fiscal 2010.

 

At the end of fiscal 2012, Sysco approved a plan to freeze future benefit accruals under the Retirement Plan as of December 31, 2012 for all U.S.-based salaried and non-union hourly employees.  Effective January 1, 2013, these employees will be eligible for additional contributions under the company’s defined contribution  401(k) plan.  The measurements for the Retirement Plan at June 30, 2012 included the impact of the freeze.  This resulted in the recognition of a curtailment gain as a component of actuarial loss arising in current year in other comprehensive loss.

 

In addition to receiving benefits upon retirement under the company’s Retirement Plan, key management personnel who are participants in the Management Incentive Plan will receive benefits under a Supplemental Executive Retirement Plan (SERP). This plan is a nonqualified, unfunded supplementary retirement plan.

 


 

Funded Status

 

Accumulated pension assets measured against the obligation for pension benefits represents the funded status of a given plan.  The funded status of Sysco’s company-sponsored defined benefit plans is presented in the table below.  The caption “Pension Benefits” in the tables below includes both the Retirement Plan and the SERP.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Postretirement Plans

 

 

June 30, 2012

 

July 2, 2011

 

June 30, 2012

 

July 2, 2011

 

 

(In thousands)

Change in benefit obligation:

 

 

 

 

 

 

 

 

 

 

 

 

Benefit obligation at beginning of year

 

$

 2,516,660

 

$

 2,212,304

 

$

 10,812

 

$

 8,461

Service cost

 

 

 108,223

 

 

 99,443

 

 

 457

 

 

 396

Interest cost

 

 

 147,512

 

 

 134,973

 

 

 632

 

 

 524

Amendments

 

 

 8,705

 

 

 8,252

 

 

 -

 

 

 987

Curtailments

 

 

 (176,531)

 

 

 -

 

 

 -

 

 

 -

Actuarial loss, net

 

 

 625,890

 

 

 121,913

 

 

 924

 

 

 157

Total disbursements

 

 

 (65,485)

 

 

 (60,225)

 

 

 129

 

 

 287

Benefit obligation at end of year

 

 

 3,164,974

 

 

 2,516,660

 

 

 12,954

 

 

 10,812

Change in plan assets:

 

 

 

 

 

 

 

 

 

 

 

 

Fair value of plan assets at beginning of year

 

 

 2,106,313

 

 

 1,666,972

 

 

 -

 

 

 -

Actual return on plan assets

 

 

 31,597

 

 

 337,889

 

 

 -

 

 

 -

Employer contribution

 

 

 162,444

 

 

 161,677

 

 

 (129)

 

 

 (287)

Total disbursements

 

 

 (65,485)

 

 

 (60,225)

 

 

 129

 

 

 287

Fair value of plan assets at end of year

 

 

 2,234,869

 

 

 2,106,313

 

 

 -

 

 

 -

Funded status at end of year

 

$

 (930,105)

 

$

 (410,347)

 

$

 (12,954)

 

$

 (10,812)

 

In order to meet a portion of its obligations under the SERP, Sysco maintains life insurance policies on the lives of the participants with carrying values of $97.6 million as of June 30, 2012 and $170.0 million as of July 2, 2011. In the second quarter of fiscal 2012, approximately $75.0 million of these policies were redeemed and corporate-owned real estate assets were substituted for these policies.  These policies are not included as plan assets or in the funded status amounts in the tables above and below; rather, the assets are held in a rabbi trust and are therefore available to satisfy the claims of the company’s creditors in the event of bankruptcy or insolvency of the company. Sysco is the sole owner and beneficiary of such policies.  The projected benefit obligation for the SERP of $473.1 million and $402.0 million as of June 30, 2012 and July 2, 2011, respectively, was included in Other long-term liabilities on the balance sheet.

 

The amounts recognized on Sysco’s consolidated balance sheets related to its company-sponsored defined benefit plans are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Postretirement Plans

 

 

June 30, 2012

 

July 2, 2011

 

June 30, 2012

 

July 2, 2011

 

 

 

(In thousands)

Current accrued benefit liability (Accrued expenses)

 

$

 (22,810)

 

$

 (22,426)

 

$

 (369)

 

$

 (336)

Non-current accrued benefit liability (Other long-term liabilities)

 

 

 (907,295)

 

 

 (387,921)

 

 

 (12,585)

 

 

 (10,476)

Net amount recognized

 

$

 (930,105)

 

$

 (410,347)

 

$

 (12,954)

 

$

 (10,812)

 

Accumulated other comprehensive loss (income) as of June 30, 2012 consists of the following amounts that had not, as of that date, been recognized in net benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other

Postretirement Plans

 

Total

 

 

 

 

 

(In thousands)

Prior service cost

 

 

 

 

$

 36,087

 

$

 1,236

 

$

 37,323

Actuarial losses (gains)

 

 

 

 

 

 1,303,582

 

 

 (3,543)

 

 

 1,300,039

Transition obligation

 

 

 

 

 

 -

 

 

 141

 

 

 141

Total

 

 

 

 

$

 1,339,669

 

$

 (2,166)

 

$

 1,337,503

Accumulated other comprehensive loss (income) as of July 2, 2011 consists of the following amounts that had not, as of that date, been recognized in net benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other

Postretirement Plans

 

Total

 

 

 

 

 

(In thousands)

Prior service cost

 

 

 

 

$

 32,187

 

$

 1,450

 

$

 33,637

Actuarial losses (gains)

 

 

 

 

 

 784,382

 

 

 (4,798)

 

 

 779,584

Transition obligation

 

 

 

 

 

 -

 

 

 294

 

 

 294

Total

 

 

 

 

$

 816,569

 

$

 (3,054)

 

$

 813,515

 

The accumulated benefit obligation, which does not consider any salary increases, for the company-sponsored defined benefit pension plans was $3,078.5 million and $2,325.2 million as of June 30, 2012 and July 2, 2011, respectively.

 

Information for plans with accumulated benefit obligation/aggregate benefit obligation in excess of fair value of plan assets is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Postretirement Plans

 

 

June 30, 2012 (1)

 

July 2, 2011 (1)

 

June 30, 2012

 

July 2, 2011

 

 

(In thousands)

Accumulated benefit obligation/aggregate benefit obligation

 

$

 3,078,488

 

$

 2,325,171

 

$

 12,954

 

$

 10,812

Fair value of plan assets at end of year

 

 

 2,234,869

 

 

 2,106,313

 

 

 -

 

 

 -

 

 (1)  Information under Pension Benefits as of June 30, 2012 and July 2, 2011 includes both the Retirement Plan and the SERP.

 

Components of Net Benefit Costs and Other Comprehensive Income

 

The components of net company-sponsored pension costs for each fiscal year are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

 

 

 

 

2012

 

2011

 

2010

(53 Weeks)

 

 

 

 

 

(In thousands)

Service cost

 

 

 

 

$

 108,223

 

$

 99,443

 

$

 66,650

Interest cost

 

 

 

 

 

 147,512

 

 

 134,973

 

 

 119,593

Expected return on plan assets

 

 

 

 

 

 (161,605)

 

 

 (131,921)

 

 

 (104,860)

Amortization of prior service cost

 

 

 

 

 

 4,806

 

 

 3,960

 

 

 4,209

Amortization of actuarial loss

 

 

 

 

 

 60,166

 

 

 79,952

 

 

 40,526

Net pension costs

 

 

 

 

$

 159,102

 

$

 186,407

 

$

 126,118

 

The components of other postretirement benefit costs for each fiscal year are as follows:          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Postretirement Plans

 

 

 

 

 

2012

 

2011

 

2010

(53 Weeks)

 

 

 

 

 

(In thousands)

Service cost

 

 

 

 

$

 457

 

$

 396

 

$

 328

Interest cost

 

 

 

 

 

 632

 

 

 524

 

 

 562

Amortization of prior service cost

 

 

 

 

 

 215

 

 

 185

 

 

 185

Amortization of actuarial gain

 

 

 

 

 

 (331)

 

 

 (388)

 

 

 (490)

Amortization of transition obligation

 

 

 

 

 

 153

 

 

 153

 

 

 153

Net other postretirement benefit costs

 

 

 

 

$

 1,126

 

$

 870

 

$

 738

 


 

Net company-sponsored pension costs decreased $27.3 million in fiscal 2012 due primarily to higher returns on assets of Sysco’s Retirement Plan during fiscal 2011.  Net company-sponsored pension costs in fiscal 2013 are expected to decrease by approximately $26.5 million over fiscal 2012 due primarily to  the freeze of the plan, partially offset by the impact of reduced discount rates and amortization of losses from unrecognized actuarial losses.

 

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) related to company-sponsored pension plans for each fiscal year are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

 

 

 

 

2012

 

2011

 

2010

(53 Weeks)

 

 

 

 

 

(In thousands)

Amortization of prior service cost

 

 

 

 

$

 4,806

 

$

 3,960

 

$

 4,209

Amortization of actuarial loss

 

 

 

 

 

 60,166

 

 

 79,952

 

 

 40,526

Prior service cost arising in current year

 

 

 

 

 

 (8,706)

 

 

 (8,252)

 

 

 -

Actuarial (loss) gain arising in current year

 

 

 

 

 

 (579,366)

 

 

 84,055

 

 

 (454,023)

Net pension costs

 

 

 

 

$

 (523,100)

 

$

 159,715

 

$

 (409,288)

 

Other changes in benefit obligations recognized in other comprehensive (loss) income related to other postretirement plans for each fiscal year are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Postretirement Plans

 

 

 

 

 

2012

 

2011

 

2010

(53 Weeks)

 

 

 

 

 

(In thousands)

Amortization of prior service cost

 

 

 

 

$

 215

 

$

 185

 

$

 185

Amortization of actuarial gain

 

 

 

 

 

 (331)

 

 

 (388)

 

 

 (490)

Amortization of transition obligation

 

 

 

 

 

 153

 

 

 153

 

 

 153

Prior service cost arising in current year

 

 

 

 

 

 -

 

 

 (987)

 

 

 -

Actuarial (loss) gain arising in current year

 

 

 

 

 

 (925)

 

 

 (157)

 

 

 (733)

Net pension costs

 

 

 

 

$

 (888)

 

$

 (1,194)

 

$

 (885)

 

Amounts included in accumulated other comprehensive loss (income) as of June 30, 2012 that are expected to be recognized as components of net company-sponsored benefit cost during fiscal 2013 are:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other

Postretirement Plans

 

Total

 

 

 

 

 

(In thousands)

Amortization of prior service cost

 

 

 

 

$

 5,847

 

$

 169

 

$

 6,016

Amortization of actuarial losses (gains)

 

 

 

 

 

 76,086

 

 

 (203)

 

 

 75,883

Amortization of transition obligation

 

 

 

 

 

 -

 

 

 141

 

 

 141

Total

 

 

 

 

$

 81,933

 

$

 107

 

$

 82,040

 

Employer Contributions

 

The company made cash contributions to its company-sponsored pension plans of $162.4 million and $161.7 million in fiscal years 2012 and 2011, respectively.  The $140.0 million contribution to the Retirement Plan in fiscal 2012 exceeded the minimum required contribution for the calendar 2011 plan year to meet ERISA minimum funding requirements.  The $140.0 million contribution to the Retirement Plan in fiscal 2011 was voluntary, as there was no minimum required contribution for the calendar 2010 plan year.  There are no required contributions to the Retirement Plan to meet ERISA minimum funding requirements in fiscal 2013. The company’s contributions to the SERP and other post-retirement plans are made in the amounts needed to fund current year benefit payments. The estimated fiscal 2013 contributions to fund benefit payments for the SERP and other postretirement plans are $23.4 million and $0.4 million, respectively.

 


 

Estimated Future Benefit Payments

 

Estimated future benefit payments for vested participants, based on actuarial assumptions, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Benefits

 

Other Postretirement Plans

 

 

 

 

 

 

 

 

(In thousands)

2013

 

 

 

 

 

 

 

$

 74,988

 

$

 378

2014

 

 

 

 

 

 

 

 

 82,762

 

 

 523

2015

 

 

 

 

 

 

 

 

 92,032

 

 

 743

2016

 

 

 

 

 

 

 

 

 102,279

 

 

 921

2017

 

 

 

 

 

 

 

 

 113,637

 

 

 1,063

Subsequent five years

 

 

 

 

 

 

 

 

 732,601

 

 

 6,169

 

Assumptions

 

Weighted-average assumptions used to determine benefit obligations as of year-end were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

July 2, 2011

Discount rate — Retirement Plan

 

 

 

 4.81

%

 

 5.94

%

Discount rate — SERP

 

 

 

 4.89

 

 

 5.93

 

Discount rate — Other Postretirement Plans

 

 

 

 4.81

 

 

 5.94

 

Rate of compensation increase — Retirement Plan

 

 

 

 5.30

 

 

 5.30

 

 

 

For determining the benefit obligations as of June 30, 2012 and July 2, 2011, the SERP calculations utilized an age-graded salary growth assumption. 

 

Weighted-average assumptions used to determine net company-sponsored pension costs and other postretirement benefit costs for each fiscal year were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

2010

Discount rate — Retirement Plan

 5.94

%

 

 6.15

%

 

 8.02

%

Discount rate — SERP

 5.93

 

 

 6.35

 

 

 7.14

 

Discount rate — Other Postretirement Plans

 5.94

 

 

 6.32

 

 

 8.02

 

Expected rate of return — Retirement Plan

 7.75

 

 

 8.00

 

 

 8.00

 

Rate of compensation increase — Retirement Plan

 5.30

 

 

 5.30

 

 

 5.21

 

 

 

For determining the net pension costs related to the SERP for fiscal 2012 and 2011, the SERP calculations utilized an age-graded salary growth assumption.   The calculation for fiscal 2010 utilized an age-graded salary growth assumption with reductions taken for determining fiscal 2010 pay due to base salary freezes in effect for fiscal 2010.

 

A healthcare cost trend rate is not used in the calculations of postretirement benefit obligations because Sysco subsidizes the cost of postretirement medical coverage by a fixed dollar amount, with the retiree responsible for the cost of coverage in excess of the subsidy, including all future cost increases.

 

For guidance in determining the discount rate, Sysco calculates the implied rate of return on a hypothetical portfolio of high-quality fixed-income investments for which the timing and amount of cash outflows approximates the estimated payouts of the company-sponsored pension plans. The discount rate assumption is reviewed annually and revised as deemed appropriate.  The discount rate to be used for the calculation of fiscal 2013 net company-sponsored benefit costs for the Retirement Plan is 4.81%.  The discount rate to be used for the calculation of fiscal 2013 net company-sponsored benefit costs for the SERP is 4.89%.   The discount rate to be used for the calculation of fiscal 2013 net company-sponsored benefit costs for the Other Postretirement Plans is 4.81%.

 

The expected long-term rate of return on plan assets assumption is net return on assets assumption, representing gross return on assets less plan expenses.  The expected return is derived from a mathematical asset model that incorporates assumptions as to the various asset class returns, reflecting a combination of rigorous historical performance analysis and the forward-looking views of the financial markets regarding the yield on bonds, the historical returns of the major stock markets and returns on alternative investments. The rate of return assumption is reviewed annually and revised as deemed appropriate.  The expected long-term rate of return to be used in the calculation of fiscal 2013 net company-sponsored benefit costs for the Retirement Plan is 7.75%.


 

Plan Assets

 

Investment Strategy

 

The company’s overall strategic investment objectives for the Retirement Plan are to preserve capital for future benefit payments and to balance risk and return commensurate with ongoing changes in the valuation of plan liabilities.  In order to accomplish these objectives, the company oversees the Retirement Plan’s investment objectives and policy design, decides proper plan asset class strategies and structures, monitors the performance of plan investment managers and investment funds and determines the proper investment allocation of pension plan contributions and withdrawals. The company has created an investment structure for the Retirement Plan that takes into account the nature of the Retirement Plan’s liabilities.  This structure ensures the Retirement Plan’s investment are diversified within each asset class, in addition to being diversified across asset classes with the intent to build asset class portfolios that are structured without strategic bias for or against any subcategories within each asset class.  The company has also created a set of investment guidelines for the Retirement Plan’s investment managers to specify prohibited transactions, including borrowing of money except for real estate portfolios or private equity portfolios where leverage is a key component of the investment strategy and permitted in the investments’ governing documents, the purchase of securities on margin unless fully collateralized by cash or cash equivalents or short sales, pledging, mortgaging or hypothecating of any securities except for loans of securities that are fully collateralized, market timing transactions and the direct purchase of the securities of Sysco or the investment manager. The purchase or sale of derivatives for speculation or leverage is also prohibited; however, investment managers are allowed to use derivative securities so long as they do not increase the risk profile or leverage of the manager’s portfolio. 

 

The company’s target and actual investment allocation as of June 30, 2012 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Target Asset Allocation Range

 

Actual Asset Allocation

U.S. equity

 

 

 

 

 

 

 

23 - 31

%

 

31

%

International equity

 

 

 

 

 

 

 

23 - 31

 

 

30

 

Core fixed income

 

 

 

 

 

 

 

11 - 17

 

 

12

 

Long duration fixed income

 

 

 

 

 

 

 

10 - 18

 

 

15

 

High yield fixed income

 

 

 

 

 

 

 

7 - 11

 

 

9

 

Alternative investments

 

 

 

 

 

 

 

5 - 15

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

100

%

 

Sysco’s investment strategy is implemented through a combination of balanced and specialist investment managers, passive investment funds and actively-managed investment funds. U.S. equity consists of both large-cap and small-to-mid-cap securities.  Core fixed income investments include intermediate range U.S. government and agency securities, corporate bonds from diversified industries, asset-backed securities, mortgage-backed securities, other debt securities and derivative securities. Long duration fixed income investments include U.S. government and agency securities, corporate bonds from diversified industries, asset-backed securities, mortgage-backed securities, other debt securities and derivative securities. High yield fixed income consists of below investment grade corporate debt securities and may include derivative securities.  Alternative investments may include private equity, private real estate, timberland, and commodities investments. Investment funds are selected based on each fund’s stated investment strategy to align with Sysco’s overall target mix of investments.  Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered appropriate.  As of June 30, 2012, actual asset allocation varied from the stated target in certain categories, as alternative investment funding, primarily in private equity funds require contributions over a multi-year period.  Until such capital is required, the company has chosen to invest these amounts in U.S. and international equities.

 

As discussed above, the Retirement Plan’s investments in equity, fixed income and alternative investments provide a range of returns and also expose the plan to investment risk.  However, the investment policies put in place by the company require diversification of plan assets across issuers, industries and countries.  As such, the Retirement Plan does not have significant concentrations of risk in plan assets. 

 

Fair Value of Plan Assets

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price).  See Note 4, “Fair Value Measurements,” for a description of the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The following is a description of the valuation methodologies used for assets and liabilities measured at fair value.

 

Cash and cash equivalents: Valued at amortized cost, which approximates fair value.  Cash and cash equivalents is included as a Level 2 measurement in the table below.

 

Equity securities: Valued at the closing price reported on the exchange market. If a stock is not listed on a public exchange, such as an American Depository Receipt or some preferred stocks, the stock is valued using an evaluated bid price based on a compilation of observable market information. Inputs used include yields, the underlying security “best price”, adjustments for corporate actions and exchange prices of underlying and common stock of the same issuer.  Equity securities valued at the closing price reported on the exchange market are classified as a Level 1 measurement in the table below; all other equity securities are included as a Level 2 measurement.

 

Fixed income securities: Valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active market.  Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash flows, rating changes and collateral performance and type.  All fixed income securities are included as a Level 2 measurement in the table below.

 

Investment funds: Valued at the net asset value (NAV) provided by the manager of each fund.  The NAV is calculated as the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV is based on the fair value of the underlying securities within the fund.  The real estate funds are valued at the NAV of shares held by the Retirement Plan, which is based on the valuations of the underlying real estate investments held by each fund.  Each real estate investment is valued on the basis of a discounted cash flow approach. Inputs used include future rental receipts, expenses and residual values from a market participant view of the highest and best use of the real estate as rental property.  All investment funds, with the exception of the real estate funds and private equity funds, are included as a Level 2 measurement in the table below.  The real estate funds and private equity funds are included as Level 3 measurements.

 

Derivatives:  Valuation method varies by type of derivative security.

 

·         Credit default and interest rate swaps:  Valued using evaluated bid prices based on a compilation of observable market information.  Inputs used for credit default swaps include spread curves and trade data about the credit quality of the counterparty.  Inputs used for interest rate swaps include benchmark yields, swap curves, cash flow analysis, and interdealer broker rates.  Credit default and interest rate swaps are included as a Level 2 measurement in the table below.

·         Foreign currency contracts: Valued using a standardized interpolation model that utilizes the quoted prices for standard-length forward foreign currency contracts and adjusts to the remaining term outstanding on the contract being valued.  Foreign currency contracts are included as a Level 2 measurement in the table below.

·         Futures and option contracts: Valued at the closing price reported on the exchange market for exchange-traded futures and options.  Over-the-counter options are valued using pricing models that are based on observable market information.  Exchange-traded futures and options are included as a Level 1 measurement in the table below; over-the-counter options are included as a Level 2 measurement.

 


 

The following table presents the fair value of the Retirement Plan’s assets by major asset category as of June 30, 2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Measured at Fair Value as of June 30, 2012

 

Level 1

 

Level 2

 

Level 3

 

Total

 

(In thousands)

Cash and cash equivalents 1

$

 -

 

$

 44,904

 

$

 -

 

$

 44,904

U.S. equity:

 

 

 

 

 

 

 

 

 

 

 

U.S. large-cap 1

 

 143,544

 

 

 414,048

 

 

 -

 

 

 557,592

U.S. small-to-mid-cap

 

 133,388

 

 

 -

 

 

 -

 

 

 133,388

International equity  2

 

 -

 

 

 670,139

 

 

 -

 

 

 670,139

Core fixed income:

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

 -

 

 

 43,690

 

 

 -

 

 

 43,690

Corporate bonds 1

 

 -

 

 

 85,391

 

 

 -

 

 

 85,391

Asset-backed securities

 

 -

 

 

 11,937

 

 

 -

 

 

 11,937

Mortgage-backed securities, net 1

 

 -

 

 

 106,722

 

 

 -

 

 

 106,722

Other 1

 

 192

 

 

 17,248

 

 

 -

 

 

 17,440

Derivatives, net 3

 

 (16)

 

 

 (6)

 

 

 -

 

 

 (22)

Long duration fixed income:

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

 -

 

 

 143,825

 

 

 -

 

 

 143,825

Corporate bonds

 

 -

 

 

 119,947

 

 

 -

 

 

 119,947

Mortgage-backed securities

 

 -

 

 

 9,946

 

 

 -

 

 

 9,946

Municipal bonds

 

 -

 

 

 22,014

 

 

 -

 

 

 22,014

Sovereign debt

 

 -

 

 

 18,126

 

 

 -

 

 

 18,126

Other 1

 

 -

 

 

 12,813

 

 

 -

 

 

 12,813

Derivatives, net 4

 

 -

 

 

 (43)

 

 

 -

 

 

 (43)

High yield fixed income  2

 

 -

 

 

 205,984

 

 

 -

 

 

 205,984

Alternative investments:

 

 

 

 

 

 

 

 

 

 

 

 Real estate 2

 

 -

 

 

 -

 

 

 51,097

 

 

 51,097

 Private equity 2

 

 -

 

 

 -

 

 

 5,295

 

 

 5,295

Total investments at fair value

$

 277,108

 

$

 1,926,685

 

$

 56,392

 

$

 2,260,185

Other 5

 

 

 

 

 

 

 

 

 

 

 (25,316)

Fair value of plan assets at end of year

 

 

 

 

 

 

 

 

 

$

 2,234,869

 

 

 

1  Include direct investments and investment funds.

2  Include investments in investment funds only.

3  Include credit default swaps, interest rate swaps, and futures.  The fair value of asset positions totaled $0.3 million; the fair value of liability positions totaled $0.3 million.

4 Include credit default swaps, interest rate swaps, foreign currency contracts, futures and options.  The fair value of asset positions totaled $0.5 million; the fair value of liability positions totaled $0.6 million.

5  Include primarily plan receivables and payables, net.


 

The following table presents the fair value of the Retirement Plan’s assets by major asset category as of July 2, 2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Measured at Fair Value as of July 2, 2011

 

Level 1

 

Level 2

 

Level 3

 

Total

 

(In thousands)

Cash and cash equivalents 1

$

 -

 

$

 112,217

 

$

 -

 

$

 112,217

U.S. equity:

 

 

 

 

 

 

 

 

 

 

 

U.S. large-cap 1

 

 139,048

 

 

 357,712

 

 

 -

 

 

 496,760

U.S. small-to-mid-cap

 

 166,890

 

 

 -

 

 

 -

 

 

 166,890

International equity  2

 

 117,655

 

 

 455,811

 

 

 -

 

 

 573,466

Core fixed income:

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

 -

 

 

 62,691

 

 

 -

 

 

 62,691

Corporate bonds 1

 

 -

 

 

 80,379

 

 

 -

 

 

 80,379

Asset-backed securities

 

 -

 

 

 8,704

 

 

 -

 

 

 8,704

Mortgage-backed securities, net 3

 

 -

 

 

 129,941

 

 

 -

 

 

 129,941

Other 1

 

 204

 

 

 17,296

 

 

 -

 

 

 17,500

Derivatives, net 4

 

 (34)

 

 

 (340)

 

 

 -

 

 

 (374)

Long duration fixed income:

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

 -

 

 

 79,970

 

 

 -

 

 

 79,970

Corporate bonds

 

 -

 

 

 139,916

 

 

 -

 

 

 139,916

Mortgage-backed securities

 

 -

 

 

 11,810

 

 

 -

 

 

 11,810

Municipal bonds

 

 -

 

 

 18,786

 

 

 -

 

 

 18,786

Sovereign debt

 

 -

 

 

 10,552

 

 

 -

 

 

 10,552

Other 1

 

 -

 

 

 12,529

 

 

 -

 

 

 12,529

Derivatives, net 5

 

 280

 

 

 512

 

 

 -

 

 

 792

High yield fixed income  2

 

 -

 

 

 191,583

 

 

 -

 

 

 191,583

Alternative investments:

 

 

 

 

 

 

 

 

 

 

 

 Real estate 2

 

 -

 

 

 -

 

 

 30,615

 

 

 30,615

 Private equity 2

 

 -

 

 

 -

 

 

 1,480

 

 

 1,480

Total investments at fair value

$

 424,043

 

$

 1,690,069

 

$

 32,095

 

$

 2,146,207

Other 6

 

 

 

 

 

 

 

 

 

 

 (39,894)

Fair value of plan assets at end of year

 

 

 

 

 

 

 

 

 

$

 2,106,313

 

 

1  Include direct investments and investment funds.

2  Include investments in investment funds only.

3  Include direct investments, investment funds and forward settling sales.

4 Include credit default swaps, interest rate swaps and futures.  The fair value of asset positions totaled $8.6 million; the fair value of liability positions totaled $9.0 million.

5 Include credit default swaps, interest rate swaps, foreign currency contracts, futures and options.  The fair value of asset positions totaled $1.1 million; the fair value of liability positions totaled $0.3 million.

6  Include primarily plan receivables and payables, net.

 

 


 

The following table sets forth a summary of changes in the fair value of the Retirement Plan’s Level 3 assets for each fiscal year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real Estate
Funds

 

Private Equity Funds

 

Total Level 3 Measurements

 

 

 

 

(In thousands)

Balance, July 3, 2010

 

 

 

$

 17,065

 

$

 -

 

$

 17,065

Actual return on plan assets:

 

 

 

 

 

 

 

 

 

 

 

Relating to assets still held at the reporting date

 

 

 

 

 3,371

 

 

 72

 

 

 3,443

Relating to assets sold during the period

 

 

 

 

 -

 

 

 -

 

 

 -

Purchases and sales, net

 

 

 

 

 10,179

 

 

 1,408

 

 

 11,587

Transfers in and/or out of Level 3

 

 

 

 

 -

 

 

 -

 

 

 -

Balance, July 2, 2011

 

 

 

$

 30,615

 

$

 1,480

 

$

 32,095

Actual return on plan assets:

 

 

 

 

 

 

 

 

 

 

 

Relating to assets still held at the reporting date

 

 

 

 

 2,155

 

 

 (14)

 

 

 2,141

Relating to assets sold during the period

 

 

 

 

 -

 

 

 -

 

 

 -

Purchases and sales, net

 

 

 

 

 18,327

 

 

 3,829

 

 

 22,156

Transfers in and/or out of Level 3

 

 

 

 

 -

 

 

 -

 

 

 -

Balance, June 30, 2012

 

 

 

$

 51,097

 

$

 5,295

 

$

 56,392