Fair Value Measurements

12 Months Ended

Dec. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair Value of Derivative Instruments

We mitigate the risk of fluctuations in currency exchange rates on our results of operations and financial condition by entering into foreign currency cash flow hedges.  We account for the fair value of our derivative financial instruments as either an asset in other current assets or noncurrent assets or a liability in accrued expenses or other noncurrent liabilities.  We use an income approach to value our outstanding foreign currency cash flow hedges.  An income approach consists of a discounted cash flow model that takes into account the present value of future cash flows under the terms of the contracts using current market information as of the measurement date such as foreign currency spot and forward rates.  Additionally, an element of default risk based on observable inputs was built into the fair value calculation.

The following table provides a summary of the fair values of our derivative financial instruments measured on a recurring basis under “Fair Value Measurements and Disclosures” (U.S. dollars in millions):

	Fair Value Measurements
	Foreign currency hedges asset (liability)
	December 30, 2011		December 31, 2010
Quoted Prices in Active Markets for Identical Assets (Level 1)	$	—	$	—
Significant Other Observable Inputs (Level 2)	7.5		(18.6		)
Significant Unobservable Inputs (Level 3)	—		—

Refer to Note 14, “Retirement and Other Employee Benefits” for further fair value disclosures related to pension assets. 

19. Fair Value Measurements (continued)

In estimating our fair value disclosures for financial instruments, we use the following methods and assumptions:

Cash and cash equivalents: The carrying amount of these items approximates fair value due to their liquid nature.

Trade accounts receivable and other accounts receivable, net: The carrying value reported in the Consolidated Balance Sheets for these items is net of allowances for doubtful accounts, which includes a degree of counterparty non-performance risk.

Accounts payable and other current liabilities: The carrying value reported in the Consolidated Balance Sheets for these items approximates their fair value, which is the likely amount for which the liability with short settlement periods would be transferred to a market participant with a similar credit standing as us.

Capital lease obligations: The carrying value of our capital lease obligations reported in the Consolidated Balance Sheets approximates their fair value based on current interest rates, which contain an element of default risk.  Refer to Note 12, “Long-Term Debt and Capital Lease Obligations”.

Long-term debt: The carrying value of our long-term debt reported in the Consolidated Balance Sheets approximates their fair value since they bear interest at variable rates or fixed rates which contain an element of default risk.  Refer to Note 12, “Long-Term Debt and Capital Lease Obligations”.

Fair Value of Non-Financial Assets

The following is a tabular presentation of the non-recurring fair value measurement along with the level within the fair value hierarchy in which the fair value measurement in its entirety falls (U.S. dollars in millions):

	Fair Value Measurements for the year ended December 30, 2011
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Central America melon assets	$	2.6	$	—	$	—	$	2.6
United Kingdom under-utilized distribution facilities and office space	9.8		—		—		9.8
United Kingdom fresh-cut facility assets	$	2.3	$	—	$	2.3	$	—
	$	14.7	$	—	$	2.3	$	12.4

During 2011, we recognized $4.3 million in asset impairment charges related to an under-performing fresh-cut facility in the United Kingdom in the other fresh produce segment. The carrying value of these assets was $6.6 million in property, plant and equipment consisting of land, building and machinery and equipment. Property, plant and equipment were written down to a fair value of $2.3 million. We estimated the fair value of the underlying assets by using the market approach. The market approach uses prices and other relevant information generated by market transactions involving comparable assets. We consider that the highest and best use of these assets for industrial redevelopment differs from its current use as a fresh-cut production facility due to real-estate market demand in that area of the United Kingdom. We used observable inputs based on market participant information, as such, we classify the fair value of these assets as Level 2 of the fair value hierarchy.

19. Fair Value Measurements (continued)

During 2011, we recognized $4.7 million in asset impairment and other charges including $2.5 million in contract termination costs and $2.2 million as a result of the under-utilized distribution centers in the United Kingdom in the banana segment. The carrying value of these assets was $8.4 million in property, plant and equipment consistent of land, building and machinery and equipment. Property, plant and equipment were written down to a fair value of $6.2 million. We estimated the fair value of these assets using a combination of an income based and market approaches considering the cash flows that would be obtained as a result of banana ripening services and eventual sale of the assets at the end of their useful life. The above mentioned contract termination costs related to the closure of a distribution facility and reduction of office space. We estimated the fair value of this obligation using an income based approach, whereby our cash flows are adjusted for a market premium risk. The fair valuation of the assets and contract termination obligation of $9.8 million are classified as Level 3 of the fair value hierarchy due to the mix of unobservable inputs utilized.

During 2011, we recognized $7.9 million in impairment charges related to the melon program rationalization. During the second quarter and as a result of the decision to discontinue planting certain melon varieties in Central America, we reviewed the carrying value of the melon assets. The carrying value of these assets was $10.5 million including $7.2 million in property, plant and equipment consisting primarily of buildings and machinery and equipment and $3.3 million of melon goodwill. Property, plant and equipment were written down to a fair value of $2.6 million. We estimated the fair value of these assets using the income based approach considering the cash flows that would be obtained as a result of the production and distribution of melons in areas of continued production. The income based approach utilizes unobservable inputs. Due to the use of unobservable inputs, we classify the fair value of these growing areas within Level 3 of the fair value hierarchy. As of December 30, 2011, we had $1.2 million in assets held for sale consisting primarily of buildings and machinery and equipment included in prepaid expenses and other current assets in our Consolidated Balance Sheets related to Central American melon assets described above.

As a result of the decision to discontinue planting certain melon varieties in Central America, which significantly reduced melon volumes in the future, we estimated an implied fair value of the melon reporting unit's goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any unrecognized intangible assets). This exercise yielded a write-down of the melon goodwill of $3.3 million.

The following is a tabular presentation of the non-recurring fair value measurement along with the level within the fair value hierarchy in which the fair value measurement in its entirety falls (U.S. dollars in millions):

	Fair Value Measurements for the year ended December 31, 2010
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investment in South Africa subsidiary	$	7.7			$	7.7	$	—
DEL MONTE® U.K. beverage trademark	5.1		—		—		5.1
Philippine banana assets	0.8		—		—		0.8
	$	13.6	$	—	$	7.7	$	5.9

During the third quarter of 2010, we recognized an impairment charge of $1.4 million related to the DEL MONTE^® indefinite-lived intangible of a perpetual, royalty-free brand name license due to lower than expected sales volumes and pricing in the United Kingdom in the prepared food segment specifically related to beverage products.  An income-based approach was used to value the trademark intangible, which measures the fair value of an intangible asset by capitalizing the royalties saved due to ownership of the intangible asset rather than paying a rent or royalty for the use of the asset.  This income-based approach referred to as the royalty savings method utilizes internal unobservable inputs such as a discounted net sales cash flow model with the application of a royalty savings rate assumption corroborated by a mix of internal and market inputs.  There was no further impairment of the U.K. beverage licenses for the year ended December 31, 2010.

19. Fair Value Measurements (continued)

During the second quarter of 2010, we entered into an agreement to sell substantially all the assets of our South Africa canning operations.  As a result, we recognized a $16.7 million asset impairment of our investment in South Africa in the prepared food reporting segment.  The carrying value of our investment in South Africa was $24.4 million, including cumulative translation adjustments, and was written down to a fair value of $7.7 million.  We estimated the fair value of the underlying assets by using the market approach.  We used observable inputs based on market participant information related to the probable sale of South African assets and, as such, we classify the fair value of the investment in South Africa within Level 2 of the fair value hierarchy. We received the regulatory approval for the sale of our South Africa canning operations effective October 11, 2010.  On October 12, 2010, the sale of our South Africa canning operations was executed by the receipt of approximately $1.5 million in cash and $6.9 million recorded as a financing receivable, which was collected on January 27, 2011.

During the fourth quarter of 2010, we recognized $12.7 million in impairment charges related to plant disease affecting an isolated growing area in our banana operations in the Philippines that was abandoned in 2011 in the banana segment. The carrying value of these assets was $13.5 million and was written down to a fair value of $0.8 million.  We estimated the fair value of these assets using the income based approach considering the cash flows that would be obtained as a result of the production and distribution of bananas over the next few months prior to abandoning the growing areas impacted by disease.  The income based approach utilizes unobservable inputs.  Due to the use of unobservable inputs, we classify the fair value of these growing areas within Level 3 of the fair value hierarchy.