Fair Values of Financial Instruments

12 Months Ended

Dec. 28, 2014

12. Fair Values of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair values of its financial instruments:


Instrument		Method and Assumptions
Cash and Cash Equivalents, Accounts Receivable and Accounts Payable		The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate carrying values due to the short maturity of these items.

Public Debt Securities		The fair values of the Company’s public debt securities are based on estimated current market prices.

Non-Public Variable Rate Debt		The carrying amounts of the Company’s variable rate borrowings approximate their fair values due to variable interest rates with short reset periods.

Deferred Compensation Plan Assets/Liabilities		The fair values of deferred compensation plan assets and liabilities, which are held in mutual funds, are based upon the quoted market value of the securities held within the mutual funds.

Acquisition Related Contingent Consideration		The fair values of acquisition related contingent consideration are based on internal forecasts and the weighted average cost of capital derived from market data.

The carrying amounts and fair values of the Company’s debt, deferred compensation plan assets and liabilities and acquisition related contingent consideration were as follows:


	Dec. 28, 2014						Dec. 29, 2013
In Thousands	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Public debt securities	$	(373,759	)	$	(404,400	)	$	(373,566	)	$	(409,434	)
Non-public variable rate debt		(71,000	)		(71,000	)		(25,000	)		(25,000	)
Deferred compensation plan assets		18,580			18,580			17,098			17,098
Deferred compensation plan liabilities		(18,580	)		(18,580	)		(17,098	)		(17,098	)
Acquisition related contingent consideration		(46,850	)		(46,850	)		0			0

GAAP requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The following table summarizes, by assets and liabilities, the valuation of the Company’s deferred compensation plan and acquisition related contingent consideration:


	Dec. 28, 2014					Dec. 29, 2013
In Thousands	Level 1		Level 2	Level 3		Level 1		Level 2	Level 3
Assets
Deferred compensation plan assets	$	18,580				$	17,098
Liabilities
Deferred compensation plan liabilities		18,580					17,098
Acquisition related contingent consideration				$	46,850				$	0

The fair value estimates of the Company’s debt are classified as Level 2. Public debt securities are valued using quoted market prices of the debt or debt with similar characteristics.

The Company maintains a non-qualified deferred compensation plan for certain executives and other highly compensated employees. The investment assets are held in mutual funds. The fair value of the mutual funds is based on the quoted market value of the securities held within the funds (Level 1). The related deferred compensation liability represents the fair value of the investment assets.

As part of the 2014 territory acquisitions, the Company will make a quarterly sub-bottling payment to CCR on a continuing basis for the grant of exclusive rights to distribute, promote, market and sell the Covered Beverages and Related Products in the Territories. This contingent consideration is valued using a probability weighted discounted cash flow model based on internal forecasts and the weighted average cost of capital derived from market data, which are considered Level 3 inputs. Significant changes in any Level 3 input or assumption in isolation will result in increases or decreases to the fair value measurement for the acquisition related contingent consideration.

The acquisition related contingent consideration is the Company’s only Level 3 asset or liability. A reconciliation of the activity is as follows:


In Thousands	2014
Opening balance	$	0
Increase due to the Johnson City and Morristown purchase		13,000
Increase due to the Knoxville purchase		33,200
Payments made		(212	)
Accrual of fourth quarter payment		(215	)
Fair value adjustment		1,077

Ending balance	$	46,850

The fair value adjustment of the acquisition related contingent consideration is recorded in other income (expense) on the Company’s consolidation statements of operations.

There were no transfers of assets or liabilities between Levels for 2014, 2013 or 2012.

- 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.

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