Employee Benefit Plans

The Company maintains a defined benefit pension plan (the “pension plan”) for the benefit of eligible employees, former employees, and retirees in the U.S. The pension plan has been frozen since 2003, and since that time, participant accounts have not been credited with any additional years of service or additional compensation, but rather only with interest on accrued balances. The pension plan is managed in compliance with all provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Investment Advisers Act of 1940, and other applicable laws. The Company funds the pension plan in accordance with applicable employee benefit and tax laws, primarily the Pension Protection Act of 2006, as amended ("PPA"). The primary purpose of the pension plan is to provide a source of retirement income for plan participants and beneficiaries.

Net pension expense for the Company’s pension plan follows:



	Fiscal Year Ended						Six Months Ended			Fiscal Year Ended
	December 29, 2013			December 30, 2012			January 1, 2012			July 3, 2011

Interest cost	$	7,854		$	8,655		$	4,919		$	9,686
Expected return on plan assets	(10,246		)	(9,741		)	(5,394		)	(10,041		)
Recognized net actuarial loss	8,757			8,022			3,181			6,855
Net pension expense	$	6,365		$	6,936		$	2,706		$	6,500

Net pension expense for fiscal 2014 is estimated at $3.7 million. During that time, it is expected that $7.2 million of amounts included in accumulated other comprehensive loss will be recognized in net periodic benefit cost. The expected long-term rate of return on pension plan assets in determining fiscal 2014 pension expense is 7.75%.

Pension benefit obligations at year-end, the fair value of pension plan assets, and the pension plan funded status are as follows:



	December 29, 2013			December 30, 2012
Change in Benefit Obligation:
Benefit obligation at beginning of period	$	230,257		$	217,452
Interest cost	7,854			8,655
Actuarial loss (gain)	(17,762		)	16,922
Benefits paid	(11,285		)	(12,772		)
Benefit obligation at end of period	$	209,064		$	230,257

Change in Plan Assets:
Fair value of plan assets at beginning of period	$	127,917		$	119,344
Actual return on plan assets	19,115			9,774
Employer contributions	24,856			11,571
Benefits paid	(11,285		)	(12,772		)
Fair value of plan assets at end of period	$	160,603		$	127,917

Funded status	$	(48,461	)	$	(102,340	)
Unrecognized net actuarial loss	169,070			204,459
Net amount recognized	$	120,609		$	102,119

Amounts Recognized in Statement of Financial Position:
Pension benefit obligations, net	$	(48,461	)	$	(102,340	)
Accumulated other comprehensive loss	169,070			204,459
Net amount recognized	$	120,609		$	102,119

The pension plan has been in a net under-funded position for the past several years, and as a result, the Company recognized an additional minimum pension liability on its balance sheet in accordance with ASC 715. The pension plan’s unrecognized losses of $169.1 million and $204.5 million (excluding tax benefits of $17 million) at December 29, 2013, and December 30, 2012, respectively, have been recorded as a reduction to equity in accumulated other comprehensive loss on the Company’s consolidated balance sheets.

During fiscal years 2013 and 2012, the Company made contributions totaling $24.9 million and $11.6 million to the pension plan. The Company previously made required contributions to the pension plan of $1.9 million in transition period 2011, and $8.4 million in fiscal 2011. Based upon current actuarial projections and pension funding regulations, future minimum required contributions to the pension plan are estimated at $43.2 million, of which approximately $15.3 million is scheduled to be contributed during fiscal 2014. The net present value of the future required minimum contributions, discounted at 4.45%, is estimated at $38.0 million. Required contributions after fiscal 2014 are subject to change and will depend on future interest rate levels, values in equity and fixed income markets, and the level and timing of interim contributions we may make to the pension plan.

Weighted average assumptions used to determine benefit cost and benefit obligation for the pension plan follow:



	Fiscal Year Ended		Six Months Ended	Fiscal Year Ended
	December 29, 2013	December 30, 2012	January 1, 2012	July 3, 2011
Discount rate used to determine benefit obligation	4.45%	3.50%	4.05%	5.15%
Discount rate used to determine benefit cost	3.50%	4.05%	5.15%	5.10%
Expected return on plan assets	7.75%	8.25%	8.25%	8.50%
Measurement date for pension benefit obligations	December 29, 2013	December 30, 2012	January 1, 2012	July 3, 2011

The Company's expected rate of return on plan assets is determined in part by reviewing past actual investment returns of plan assets and historical returns of the Company's asset allocation targets. In addition, management reviews assessments of the current market environment based on a variety of data sources by asset class, including correlations between economic growth, volatility, risk, return rates, interest rates, and inflation, applied to a number of different time periods, seeking time periods that are most representative of current markets. In reviewing these assessments, management relies in part on input

from the Company's independent investment manager and actuaries, who provide asset-liability modeling and other advice services which simulate how pension assets and liabilities will respond under different investment and interest rate scenarios. These models incorporate the Company's specific liability and cash flow information as well as other factors that influence the pension plan liability and corresponding assets. In addition, management periodically evaluates actual returns against appropriate benchmarks to determine if actual return rates were commensurate with expectations. Based on the Company's analysis of past actual return rates, current and expected asset allocations, and future expectations of asset performance, the long-term expected rate of return on assets was reduced to 7.75% for cost recognition purposes for fiscal 2013 from the expected return rate of 8.25% that was used in fiscal year 2012.

The Company has adopted an investment policy which is periodically reviewed and updated. The primary objective of the investment policy is to maximize the funded status of the pension plan based on a long-term investment horizon. The Company's long-term strategic investment objectives take into consideration a number of factors, including the funded status of the plan, the plan's projected liquidity needs, the demographics of the plan's participants, and a consideration of the probability and duration of investment losses weighted against the potential for long-term appreciation of assets.

The Company's investment policy also establishes asset allocation targets (guidelines) for each primary asset class. The asset allocation targets per the Company's most recently adopted investment policy statement are as follows:



Asset Class	Target Allocation
Equity	45% to 65%
Fixed income	15% to 30%
Alternative investments	20% to 40%
Cash	0% to 5%

Rapid unanticipated market shifts or changes in economic conditions may cause the asset mix to fall outside the target allocations. Generally these divergences should be of a short-term nature, and rebalancing may be necessary. Investments are diversified within asset classes with the intent of minimizing risk of large losses to the pension plan while maintaining liquidity sufficient to fund current benefit payments.

The U.S equity holdings portion of the portfolio consists primarily of equity securities or mutual funds of companies listed on registered exchanges or actively traded in the over-the-counter markets. International equity holdings consist primarily of equity securities of non-U.S. issuers purchased in foreign markets, on U.S. or foreign exchanges, or the over-the-counter markets. The strategy for equity holdings is to provide opportunities to earn higher rates of return than with fixed income investments, while minimizing concentrations of risk by investing in a diversified mix of companies and industries worldwide, with varying market capitalization levels, growth and value profiles, fund types, and fund managers.

Fixed income holdings include core fixed income securities rated investment grade or better, such as bonds and debentures issued by domestic and foreign private and governmental issuers, as well as high-yield fixed income securities rated below investment grade. The fixed income investment strategy includes longer term maturities which match longer duration pension liabilities, and also includes the higher yield alternatives which are shorter in duration and allow for higher potential returns. The emerging market debt portion of the portfolio consists primarily of debt securities rated below investment grade of government and corporate issuers in emerging market countries and of entities organized to restructure outstanding debt of such issuers. The primary strategy for investing in emerging market debt is to provide opportunities to earn higher returns than core fixed income.

Limited partnership holdings consist primarily of investments in hedge funds and private investment funds. The portfolio may be allocated across several hedge fund styles and strategies, and may include equity securities, debt securities, asset-backed securities, exchange-traded funds, and derivatives. Investments in limited partnerships provide opportunities to earn above market returns.

The fair values of pension plan assets as of December 29, 2013, follows:



	Balance as of		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Pension Plan Assets	December 29, 2013		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	3	$	3	$	—	$	—
Equity holdings:
U.S. large cap	21,273		21,273		—		—
U.S. small cap	7,216		7,216		—		—
U.S. blended cap	27,794		27,794		—		—
International equity	34,503		34,503		—		—
Total equity holdings	90,786		90,786		—		—
Fixed income holdings:
Core fixed income	13,654		—		13,654		—
Diversified short term debt	9,732		—		9,732		—
Emerging market debt	7,942		—		7,942		—
High yield debt	2,517		—		2,517		—
Total fixed income holdings	33,845		—		33,845		—
Multi asset class holdings	15,032		—		15,032		—
Limited partnership holdings	20,937		—		20,937		—
Total pension plan assets	$	160,603	$	90,789	$	69,814	$	—

The fair values of pension plan assets as of December 30, 2012, follows:



	Balance as of		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
Pension Plan Assets	December 30, 2012		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	—	$	—	$	—	$	—
Equity holdings:
U.S. large cap	43,759		43,759		—		—
U.S. small cap	4,087		4,087		—		—
International equity	25,185		25,185		—		—
Total equity holdings	73,031		73,031		—		—
Fixed income holdings:
Core fixed income	19,618		—		19,618		—
Emerging market debt	5,130		—		5,130		—
Total fixed income holdings	24,748		—		24,748		—
Limited partnership holdings	30,138		—		30,138		—
Total pension plan assets	$	127,917	$	73,031	$	54,886	$	—

Pension plan assets do not include any shares of Company common stock as of December 29, 2013, or at December 30, 2012.

The Company uses the market approach in determining the fair value of pension assets, which uses observable prices and other information generated by market transactions involving identical or comparable assets. Cash is valued at cost, which approximates fair value.

The valuation of level 1 assets reflects quoted closing market prices from the exchanges where the securities are actively traded.

Level 2 assets are valued using observable inputs for similar assets in active markets, or identical assets in inactive markets. Debt securities categorized as level 2 assets are generally valued based on independent broker/dealer bids, or by comparison to other debt securities having similar durations, yields, and credit ratings.

Level 3 assets are fund investments in private companies, and are typically valued using entity-specific inputs, including discounted cash flow analysis, earnings multiple approaches, recent transactions, volatilities, and other factors.

The fair value of the Company's pension plan investments in limited partnership holdings has been estimated using the net asset value per share of the investment as a practical expedient. Investments in limited partnerships were categorized as level 3 investments at January 1, 2012, due to lock-up provisions which prohibited the sale of the Company's interest in these investments for specified periods of time. These lockup provisions have since expired, and the investments in limited partnerships can now be redeemed at net asset value in the near term (within three to six months). As a result, the investments in limited partnerships were reclassified from level 3 assets at January 1, 2012, to level 2 assets at December 30, 2012.

The following table presents a reconciliation of the fair value measurements using significant unobservable inputs (Level 3) as of December 29, 2013, and December 30, 2012:



	December 29, 2013		December 30, 2012
Balance, beginning of period	$	—	$	28,911
Depreciation in the fair market value of plan assets	—		—
Reclassification of assets to level 2	—		(28,911		)
Balance, end of period	$	—	$	—

Expected future benefit payments under the pension plan by fiscal year are as follows:



Fiscal	Benefit
Year	Payment
2014	$	13,510
2015	13,199
2016	13,525
2017	13,405
2018	13,410
2019-2023	68,024

In addition to the pension plan, the Company maintains a defined contribution savings plan (“401k plan”) for eligible employees. Contributions made by the Company to the 401k plan during fiscal 2013 were $444. Contributions made by the Company to the 401k plan during fiscal 2012, transition period 2011, and fiscal 2011 were $449, $232, and $200, respectively.