Fair Value Measurement

6 Months Ended

Jun. 30, 2020

Fair Value Measurement

Fair Value Measurement

(9) Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.

Level 1 Inputs based on quoted prices in active markets for identical assets.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the assets, either directly or indirectly.

Level 3 Inputs that are unobservable for the asset.

There were no transfers among levels within the fair value hierarchy during the 13 and 26 weeks ended June 30, 2020.

The following table presents the fair values for our financial assets and liabilities measured on a recurring basis:

	Fair Value Measurements
	Level	June 30, 2020		December 31, 2019
Deferred compensation plan—assets	1	$	45,542	$	44,623
Deferred compensation plan—liabilities	1		(45,473)		(44,679)

The Second Amended and Restated Deferred Compensation Plan of Texas Roadhouse Management Corp., as amended, (the "Deferred Compensation Plan") is a nonqualified deferred compensation plan which allows highly compensated employees to defer receipt of a portion of their compensation and contribute such amounts to one or more investment funds held in a rabbi trust. We report the amounts of the rabbi trust in other assets and the corresponding liability in other liabilities in our unaudited condensed consolidated financial statements. These investments are considered trading securities and are reported at fair value based on quoted market prices. The realized and unrealized holding gains and losses related to these investments, as well as the offsetting compensation expense, are recorded in general and administrative expense in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss).

The following table presents the fair value of our assets measured on a nonrecurring basis:

	Fair Value Measurements					Total gain (loss)
						13 Weeks Ended		26 Weeks Ended
		June 30,		December 31,		June 30,		June 30,
	Level	2020		2019		2020		2020
Long-lived assets held for use	1	$	—	$	1,684	$	—	$	—
Operating lease right-of-use assets	3	$	—	$	611	$	—	$	(501)
Investments in unconsolidated affiliates	3	$	2,000	$	—	$	—	$	(528)

Long-lived assets held for use include leasehold improvements for one restaurant that was subject to a forced relocation. This restaurant was relocated in February 2020 at which time the contractually negotiated amount for these assets was received.

Operating lease right-of-use assets include the lease related assets for one underperforming store that was permanently closed in April 2020 and one store that was relocated in February 2020. Both of these assets were reduced to a fair value of zero in Q1 2020. This resulted in a loss of $0.5 million which is included in impairment and closure, net in our unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) for the 26 weeks ended June 30, 2020. At December 31, 2019, operating lease right-of-use assets include the lease related assets for the underperforming store noted above.

Investments in unconsolidated affiliates include a 40% equity interest in a China joint venture that was reduced to fair value. This asset is valued using a Level 3 input, or the amount we expect to receive upon the sale of this investment. This resulted in a loss of $0.5 million which is included in equity income from investments in unconsolidated affiliates in our unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) for the 26 weeks ended June 30, 2020.

At June 30, 2020 and December 31, 2019, the fair values of cash and cash equivalents, accounts receivable and accounts payable approximated their carrying values based on the short-term nature of these instruments. At June 30, 2020, the fair value of our revolving credit facility approximated its carrying value since it is a variable rate credit facility (Level 2).