Fair Value Measurements

9 Months Ended

Sep. 27, 2022

Fair Value Measurements

Fair Value Measurements

(10) 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 39 weeks ended September 27, 2022.

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

	Fair Value Measurements
	Level	September 27, 2022		December 28, 2021
Deferred compensation plan—assets	1	$	59,153	$	67,512
Deferred compensation plan—liabilities	1	$	(58,969)	$	(67,431)

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 and comprehensive income.

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

	Fair Value Measurements					Total gain (loss)
						13 Weeks Ended				39 Weeks Ended
		September 27,		December 28,		September 27,		September 28,		September 27,		September 28,
	Level	2022		2021		2022		2021		2022		2021
Long-lived assets held for sale	3	$	—	$	1,175	$	—	$	—	$	690	$	(470)
Operating lease right-of-use assets	3	$	—	$	—	$	(314)	$	—	$	(654)	$	—
Investments in unconsolidated affiliates	3	$	—	$	—	$	—	$	—	$	—	$	(531)

Long-lived assets held for sale include land and building at a site that was relocated and had a carrying amount of $1.2 million as of December 28, 2021. These assets were included in prepaid expenses and other current assets in our consolidated balance sheet and were valued using a Level 3 input. These assets were sold during the 39 weeks ended September 27, 2022 and resulted in a gain of $0.7 million which is included in impairment and closure, net in our unaudited condensed consolidated statements of income and comprehensive income.

Operating lease right-of-use assets as of September 27, 2022 includes the lease related asset for one restaurant that was relocated and the lease related asset for one restaurant which is scheduled to be relocated in 2022. These assets were reduced to a fair value of zero in 2022. This resulted in a loss of $0.3 million and $0.7 million for the 13 and 39 weeks ended September 27, 2022, respectively, which is included in impairment and closure, net in our unaudited condensed consolidated statements of income and comprehensive income.

Investments in unconsolidated affiliates included a 40% equity interest in a joint venture in China which was fully impaired in late 2021. This asset was valued using a Level 3 input, or the amount we expected to receive upon the sale of this investment. This resulted in a loss of $0.5 million and is included in equity income from investments in unconsolidated affiliates in our unaudited condensed consolidated statements of income and comprehensive income for the 39 weeks ended September 28, 2021.

At September 27, 2022 and December 28, 2021, 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 September 27, 2022 and December 28, 2021, the fair value of our amended revolving credit facility approximated its carrying value since it is a variable rate credit facility (Level 2).