FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2020

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

Accounting Standards Codification 820, Fair Value Measurements and Disclosures defines fair value as a market-based measurement that should be determined based on the assumptions that marketplace participants would use in pricing an asset or liability. As a basis for considering such assumptions, the standard establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:


Level 1 — observable inputs such as quoted prices in active markets for identical assets and liabilities;
Level 2 — observable inputs such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other inputs that are observable, or can be corroborated by observable market data; and
Level 3 — unobservable inputs for which there are little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of cash and cash equivalents, receivables, accounts payable, accrued liabilities and the Revolving Credit Facility approximate their respective fair values. Based on the interest rates currently available and their underlying risk, the carrying value of franchise notes receivable recorded in other long-term assets approximates its fair value.

The carrying value and estimated fair value of the forward contracts for the issuance of convertible preferred stock, the Term Loan Facility, net of discount, Notes (net of the equity component classified in stockholders' equity and discount) and the interest rate swaps were as follows:


	March 31, 2020						December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(in thousands)
Liabilities:
Tranche B-2 Term Loan	$	434,773	$	239,125	$	441,500	$	414,321
FILO Term Loan	273,898		231,786		266,814		265,851
Notes	156,427		148,606		154,675		148,488
Interest rate swaps	10,810		10,810		6,940		6,940

The fair values of the term loans were determined using the instruments' trading value in markets that are not active, which are considered Level 2 inputs. The fair value of the Notes was determined based on quoted market prices and bond terms and conditions, which are considered Level 2 inputs. The Company's interest rate

swaps are carried at fair value, which is based primarily on Level 2 inputs utilizing readily observable market data, such as LIBOR forward rates, for all substantial terms of the interest rate swap contracts and the assessment of nonperformance risk.

As described in Note 5, "Property, Plant and Equipment, Net," and Note 6, "Goodwill and Intangible Assets, Net," the Company recorded long-lived asset impairments during the three months ended March 31, 2020. This resulted in the following assets being measured at fair value on a non-recurring basis using Level 3 inputs:

•the indefinite-lived brand name intangible asset at March 31, 2020;

•goodwill at March 31, 2020 for the Health Store reporting unit;

•property and equipment and right-of-use assets at certain of the Company's stores at March 31, 2020;

•equity method investment in the Manufacturing JV at March 31, 2020.