Fair Value Measurements

12 Months Ended

Dec. 29, 2019

Fair Value Measurements on a Recurring Basis - The following table summarizes the Company’s financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated:



	DECEMBER 29, 2019						DECEMBER 30, 2018
(dollars in thousands)	TOTAL		LEVEL 1		LEVEL 2		TOTAL		LEVEL 1		LEVEL 2
Assets:
Cash equivalents:
Fixed income funds	$	1,037	$	1,037	$	—	$	627	$	627	$	—
Money market funds	12,752		12,752		—		17,827		17,827		—
Other current assets, net:
Derivative instruments - interest rate swaps	—		—		—		765		—		765
Total asset recurring fair value measurements	$	13,789	$	13,789	$	—	$	19,219	$	18,454	$	765

Liabilities:
Accrued and other current liabilities:
Derivative instruments - interest rate swaps	$	7,174	$	—	$	7,174	$	1,393	$	—	$	1,393
Other long-term liabilities:
Derivative instruments - interest rate swaps	16,835		—		16,835		9,723		—		9,723
Total liability recurring fair value measurements	$	24,009	$	—	$	24,009	$	11,116	$	—	$	11,116

Fair value of each class of financial instrument is determined based on the following:



FINANCIAL INSTRUMENT		METHODS AND ASSUMPTIONS
Fixed income funds and Money market funds		Carrying value approximates fair value because maturities are less than three months.
Derivative instruments		The Company’s derivative instruments include interest rate swaps. Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. The Company also considers its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As of December 29, 2019 and December 30, 2018, the Company has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

Fair Value Measurements on a Nonrecurring Basis - Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to property, fixtures and equipment, operating lease right-of-use assets, goodwill and other intangible assets, which are remeasured when carrying value exceeds fair value. Carrying value after impairment approximates fair value. The following table summarizes the Company’s assets measured at fair value by hierarchy level on a nonrecurring basis, for the periods indicated:



	2019				2018				2017
(dollars in thousands)	CARRYING VALUE		TOTAL IMPAIRMENT		CARRYING VALUE		TOTAL IMPAIRMENT		CARRYING VALUE		TOTAL IMPAIRMENT
Assets held for sale (1)	$	2,049	$	315	$	8,590	$	5,276	$	870	$	467
Operating lease right-of-use assets (2)	6,597		4,284		—		—		—		—
Property, fixtures and equipment (3)	3,915		4,535		6,464		21,523		19,222		23,539
Other (4)	—		—		—		—		—		1,444
	$	12,561	$	9,134	$	15,054	$	26,799	$	20,092	$	25,450

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(1)	All assets are measured using third-party market appraisals or executed sales contracts (Level 2). Refer to Note 4 - Disposals for discussion of impairments related to Carrabba’s Italian Grill in 2018.


(2)	Carrying values for Operating lease right-of-use assets measured using Level 3 inputs to estimate fair value totaled $6.4 million for 2019. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate the fair value.

(3)

Carrying values for Property, fixtures and equipment measured using Level 3 inputs to estimate fair value totaled $1.6 million and $1.9 million for 2019 and 2018, respectively. Carrying values for Property, fixtures and equipment measured using level 2 inputs to estimate fair value totaled $2.3 million, $4.6 million and $19.2 million for 2019, 2018 and 2017, respectively. Third-party market appraisals (Level 2) and discounted cash flow models (Level 3) were used to estimate the fair value. Refer to Note 5 - Impairments and Exit Costs for a more detailed discussion of impairments.


(4)	Other primarily includes goodwill related to the Company’s China subsidiary within the international segment in 2017. All assets measured using market appraisals (Level 2) to estimate the fair value.

Fair Value of Financial Instruments - The Company’s non-derivative financial instruments as of December 29, 2019 and December 30, 2018 consist of cash equivalents, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts reported on its Consolidated Balance Sheets due to their short duration.

Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The following table includes the carrying value and fair value of the Company’s debt by hierarchy level as of the periods indicated:



	DECEMBER 29, 2019				DECEMBER 30, 2018
	CARRYING VALUE		FAIR VALUE		CARRYING VALUE		FAIR VALUE
(dollars in thousands)	CARRYING VALUE		LEVEL 2		CARRYING VALUE		LEVEL 2
Senior Secured Credit Facility:
Term loan A	$	450,000	$	450,563	$	475,000	$	464,906
Revolving credit facility	$	599,000	$	599,000	$	599,500	$	590,508

- 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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