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FAIR VALUE

9 Months Ended

Sep. 28, 2019

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

FAIR VALUE

Fair Value Measurements—Certain acquisitions made by the Company require the payment of contingent amounts of purchase consideration. These payments are contingent on specified operating results being achieved in periods subsequent to the acquisition and will only be made if earn-out thresholds are achieved. Contingent consideration obligations are measured at fair value each reporting period. Any adjustments to fair value are recognized in earnings in the period identified.

The Company entered into interest rate derivatives on $200.0 million of its term loan borrowings to add stability to interest expense and to manage its exposure to interest rate movements. The interest rate derivative expired in September 2019. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and will be subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The fair value of contingent consideration and derivatives as of September 28, 2019 and December 29, 2018 was:



	September 28, 2019		December 29, 2018
Current portion of acquisition-related liabilities and Accrued expenses:
Contingent consideration	$	2,674	$	1,394
Cash flow hedges	—		—
Acquisition-related liabilities and Other noncurrent liabilities:
Contingent consideration	$	1,270	$	5,175
Cash flow hedges	—		—

The fair value of contingent consideration was based on unobservable, or Level 3, inputs, including projected probability-weighted cash payments and a 10.0% discount rate, which reflects a market discount rate. Changes in fair value may occur as a result of a change in actual or projected cash payments, the probability weightings applied by the Company to projected payments or a change in the discount rate. Significant increases or decreases in any of these inputs in isolation could result in a lower, or higher, fair value measurement. The fair value of the cash flow hedges is based on observable, or Level 2, inputs such as interest rates, bond yields and prices in inactive markets. There were no material valuation adjustments to contingent consideration or derivatives as of September 28, 2019 and September 29, 2018.

Financial Instruments—The Company’s financial instruments include debt and certain acquisition-related liabilities (deferred consideration and noncompete obligations). The carrying value and fair value of these financial instruments as of September 28, 2019 and December 29, 2018 was:



	September 28, 2019				December 29, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Level 2
Long-term debt(1)	$	1,914,189	$	1,873,745	$	1,777,722	$	1,828,159
Level 3
Current portion of deferred consideration and noncompete obligations(2)	31,724		31,724		32,876		32,876
Long term portion of deferred consideration and noncompete obligations(3)	39,392		39,392		44,293		44,293


(1)	$6.4 million were included in current portion of debt as of September 28, 2019 and December 29, 2018.


(2)	Included in current portion of acquisition-related liabilities on the consolidated balance sheets.


(3)	Included in acquisition-related liabilities on the consolidated balance sheets.

The fair value of debt was determined based on observable, or Level 2, inputs, such as interest rates, bond yields and quoted prices in inactive markets. The fair values of the deferred consideration and noncompete obligations were determined based on unobservable, or Level 3, inputs, including the cash payment terms in the purchase agreements and a discount rate reflecting the Company’s credit risk. The discount rate used is generally consistent with that used when the obligations were initially recorded.

Securities with a maturity of three months or less are considered cash equivalents and the fair value of these assets approximates their carrying value.

Summit Materials, LLC

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value

FAIR VALUE



	September 28, 2019		December 29, 2018
Current portion of acquisition-related liabilities and Accrued expenses:
Contingent consideration	$	2,674	$	1,394
Cash flow hedges	—		—
Acquisition-related liabilities and Other noncurrent liabilities:
Contingent consideration	$	1,270	$	5,175
Cash flow hedges	—		—



	September 28, 2019				December 29, 2018
	Fair Value		Carrying Value		Fair Value		Carrying Value
Level 2
Long-term debt(1)	$	1,914,189	$	1,873,745	$	1,777,722	$	1,828,159
Level 3
Current portion of deferred consideration and noncompete obligations(2)	29,224		29,224		30,376		30,376
Long term portion of deferred consideration and noncompete obligations(3)	37,375		37,375		40,179		40,179


(1)	$6.4 million were included in current portion of debt as of September 28, 2019 and December 29, 2018.


(2)	Included in current portion of acquisition-related liabilities on the consolidated balance sheets.


(3)	Included in acquisition-related liabilities on the consolidated balance sheets.

The fair value of debt was determined based on observable, or Level 2 inputs, such as interest rates, bond yields and quoted prices in inactive markets. The fair values of the deferred consideration and noncompete obligations were determined based on unobservable, or Level 3, inputs, including the cash payment terms in the purchase agreements and a discount rate reflecting the Company’s credit risk. The discount rate used is generally consistent with that used when the obligations were initially recorded.

Securities with a maturity of three months or less are considered cash equivalents and the fair value of these assets approximates their carrying value.

- 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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