Fair Value

GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

We have certain financial assets and liabilities that are not measured at fair value in our consolidated and combined balance sheets but for which we disclose the fair value. Except for Redeemable non-controlling interests, we have no balance sheet items that are measured at fair value on a recurring basis. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:


•	Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

•

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly for indirectly. Level 2 inputs include 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, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3 Inputs that are unobservable for the asset or liability.

The following section describes the valuation methodologies that we used to measure different financial instruments at fair value:

Financial assets and liabilities

The carrying amounts reported on the consolidated and combined balance sheets for Cash and cash equivalents, Accounts receivable, Other receivables, Accounts payable, and other current liabilities approximate their fair value due to the short maturity of those instruments.

Investments in affiliates

There are no quoted market prices available for investments in affiliates; however, we believe the carrying amounts are a reasonable estimate of fair value.

Long-term debt

Our long-term debt is classified as a Level 2 instrument. The carrying amount of the term loan (see Note 11 - Debt) approximates fair value given its recent issuance and the underlying interest rate applied to such amounts outstanding is currently reset to market rate on a monthly basis.

Derivative contracts

As of June 30, 2019, we had no outstanding derivative contracts. For the year ended December 29, 2018, we had derivative contracts which were deemed to be immaterial. See Note 15 - Subsequent Events for further details on derivatives.

Redeemable non-controlling interests

Some minority equity owners in certain of our subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities at fair value based on third-party valuations. The primary factor affecting the fair value of redeemable non-controlling interests is expected earnings. If such earnings are not achieved, the value of the redeemable non-controlling interests might be impacted. The non-controlling interests subject to put options are adjusted to their estimated redemption amounts each reporting period with a corresponding adjustment to Additional paid-in capital. Reductions in the carrying amounts are subject to a “floor” amount that is equal to the fair value of the redeemable non-controlling interests at the time they were originally recorded. The recorded value of the redeemable non-controlling interests cannot go below the floor level. Redeemable non-controlling interests are classified as Level 3 instruments. See Note 7 - Redeemable Non-controlling Interests for further details on the changes in redeemable non-controlling interests.

There were no transfers between levels within the fair value hierarchy and no changes in valuation techniques during the three and six months ended June 30, 2019.