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 measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a non-recurring basis, and certain financial assets and liabilities that

are not measured at fair value in our consolidated and combined balance sheets but the fair value is disclosed. 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


•	Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability


•	Level 3 - Unobservable inputs for the asset or liability

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

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

Derivative Contracts

Our derivatives at September 30, 2019 consist of five over-the-counter interest rate swap contracts which are not traded through an exchange. Accordingly, our interest rate swaps are classified as Level 2 instruments. We use widely accepted valuation tools to determine fair value, such as discounting cash flows to calculate a present value for the derivatives. These instruments are carried at fair value as of September 30, 2019. See Note 12 - Derivatives and Financial Instruments.

For the year ended December 29, 2018, we had derivative contracts that were deemed to be immaterial.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring basis primarily relate to property and equipment, right-of-use assets, intangible assets, and goodwill. We do not periodically adjust carrying value to fair value for these assets; rather, the carrying value of the asset is reduced to its fair value when we determine that impairment has occurred. At August 31, 2019, assets measured at fair value on a nonrecurring basis consisted of goodwill. The fair value measurement of goodwill was measured using third-party valuation models and was determined using both the market approach and income approach, which includes discounted expected cash flows. As the discounted cash flows include unobservable inputs that were significant to the fair value measurement, the fair value was classified as a Level 3 measurement within the fair value hierarchy. See Note 5 - Goodwill and Other Intangible Assets, Net.

Assets and Liabilities that are not Measured 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 Accrued expenses 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 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. See Note 11 - Debt.