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FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2019

FAIR VALUE MEASUREMENTS

Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy:

Level 1 – Based on unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Based on observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 – Based on unobservable inputs that reflect the entity's own assumptions about the assumptions that a market participant would use in pricing the asset or liability.

We did not have any level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented.

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of December 31, 2019 and 2018:



	Assets (Liabilities)
	Level 1		Level 2		Level 3		Total
December 31, 2019:
Derivative Instruments:
Assets:
Foreign exchange contracts (1)	$	—	$	2,731	$	—	$	2,731
Interest rate swap agreements (2)	—		555		—		555
Deferred compensation derivatives (3)	—		2,557		—		2,557
Commodities futures and options (4)	9,080		—		—		9,080
Liabilities:
Foreign exchange contracts (1)	—		1,779		—		1,779
Commodities futures and options (4)	626		—		—		626
December 31, 2018:
Assets:
Foreign exchange contracts (1)	$	—	$	3,464	$	—	$	3,464
Commodities futures and options (4)	7,230		—		—		7,230
Liabilities:
Foreign exchange contracts (1)	—		969		—		969
Interest rate swap agreements (2)	—		4,832		—		4,832
Deferred compensation derivatives (3)	—		4,736		—		4,736
Commodities futures and options (4)	262		—		—		262

(1)

The fair value of foreign currency forward exchange contracts is the difference between the contract and current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences.


(2)	The fair value of interest rate swap agreements represents the difference in the present value of cash flows calculated at the contracted interest rates and at current market interest rates at the end of the period. We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same or similar financial instruments.


(3)	The fair value of deferred compensation derivatives is based on quoted prices for market interest rates and a broad market equity index.


(4)	The fair value of commodities futures and options contracts is based on quoted market prices.

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of December 31, 2019 and December 31, 2018 because of the relatively short maturity of these instruments.

The estimated fair value of our long-term debt is based on quoted market prices for similar debt issues and is, therefore, classified as Level 2 within the valuation hierarchy. The fair values and carrying values of long-term debt, including the current portion, were as follows:



	Fair Value				Carrying Value
At December 31,	2019		2018		2019		2018
Current portion of long-term debt	$	712,863	$	5,387	$	703,390	$	5,387
Long-term debt	3,656,540		3,228,877		3,530,813		3,254,280
Total	$	4,369,403	$	3,234,264	$	4,234,203	$	3,259,667

Other Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, GAAP requires that, under certain circumstances, we also record assets and liabilities at fair value on a nonrecurring basis.

2019 Activity

During 2019, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:



	2019
Customer relationship and trademark intangible assets (1)	$	100,131
Other long-lived assets not held for sale (2)	9,629
Adjustment to disposal group (3)	2,725
Long-lived and intangible asset impairment charges	$	112,485

(1)

During the fourth quarter of 2019, as discussed in Note 3, we recorded impairment charges to write down customer relationship and trademark intangible assets associated with Krave. These charges were determined by comparing the fair value of the asset group to its carrying value. We used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis and relief-from-royalty valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.


(2)	During 2019, we recorded impairment charges predominantly comprised of select long-lived assets that had not yet met the held for sale criteria. The fair value of these assets was supported by potential sales prices with third-party buyers and market analysis.


(3)	In connection with our disposal group classified as held for sale, as discussed in Note 8, during 2019, we recorded impairment charges to adjust long-lived asset values. The fair value of the disposal group was supported by potential sales prices with third-party buyers. We expect the sale of the disposal group to be completed in the first half of 2020.

In connection with the acquisition of ONE Brands in the third quarter of 2019, as discussed in Note 2, we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

2018 Activity

In connection with the acquisitions of Amplify in the first quarter of 2018 and Pirate Brands in the fourth quarter of 2018, as discussed in Note 2, we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty, and a form of the multi-period excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

In connection with disposal groups classified as held for sale, as discussed in Note 8, during 2018, we recorded impairment charges totaling $57,729 to adjust the long-lived asset values within certain disposal groups, including the SGM and Tyrrells businesses, the Lotte Shanghai Foods Co., Ltd. ("LSFC") joint venture and other assets. These charges represent the excess of the disposal groups' carrying values, including the related currency translation adjustment amounts realized or to be realized upon completion of the sales, over the sales values less costs to sell for the respective businesses. The fair values of the disposal groups were supported by the sales prices paid by third-party

buyers or estimated sales prices based on marketing of the disposal group, when the sale has not yet been completed. The sales of SGM and Tyrrells were both completed in July 2018.

2017 Activity

During the first quarter of 2017, as discussed in Note 9, we recorded impairment charges totaling $105,992 to write down distributor relationship and trademark intangible assets that had been recognized in connection with the 2014 SGM acquisition and wrote down property, plant and equipment by $102,720. These charges were determined by comparing the fair value of the assets to their carrying value. The fair value of the assets was derived using a combination of an estimated market liquidation approach and discounted cash flow analyses based on Level 3 inputs.