15. Fair Value of Financial Assets and Liabilities

9 Months Ended

Jul. 04, 2012

Notes to Financial Statements

15. Fair Value of Financial Assets and Liabilities

Note 15. Fair Value of Financial Assets and Liabilities

The fair value framework as established in ASC paragraph 820-10-50-2 requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair values, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

• Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities.

• Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

• Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The following methods and assumptions were used to determine the fair value of each class of the following assets and liabilities recorded at fair value in the consolidated balance sheet.

Cash equivalents: Cash equivalents primarily consist of money market funds. Money market funds that are carried at fair value, based on quoted market prices, are classified within Level 1 of the fair value hierarchy. All other cash equivalents carried at fair value based on observable inputs for which a quoted market price is not available are classified within Level 2 of the fair value hierarchy. Consolidated affiliated partnerships did not hold cash equivalents on July 4, 2012 and September 28, 2011.

Equity securities: The Company’s investments in equity securities are carried at fair value, based on quoted market prices, and are classified within Level 1 of the fair value hierarchy. 

Non-qualified deferred compensation plan investments: The assets of the Company’s Non-Qualified Savings Plan are set up in a rabbi trust. They represent mutual funds that are carried at fair value, based on quoted market prices, and are classified within Level 1 of the fair value hierarchy.

Investment held by consolidated affiliated partnership: Investments of $193 as of July 4, 2012 and September 28, 2011 have been classified within Level 3 of the fair value hierarchy and represent a private security.

Investment derivatives and interest rate swaps: Investment derivatives and interest rate swaps are marked to market each reporting period with fair value based on readily available market quotes, and are classified within Level 2 of the fair value hierarchy. Interest rate swaps on July 4, 2012 and September 28, 2011 represent the mark to market adjustment for Steak n Shake’s interest rate swap.

The fair values of financial assets and liabilities were as follows:

	July 4, 2012										September 28, 2011
		Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3		Total
Assets
Cash equivalents	$	—	$	14,570	$	—	$	14,570	$	—		$	88,022	$	—	$	88,022
Equity securities:
Restaurant/Retail		244,276		—		—		244,276		89,971			—		—		89,971
Other		1,415		—		—		1,415		25,350			—		—		25,350
Equity securities held by consolidated affiliated partnerships:
Restaurant/Retail		10,435		—		—		10,435		7,677			—		—		7,677
Other		12,562		—		—		12,562		10,913			—		—		10,913
Non-qualified deferred compensation plan investments		811		—		—		811		546			—		—		546
Investment held by consolidated affiliated partnership		—		—		193		193		—			—		193		193
Total assets at fair value	$	269,499	$	14,570	$	193	$	284,262	$	134,457		$	88,022	$	193	$	222,672
Liabilities
Interest rate swaps	$	—	$	356	$	—	$	356	$	—		$	439	$	—	$	439

There were no changes in the valuation techniques used to measure fair values on a recurring basis.

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows:

	Forty Weeks Ended
		July 4,		July 6,
		2012		2011
Beginning of period balance	$	193	$	323
Sale of assets		—		(124	)
Loss included in earnings		—		(10	)
End of period balance	$	193	$	189

For the year-to-date period in fiscal year 2012, we had no significant fair value adjustments applicable to items that are subject to non-recurring fair value measurement after the initial measurement date.