Note 19. Fair Value of Financial Assets and Liabilities

3 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Note 19. Fair Value of Financial Assets and Liabilities

The fair values of substantially all of our financial instruments were measured using market or income approaches. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the fair values presented are not necessarily indicative of the amounts that could be realized in an actual current market exchange. The use of alternative market assumptions and/or estimation methodologies may have a material effect on the estimated fair value. The hierarchy for measuring fair value consists of Levels 1 through 3, which are described below.

• Level 1 – Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets.

• Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that may be considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Pricing evaluations generally reflect discounted expected future cash flows, which incorporate yield curves for instruments with similar characteristics, such as credit ratings, estimated durations and yields for other instruments of the issuer or entities in the same industry sector.

• Level 3 – Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities and we may be unable to corroborate the related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities.

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 which are classified within Level 1 of the fair value hierarchy.

Equity securities: The Company’s investments in equity securities are classified within Level 1 of the fair value hierarchy. 

Bonds: The Company’s investments in bonds are classified within Level 2 of the fair value hierarchy.

Non-qualified deferred compensation plan investments: The assets of the non-qualified plan are set up in a rabbi trust. They represent mutual funds and are classified within Level 1 of the fair value hierarchy.

Interest rate swaps: Interest rate swaps are marked to market each reporting period and are classified within Level 2 of the fair value hierarchy. Interest rate swaps at December 31, 2014, September 24, 2014 and September 25, 2013 represent the fair market value for Steak n Shake’s two interest rate swaps.

As of December 31, 2014, September 24, 2014 and September 25, 2013, the fair values of financial assets and liabilities were as follows.

	December 31, 2014
	Level 1	Level 2	Level 3	Total
Assets
Cash equivalents ................................................................................................................	$11,227	$        -	$    -	$ 11,227
Equity securities:
Insurance .......................................................................................................................	5,781	-	-	5,781
Bonds.................................................................................................................................	-	7,644	-	7,644
Non-qualified deferred
compensation plan investments......................................................................................	1,958	-	-	1,958
Total assets at fair value ...................................................................................................	$18,966	$  7,644	$    -	$ 26,610
Liabilities
Interest rate swaps ............................................................................................................	$        -	$     175	$    -	$      175
Total liabilities at fair value ..............................................................................................	$        -	$     175	$    -	$      175

	September 24, 2014				September 25, 2013
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Assets
Cash equivalents .......................................	$    348	$         -	$     -	$      348	$         -	$     -	$     -	$         -
Equity securities:
Restaurant/Retail ...................................	-	-	-	-	79,357	-	-	79,357
Insurance ..............................................	6,117	-	-	6,117	6,122	-	-	6,122
Bonds........................................................	-	18,008	-	18,008	-	-	-	-
Non-qualified deferred
compensation plan investments.............	1,633	-	-	1,633	1,169	-	-	1,169
Total assets at fair value ..........................	$ 8,098	$ 18,008	$     -	$ 26,106	$ 86,648	$     -	$     -	$ 86,648
Liabilities
Interest rate swaps ...................................	$       -	$      233	$     -	$      233	$         -	$  401	$     -	$      401
Total liabilities at fair value .....................	$       -	$      233	$     -	$      233	$         -	$  401	$     -	$      401

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

The Company did not record any impairment during the 2014 transition period. The Company recorded an impairment of $41 during the 2013 transition period. During fiscal years 2014, 2013 and 2012, the Company recorded impairments on long-lived assets of $1,433, $1,666 and $901, respectively. The fair value of the long-lived assets was determined based on Level 2 inputs using quoted prices for similar properties and quoted prices for the properties from brokers. The fair value of the assets impaired was not material for any of the applicable periods.

During fiscal year 2013, the Company recorded impairment on intangible assets of $1,244. The fair value was determined based on a discounted cash flow analysis which is a level 3 measurement. The fair value of the trade name was not material at impairment.