Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.20.4
Fair Value Measurements
 12 Months Ended
Dec. 27, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Fair value measurements are made under a three-tier fair value hierarchy, which prioritizes the inputs used in the measuring of fair value:
Level 1:    Observable inputs that reflect unadjusted quote prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:    Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:    Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying amounts of the Company's cash and cash equivalents, accounts receivable, accounts payable, and current accrued expenses and other liabilities approximate fair value due to the short-term nature or maturity of the instruments.
The Company maintains a rabbi trust to fund obligations under a deferred compensation plan. See Note 16, Employee Benefit Programs. Amounts in the rabbi trust are invested in mutual funds, which are designated as trading securities and carried at fair value and are included in Other assets, net in the accompanying consolidated balance sheets. Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets). The value of the deferred compensation plan liability is dependent upon the fair value of the assets held in the rabbi trust and therefore is not measured at fair value.
The following tables present the Company's assets measured at fair value on a recurring basis as of December 27, 2020 and December 29, 2019 (in thousands):
December 27, 2020 Level 1 Level 2 Level 3
Assets:        
Investments in rabbi trust $ 6,740  $ 6,740  $ —  $ — 
Total assets measured at fair value $ 6,740  $ 6,740  $ —  $ — 
December 29, 2019 Level 1 Level 2 Level 3
Assets:
Investments in rabbi trust $ 7,337  $ 7,337  $ —  $ — 
Total assets measured at fair value $ 7,337  $ 7,337  $ —  $ — 
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, right of use assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired.
During 2020 and 2019, the Company measured non-financial assets for impairment using continuing and projected future cash flows, as discussed in Note 5, Other Charges, which were based on significant inputs not observable in the market and thus represented a level 3 fair value measurement.
Based on our 2020 and 2019 impairment analyses, we impaired long-lived assets at 40 and 29 Company-owned restaurants with carrying values of $67.3 million and $17.3 million. We determined the fair value of these long-lived assets in 2020 and 2019 to be $34.7 million and $2.2 million based on level 3 fair value measurements.
See Note 1, Description of Business and Summary of Significant Accounting Policies, for discussion of the first quarter 2020 nonrecurring fair value measurement of goodwill and related impairment charges.
Disclosures of Fair Value of Other Assets and Liabilities
The Company's liability under its credit facility is carried at historical cost in the accompanying consolidated balance sheets. Due to market interest rates decreasing during 2020, the Company determined the carrying value of the liability under its credit facility did not approximate fair value. The carrying value and fair value of the credit facility as of December 27, 2020 were $169.8 million and $172.6 million. As of December 29, 2019, the carrying value of the credit facility approximated fair value as the interest rate on the instrument approximated current market rates. The interest rate on the credit facility represents a level 2 fair value input.