Fair Value Measurements
|6 Months Ended
Jul. 13, 2014
|Fair Value Disclosures [Abstract]
|Fair Value Measurements
Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, and accounts payable 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. 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 condensed consolidated balance sheets. Fair market value of mutual funds is measured using level 1 inputs (quoted prices for identical assets in active markets). The fair value of the investments in the rabbi trust was $5.3 million and $3.8 million as of July 13, 2014 and December 29, 2013. The value of the deferred compensation plan liability is dependent upon the fair values of the assets held in the rabbi trust and therefore is not measured at fair value.
The derivative liability associated with the interest rate swap is considered to be a level 2 instrument. The interest rate swap is a standard cash flow hedge whose fair value is estimated using industry-standard valuation models. Such models project future cash flows and discount the future amounts to a present value using market-based observable inputs, including interest rate curves. See Note 9, Derivative and Other Comprehensive Income, for the discussion of the derivative liability.
Other than disclosed in Note 5, Acquisition of Red Robin Franchised Restaurants, as of July 13, 2014 and December 29, 2013, the Company had no financial assets or liabilities that were measured using level 3 inputs. The Company also had no non-financial assets or liabilities that were required to be measured on a recurring basis.
Disclosures of Fair Value of Other Assets and Liabilities
The Company’s liabilities under its credit facility and capital leases are carried at historical cost in the accompanying consolidated balance sheets. For disclosure purposes, the Company estimated the fair value of the credit facility and capital lease obligations using discounted cash flow analysis based on market rates obtained from independent third parties for similar types of debt. Both the credit facility and the Company’s capital lease obligations are considered to be level 2 instruments. The carrying value of the Company’s credit facility as of July 13, 2014 and December 29, 2013 was $127.5 million and $78.5 million. The fair value of the Company’s credit facility as of July 13, 2014 and December 29, 2013 was approximately$127.4 million and $78.4 million. There were $8.9 million of outstanding borrowings recorded for the Company’s capital leases as of July 13, 2014, which have an estimated fair value of $10.5 million. At December 29, 2013, the carrying amount of the Company’s capital lease obligations was $9.3 million and the fair value was $10.9 million.