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Fair Value Measurements
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12 Months Ended | ||||||||||||
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Dec. 28, 2014
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| 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:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying amounts of the Company’s cash and cash equivalents, accounts receivables, and accounts payables approximate fair value due to the short term nature or maturity of the instruments.
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.
The Company maintains a rabbi trust to fund obligations under a deferred compensation plan. See Note 17, 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 fair value of the investments in the rabbi trust was $5.7 million and $3.8 million as of December 28, 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.
Other than as disclosed in Note 3, Acquisitions of Red Robin Franchised Restaurants, as of December 28, 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 December 28, 2014 and December 29, 2013 was $138.5 million and $78.5 million. The fair value of the Company’s credit facility as of December 28, 2014 and December 29, 2013 was approximately $138.4 million and $78.4 million. There were $8.5 million of outstanding borrowings recorded for the Company’s capital leases as of December 28, 2014, which have an estimated fair value of $10.0 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.
Asset Impairment
The Company recorded impairment charges for three and four of its restaurants in 2014 and 2013. In addition, the Company recorded an impairment charge in fiscal year 2014 related to certain software in development. These assets are considered to be assets that are measured at fair value on a nonrecurring basis. The inputs used for the fair value measurement of the restaurants are considered Level 3. For further information refer to Note 4, Restaurant Impairment and Restaurant Closures.
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