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FAIR VALUE

6 Months Ended

Jun. 26, 2021

The Company has certain financial assets and liabilities recorded at fair value, which have been classified as Level 1, 2, or 3 within the fair value hierarchy:

•Level 1 - Fair values are determined utilizing prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access,

•Level 2 - Fair values are determined by utilizing quoted prices for identical or similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves, and foreign currency spot rates,

•Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The fair value hierarchy level is determined by asset and class based on the lowest level of significant input. The observability of inputs may change for certain assets or liabilities. This condition could cause an asset or liability to be reclassified between levels. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During the six months ended June 26, 2021 and June 27, 2020, there were no transfers between levels.

Valuation methodologies used for assets and liabilities measured or disclosed at fair value are as follows:

•Cash equivalents - Valued at market prices determined through third-party pricing services;

•Foreign currency forward contracts - Valued using market observable inputs, such as forward foreign exchange points and foreign exchanges rates;

•Life insurance policies - Valued at cash surrender value based on the fair value of underlying investments;

•Debt instruments - The book value of the Company’s term and revolving loans, which are variable rate loans carried at amortized cost, approximates the fair value based on current market pricing of similar debt. The book values of the Company’s Senior Notes, which are fixed rate debt, are carried at amortized cost. Fair values of the Senior Notes are based on quoted market prices and on borrowing rates available to the Company; and

•Contingent consideration - Valued based on a probability weighting of the future cash flows associated with the potential outcomes.

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	June 26, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents	$	—	$	1,592	$	—	$	1,592
Other assets:
Life insurance policies	—		40,652		—		40,652
Total assets measured at fair value	$	—	$	42,244	$	—	$	42,244

Other current liabilities measured at fair value:
Contingent consideration	$	—	$	—	$	23,531	$	23,531
Other long-term liabilities measured at fair value:
Contingent consideration	—		—		13,776		13,776
Total liabilities measured at fair value	$	—	$	—	$	37,307	$	37,307


	December 26, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents	$	—	$	2,273	$	—	$	2,273
Other assets:
Life insurance policies	—		35,770		—		35,770
Total assets measured at fair value	$	—	$	38,043	$	—	$	38,043

Other liabilities measured at fair value:
Contingent consideration	$	—	$	—	$	2,328	$	2,328
Total liabilities measured at fair value	$	—	$	—	$	2,328	$	2,328

Contingent Consideration

The following table provides a rollforward of the contingent consideration related to the Company’s business combinations. See Note 2, “Business Combinations.”


	Six Months Ended
	June 26, 2021		June 27, 2020
	(in thousands)
Beginning balance	$	2,328	$	712
Additions	37,983		2,131

Payments	(2,889)		(230)
Adjustment of previously recorded contingent liability	—		(468)
Foreign currency	(115)		(3)
Ending balance	$	37,307	$	2,142

The Company estimates the fair value of contingent consideration obligations through valuation models, such as probability-weighted and option pricing models, that incorporate probability adjusted assumptions and simulations related to the achievement of the milestones and the likelihood of making related payments. The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain financial targets, forecasted results or targets, volatility, discount rates, and risk-free rates. Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively.

Debt Instruments

The book value of the Company’s term and revolving loans, which are variable rate loans carried at amortized cost, approximates the fair value based on current market pricing of similar debt. As the fair value is based on significant other observable inputs, including current interest and foreign currency exchange rates, it is deemed to be Level 2 within the fair value hierarchy.

The book value of the Company’s Senior Notes are fixed rate obligations carried at amortized cost. Fair value is based on quoted market prices as well as borrowing rates available to the Company. As the fair value is based on significant other observable outputs, it is deemed to be Level 2 within the fair value hierarchy. The book value and fair value of the Company’s Senior Notes is summarized below:


	June 26, 2021				December 26, 2020
	Book Value		Fair Value		Book Value		Fair Value
5.5% Senior Notes due 2026	$	—	$	—	$	500,000	$	523,100
4.25% Senior Notes due 2028	500,000		516,850		500,000		523,750
3.75% Senior Notes due 2029	500,000		505,000		—		—
4.0% Senior Notes due 2031	500,000		515,000		—		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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