Fair Value Measurements

GAAP establishes a framework for using fair value to measure assets and liabilities, and expands disclosure about fair value measurements. Fair value measurements guidance applies whenever other authoritative accounting guidance requires or permits assets or liabilities to be measured at fair value.

GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value. These tiers include:


•	Level 1: Defined as observable inputs such as quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•

Level 2: Defined as pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures.


•	Level 3: Defined as pricing inputs that are unobservable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The fair values of the Company's cash and cash equivalents, restricted cash and cash equivalents, trade receivables and other receivables, net, and accounts payable approximate their carrying value due to their short duration. The carrying value of the Company's total credit facility debt, net of unamortized discounts and debt issue costs, at March 13, 2019 and August 29, 2018 was approximately $40.7 million and $39.3 million, respectively, which approximates fair value because the applicable interest rate is adjusted frequently based on short-term market rates (Level 2).

Recurring fair value measurements related to assets are presented below:

Fair Value
Measurement Using

March 13, 2019

Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Valuation Method

Recurring Fair Value - Assets

(In thousands)

Continuing Operations:

Derivative - Interest Rate Swap⁽¹⁾

—

(1) The Company terminated its interest rate swap in the first quarter of fiscal 2019 and received cash proceeds of approximately $0.3 million which is recorded in Other income.

Fair Value Measurement Using

March 14, 2018

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs

(Level 3)

Valuation Method

Recurring Fair Value - Assets

(In thousands)

Continuing Operations:

Derivative - Interest Rate Swap⁽¹⁾

361

—

361

—

Discounted Cash Flow

(1) The fair value of the interest rate swap is recorded in Other Assets on the company's Consolidated Balance Sheet.

Recurring fair value measurements related to liabilities are presented below:

Fair Value
Measurement Using

March 13, 2019

Quoted
Prices in
Active
Markets for
Identical
Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Valuation Method

Recurring Fair Value - Liabilities

(In thousands)

Continuing Operations:

TSR Performance Based Incentive Plan⁽¹⁾

—

Monte Carlo Simulation

(1) The fair value of the Company's 2017 Performance Based Incentive Plan liabilities was zero. See Note 13 to the Company's consolidated financial statements in this Form 10-Q for further discussion of Performance Based Incentive Plan.



			Fair Value Measurement Using
	March 14, 2018		Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Method
Recurring Fair Value - Liabilities			(In thousands)
Continuing Operations:
TSR Performance Based Incentive Plan⁽¹⁾	$	357	$	—	$	357	$	—	Monte Carlo Simulation
Total liabilities at Fair Value	$	357	$	—	$	357	$	—

(1) The fair value of the Company's 2016 and 2017 Performance Based Incentive Plan liabilities were approximately $0.2 million and $0.1 million, respectively, and is recorded in Other liabilities on the Company's Consolidated Balance Sheet. See Note 13 to the Company's consolidated financial statements in this Form 10-Q for further discussion of Performance Based Incentive Plan.

Non-recurring fair value measurements related to impaired property held for sale and property and equipment consisted of the following:



			Fair Value Measurement Using
	March 13, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Impairments⁽³⁾
Nonrecurring Fair Value Measurements			(In thousands)
Continuing Operations
Property held for sale⁽¹⁾	$	6,573	$	—	$	—	$	6,573	$	(62	)
Property and equipment related to company-owned restaurants⁽²⁾	704		—		—		704		(1,129		)
Total Nonrecurring Fair Value Measurements	$	7,277	$	—	$	—	$	7,277	$	(1,191	)

(1) In accordance with Subtopic 360-10, long-lived assets held for sale with a carrying value of approximately $6.6 million were written down to their fair value, less cost to sell, of approximately $6.6 million, resulting in an impairment charge of less than $0.1 million.

(2) In accordance with Subtopic 360-10, long-lived assets held and used with a carrying value of approximately $1.8 million were written down to their fair value of approximately $0.7 million, resulting in an impairment charge of approximately $1.1 million.

(3) Total impairments for continuing operations are included in Provision for asset impairments and restaurant closings in the Company's Consolidated Statement of Operations for the two quarters ended March 13, 2019.



			Fair Value Measurement Using
	March 14, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Impairments⁽⁴⁾
Nonrecurring Fair Value Measurements			(In thousands)
Continuing Operations
Property held for sale⁽¹⁾	$	2,331	$	—	$	—	$	2,331	$	(298	)
Property and equipment related to company-owned restaurants ⁽²⁾	1,519		—		—		1,519		(1,116		)
Goodwill ⁽³⁾	—		—		—		—		(273		)
Total Nonrecurring Fair Value Measurements	$	3,850	$	—	$	—	$	3,850	$	(1,687	)

(1) In accordance with Subtopic 360-10, long-lived assets held for sale with a carrying value of approximately $2.6 million were written down to their fair value, less costs to sell, of approximately $2.3 million, resulting in an impairment charge of approximately $0.3 million.

(2) In accordance with Subtopic 360-10, long-lived assets held and used with a carrying amount of approximately $2.6 million were written down to their fair value of approximately $1.5 million, resulting in an impairment charge of approximately $1.1 million.

(3) In accordance with Subtopic 350-20, goodwill with a carrying value of approximately $273 thousand was written down to zero, resulting in an impairment charge of approximately $273 thousand.

(4) Total impairments are included in Provision for asset impairments and restaurant closings in the Company's Consolidated Statement of Operations in the two quarters ended March 14, 2018.