Fair Value Measurements and Financial Instruments

6 Months Ended

Jul. 02, 2022

Fair value measurements and financial instruments

Fair Value Measurements and Financial Instruments

FASB ASC 820, “Fair Value Measurements and Disclosures" (“Topic 820”) defines fair value based on the price that would be received to sell an asset or the exit price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principal or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability.

Valuation Hierarchy--Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value. The hierarchy prioritizes the inputs into three broad levels:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2 inputs are observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Our assets and liabilities measured at fair value on a recurring basis at July 2, 2022 were as follows:


			Fair Value Measurements at July 2, 2022 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at July 2, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current	$	4,250	$	4,250	$	—	$	—
Certificates of deposits, noncurrent	9,609		9,609		—		—


Available-for-sale debt securities:
United States Government and agency securities	9,852		9,852		—		—
Corporate notes and bonds	276		276		—		—
Total available-for-sale debt securities	10,128		10,128		—		—

Marketable equity securities:
Mutual funds	15,658		15,658		—		—
Corporate stocks	2,184		2,184		—		—

Exchange traded funds	6,601		6,601		—		—

Total marketable equity securities	24,443		24,443		—		—

Liabilities:
Deferred compensation	$	4,726	$	—	$	4,726	$	—

Our assets and liabilities measured at fair value on a recurring basis at December 31, 2021 were as follows:


			Fair Value Measurements at December 31, 2021 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at December 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance
Certificates of deposits, current	$	4,250	$	4,250	$	—	$	—
Certificates of deposits, noncurrent	10,609		10,609		—		—


Available-for-sale debt securities:
United States Government and agency securities	3,230		3,230		—		—
Corporate notes and bonds	176		176		—		—
Total available-for-sale debt securities	3,406		3,406		—		—

Marketable equity securities:
Mutual funds	7,476		7,476		—		—
Corporate stocks	1,934		1,934		—		—

Exchange traded funds	1,976		1,976		—		—

Total marketable equity securities	11,386		11,386		—		—

Liabilities:
Deferred compensation	$	4,333	$	—	$	4,333	$	—

The assets invested for self-insurance are certificates of deposit, stocks, bonds, mutual funds and exchange traded funds--classified as Level 1--based on quoted market prices of the identical underlying securities in active markets. The estimated fair value of the deferred compensation--classified as Level 2--is based on the value of the Company's common shares, determined by independent valuation.

Fair Value of Financial Instruments--The fair values of our current financial assets and current liabilities, including cash, accounts receivable, accounts payable, and accrued expenses, among others, approximate their reported carrying values because of their short-term nature. Financial instruments classified as noncurrent assets and liabilities and their carrying values and fair values were as follows:


	July 2, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Available-for-sale debt securities	$	10,128	$	10,128	$	3,406	$	3,406
Marketable equity securities	24,443		24,443		11,386		11,386

Liabilities:
Revolving credit facility, noncurrent	$	105,677	$	105,677	$	46,832	$	46,832
Senior unsecured notes, noncurrent	75,000		75,462		75,000		78,432
Term loans, noncurrent	2,003		2,011		2,373		2,431
Total	$	182,680	$	183,150	$	124,205	$	127,695

The carrying value of our revolving credit facility approximates fair value--classified as Level 2--as the interest rates on the amounts outstanding are variable. The fair value of our senior unsecured notes and term loans--classified as Level 2--is determined based on expected future weighted-average interest rates with the same remaining maturities.

Market Risk--In the normal course of business, we are exposed to market risk related to changes in foreign currency exchange rates, changes in interest rates and changes in fuel prices. We do not hold or issue derivative financial instruments for trading or speculative purposes. In prior years, we have used derivative financial instruments to manage risk, in part, associated with changes in interest rates and changes in fuel prices. Presently, we are not engaged in any hedging or derivative activities.