Fair Value Measurements

9 Months Ended

Sep. 27, 2020

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques under the accounting guidance related to fair value measurements are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. These inputs are classified into the following hierarchy:

•Level 1 Inputs - Quoted prices for identical assets or liabilities in active markets.

•Level 2 Inputs - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•Level 3 Inputs - Pricing inputs are unobservable for the assets or liabilities and include situations where there is little, if any, market activity for the assets or liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:


	September 27, 2020				December 29, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Fair Value Measurements
Financial assets
Cash equivalents	$	75,062	$	75,062	$	114,992	$	114,992	Level 1
Other investments in equity securities (a)	—		—		639		1,649		Level 3

Financial liabilities
Series 2019-1 Class A-2-I Notes (b)	391,000		414,499		398,000		405,152		Level 2
Series 2019-1 Class A-2-II Notes (b)	439,875		477,792		447,750		459,136		Level 2
Series 2018-1 Class A-2-I Notes (b)	437,625		452,198		441,000		444,859		Level 2
Series 2018-1 Class A-2-II Notes (b)	461,938		491,641		465,500		475,718		Level 2
Series 2015-1 Class A-2-III Notes (b)	475,000		486,543		478,750		490,531		Level 2
Canadian revolving credit facility	4,108		4,108		—		—		Level 2
7% debentures, due in 2025 (b)	83,696		98,100		82,837		94,838		Level 2

_______________

(a)The fair values of our investments were not significant and were based on our review of information provided by the investment managers or investees, which was based on (1) valuations performed by the investment managers or investees, (2) quoted market or broker/dealer prices for similar investments and (3) quoted market or broker/dealer prices adjusted by the investment managers for legal or contractual restrictions, risk of nonperformance or lack of marketability, depending upon the underlying investments. In June 2020, the Company impaired a miscellaneous investment due to the deterioration in operating performance of the underlying assets. In July 2020, the Company sold its remaining interest in this investment.

(b)The fair values were based on quoted market prices in markets that are not considered active markets.

The carrying amounts of cash, accounts payable and accrued expenses approximate fair value due to the short-term nature of those items. The carrying amounts of accounts and notes receivable, net (both current and non-current) approximate fair value due to the effect of the related allowance for doubtful accounts. Our cash equivalents are the only financial assets measured and recorded at fair value on a recurring basis.

Non-Recurring Fair Value Measurements

Assets and liabilities remeasured to fair value on a non-recurring basis resulted in impairment that we have recorded to “Impairment of long-lived assets” in our condensed consolidated statements of operations.

Total impairment losses may reflect the impact of remeasuring long-lived assets held and used (including land, buildings, leasehold improvements, favorable lease assets and right-of-use assets) to fair value as a result of (1) declines in operating performance at Company-operated restaurants and (2) the Company’s decision to lease and/or sublease the land and/or buildings to franchisees in connection with the sale or anticipated sale of restaurants, including any subsequent lease modifications. The fair values of long-lived assets held and used presented in the tables below represent the remaining carrying value and were estimated based on either discounted cash flows of future anticipated lease and sublease income or discounted cash flows of future anticipated Company-operated restaurant performance.

Total impairment losses may also include the impact of remeasuring long-lived assets held for sale, which primarily include surplus properties. The fair values of long-lived assets held for sale presented in the tables below represent the remaining carrying value and were estimated based on current market values. See Note 11 for further information on impairment of our long-lived assets.


			Fair Value Measurements
	September 27, 2020		Level 1		Level 2		Level 3
Held and used	$	304	$	—	$	—	$	304
Held for sale	1,417		—		—		1,417
Total	$	1,721	$	—	$	—	$	1,721


			Fair Value Measurements
	December 29, 2019		Level 1		Level 2		Level 3
Held and used	$	3,582	$	—	$	—	$	3,582
Held for sale	988		—		—		988
Total	$	4,570	$	—	$	—	$	4,570

- 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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