Fair Value of Financial Instruments

12 Months Ended

Dec. 27, 2020

The Company measures certain assets at fair value in accordance with current accounting standards. The fair value hierarchy consists of three levels: Level 1 fair values are valuations based on quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access; Level 2 fair values are those valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities; and Level 3 fair values are valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. There have been no transfers between levels within the fair value hierarchy.

Current accounting standards permit entities to choose to measure many financial instruments and certain other items at fair value and establish presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar assets and liabilities. The Company has elected the fair value option for certain investments using net asset value per share. During 2020, as part of its global cash management strategy, the Company liquidated these investments and received proceeds of $25,233 which is reflected in other investing activities within the Company’s consolidated statement of cash flows. At December 29, 2019, these investments totaled $25,518, and were included in prepaid expenses and other current assets in the consolidated balance sheets. The Company recorded net (losses) gains of $(295), $1,903 and $(180) on these investments in other (income) expense, net for the years ended December 27, 2020, December 29, 2019 and December 30, 2018, respectively, relating to the change in fair value of such investments.

At December 27, 2020 and December 29, 2019, the Company had the following assets and liabilities measured at fair value in its consolidated balance sheets (excluding assets for which the fair value is measured using net asset value per share):


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
December 27, 2020
Assets:
Available-for-sale securities	$	2,135	2,135	—	—
Derivatives	4,794		—	4,794	—
Total assets	$	6,929	2,135	4,794	—
Liabilities:
Derivatives	$	12,684	—	12,684	—
Option agreement	20,602		—	—	20,602
Total liabilities	$	33,286	—	12,684	20,602
December 29, 2019
Assets:
Available-for-sale securities	$	1,296	1,296	—	—
Derivatives	48,973		—	48,973	—
Total assets	$	50,269	1,296	48,973	—
Liabilities:
Derivatives	$	5,733	—	5,733	—
Option agreement	22,145		—	—	22,145
Total liabilities	$	27,878	—	5,733	22,145

Available-for-sale securities include equity securities of one company quoted on an active public market. The Company’s derivatives consist of foreign currency forward contracts. The Company uses current forward rates of the respective foreign currencies to measure the fair value of these contracts. The option agreement included in other liabilities at December 27, 2020 and December 29, 2019 is valued using an option pricing model based on the fair value of the related investment. Inputs used in the option pricing model include volatility and fair value of the underlying company which are considered unobservable inputs as they reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. The Company believes that this is the best information available for use in the fair value measurement. There were no changes in these valuation techniques during 2020.

The following is a reconciliation of the beginning and ending balances of the fair value measurements of the Company’s financial instruments which use significant unobservable inputs (Level 3):


	2020		2019
Balance at beginning of year	$	(22,145)	(23,440)
Net gains from change in fair value	1,543		1,295
Balance at end of year	$	(20,602)	(22,145)

- 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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