FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 27, 2020

FAIR VALUE MEASUREMENTS

Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy:


Level 1 – Based on unadjusted quoted prices for identical assets or liabilities in an active market.
Level 2 – Based on observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 – Based on unobservable inputs that reflect the entity's own assumptions about the assumptions that a market participant would use in pricing the asset or liability.

We did not have any Level 3 financial assets or liabilities, nor were there any transfers between levels during the periods presented.

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of September 27, 2020 and December 31, 2019:


	Assets (Liabilities)
	Level 1		Level 2		Level 3		Total
September 27, 2020:
Derivative Instruments:
Assets:
Foreign exchange contracts (1)	$	—	$	3,367	$	—	$	3,367
Interest rate swap agreements (2)	—		5,098		—		5,098
Deferred compensation derivatives (3)	—		2,437		—		2,437
Commodities futures and options (4)	213		—		—		213
Liabilities:
Foreign exchange contracts (1)	—		860		—		860


Commodities futures and options (4)	7,286		—		—		7,286
December 31, 2019:
Assets:
Foreign exchange contracts (1)	$	—	$	2,731	$	—	$	2,731
Interest rate swap agreements (2)	—		555		—		555
Deferred compensation derivatives (3)	—		2,557		—		2,557
Commodities futures and options (4)	9,080		—		—		9,080
Liabilities:
Foreign exchange contracts (1)	—		1,779		—		1,779


Commodities futures and options (4)	626		—		—		626

(1)The fair value of foreign currency forward exchange contracts is the difference between the contract and current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts with similar terms, adjusted where necessary for maturity differences.

(2)The fair value of interest rate swap agreements represents the difference in the present value of cash flows calculated at the contracted interest rates and at current market interest rates at the end of the period. We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same or similar financial instruments.

(3)The fair value of deferred compensation derivatives is based on quoted prices for market interest rates and a broad market equity index.

(4)The fair value of commodities futures and options contracts is based on quoted market prices.

Other Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximated fair values as of September 27, 2020 and December 31, 2019 because of the relatively short maturity of these instruments.

The estimated fair value of our long-term debt is based on quoted market prices for similar debt issues and is, therefore, classified as Level 2 within the valuation hierarchy. The fair values and carrying values of long-term debt, including the current portion, were as follows:


	Fair Value				Carrying Value
	September 27, 2020		December 31, 2019		September 27, 2020		December 31, 2019
Current portion of long-term debt	$	799,470	$	712,863	$	788,328	$	703,390
Long-term debt	4,433,329		3,656,540		4,093,172		3,530,813
Total	$	5,232,799	$	4,369,403	$	4,881,500	$	4,234,203

Other Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, GAAP requires that, under certain circumstances, we also record assets and liabilities at fair value on a nonrecurring basis.

2020 Activity

During the first nine months ended September 27, 2020, we recorded the following impairment charges, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy:


	2020
Adjustment to disposal group (1)	$	6,200
Other asset write-down (2)	2,943
Long-lived asset impairment charges	$	9,143

(1)In connection with our disposal group classified as held for sale, as discussed in Note 8, during 2020, we recorded impairment charges to adjust long-lived asset values. The fair value of the disposal group was supported by potential sales prices with third-party buyers. We expect the sale of the disposal group to be completed during 2020.

(2)In connection with a previous sale, the Company wrote-down certain receivables deemed uncollectible.

2019 Activity

During the second quarter of 2019, we recorded impairment charges totaling $4,741. These charges were predominantly comprised of select long-lived assets that had not yet met the held for sale criteria.

In connection with the acquisition of ONE Brands in the third quarter of 2019, as discussed in Note 2, we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.