Fair Value Measurements

3 Months Ended

Apr. 04, 2023

Fair Value Measurements

Fair Value Measurements

2.  Fair Value Measurements

Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:

● Level 1: Quoted prices in active markets for identical assets or liabilities

● Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities

● Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions

The following tables present the components and classification of our assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	April 4, 2023
	Level 1		Level 2		Level 3
Assets/(Liabilities)
Non-qualified deferred compensation assets	$	82,224	$	—	$	—
Non-qualified deferred compensation liabilities		(82,038)		—		—
Acquisition-related deferred consideration		—		(10,905)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(29,284)

	January 3, 2023
	Level 1		Level 2		Level 3
Assets/(Liabilities)
Non-qualified deferred compensation assets	$	78,542	$	—	$	—
Non-qualified deferred compensation liabilities		(78,286)		—		—
Acquisition-related deferred consideration		—		(10,751)		—
Acquisition-related contingent consideration and compensation liabilities		—		—		(28,565)

The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liabilities categorized as Level 3 (in thousands):

	Thirteen		Thirteen
	Weeks Ended		Weeks Ended
	April 4, 2023		March 29, 2022
Beginning balance	$	28,565	$	23,894
Payment		—		(7,187)
Change in fair value		719		486
Ending balance	$	29,284	$	17,193

The fair value of the acquisition-related contingent consideration and compensation liabilities was determined utilizing a Monte Carlo model based on estimated future revenues, margins and volatility factors, among other variables and estimates and has no minimum or maximum payment. The undiscounted range of outcomes per the Monte Carlo model utilized to determine the fair value of the acquisition-related contingent consideration and compensation liabilities at April 4, 2023 was $0 to $276.0 million. Results could change materially if different estimates and assumptions were used. During the first quarter of fiscal 2022, we made a payment of $7.2 million per the Fox Restaurant Concept LLC (“FRC”) acquisition agreement. Our corresponding fiscal 2023 payment of $13.0 million was made early in the second quarter.

The fair values of our cash and cash equivalents, accounts and other receivables, income taxes receivable, prepaid expenses, accounts payable, income taxes payable and other accrued liabilities approximate their carrying amounts due to their short duration.

As of April 4, 2023, we had $345.0 million aggregate principal amount of Notes outstanding. The estimated fair value of the Notes based on a market approach as of April 4, 2023 was approximately $286.4 million and was determined based on the estimated or actual bids and offers of the Notes in an over-the-counter market on the last business day of the reporting period. The decrease in the fair value of the Notes was primarily due to a decline in our stock price from the date of the issuance of the Notes. See Note 5 for further discussion of the Notes.