Fair Value Measurements
|12 Months Ended|
Dec. 30, 2021
|Fair Value Disclosures [Abstract]|
|Fair Value Measurements||Fair Value Measurements
As of December 30, 2021 and December 31, 2020, the Company had certain financial assets and liabilities on its Consolidated Balance Sheets that were required to be measured at fair value on a recurring or non-recurring basis. The estimated fair values of financial assets and liabilities such as cash and cash equivalents, receivables, prepaid expenses and other current assets, other assets, accounts payable, and accrued expenses and other current liabilities approximate their respective carrying values as reported within the Consolidated Balance Sheets. Refer to Note 1, “Summary of Significant Accounting Policies” and Note 5, “Intangible Assets” for a discussion of the valuation of goodwill and intangible assets, respectively. See Note 10, “Debt” for discussion of the fair value of the Company’s debt.
Recurring Fair Value Measurements
As of December 30, 2021, the contingent earn-out liability related to the Spartan acquisition, as described in Note 14, “Acquisition,” had an estimated fair value of $10.2 million (classified as level 3 within the fair value hierarchy), of which $2.5 million is included in accrued expenses and other current liabilities and the remaining $7.7 million is included in other liabilities within the Consolidated Balance Sheets. For the fiscal year ended December 30, 2021, a $1.1 million net increase in the fair value of the contingent earn-out liability was recognized in general and administrative expense within the Consolidated Statements of Operations and Comprehensive Income.
The Company determined the fair value of the contingent earn-out liability as of December 30, 2021 with assistance from a third-party valuation specialist using a Monte Carlo valuation method using significant unobservable inputs, including the following weighted-average assumptions: discount rate of 11.5%, Spartan revenue volatility of 29.0%, and Spartan EBITDA volatility of 55.0%.
The Company also has outstanding interest rate cap contracts that were valued primarily using level 2 inputs based on data readily observable in public markets. The Company's interest rate cap contracts were negotiated with counterparties without going through a public exchange. Accordingly, the Company's fair value assessments for these derivative contracts gave consideration to the risk of counterparty default (as well as the Company's own credit risk). As of December 30, 2021 and December 31, 2020, the total fair value of the Company's interest rate cap contracts was approximately $0.5 million and $0.1 million, respectively.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef