Fair Value Measurements

Fair Value Measurements on a Recurring Basis

The Company invested $8.7 million and $11.9 million of its excess cash in fixed income and money market funds classified as Cash and cash equivalents or restricted cash in its Consolidated Balance Sheets as of March 30, 2014 and December 31, 2013, respectively, at a net value of 1:1 for each dollar invested. The fair value of the investments in these funds is determined by using quoted prices for identical assets in an active market. As a result, the Company has determined that the inputs used to value these investments fall within Level 1 of the fair value hierarchy.

The following tables present the Company’s fixed income and money market funds measured at fair value on a recurring basis as of March 30, 2014 and December 31, 2013, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):



	TOTAL MARCH 30, 2014		LEVEL 1		LEVEL 2		LEVEL 3
Assets:
Fixed income funds - cash equivalents	$	4,012	$	4,012	$	—	$	—
Money market funds - cash equivalents	4,553		4,553		—		—
Money market funds - restricted cash equivalents	110		110		—		—
Total recurring fair value measurements	$	8,675	$	8,675	$	—	$	—



	TOTAL DECEMBER 31, 2013		LEVEL 1		LEVEL 2		LEVEL 3
Assets:
Fixed income funds - cash equivalents	$	9,849	$	9,849	$	—	$	—
Money market funds - cash equivalents	1,988		1,988		—		—
Money market funds - restricted cash equivalents	68		68		—		—
Total recurring fair value measurements	$	11,905	$	11,905	$	—	$	—

In connection with the 2012 CMBS Loan, the Company entered into an interest rate cap with a notional amount of $48.7 million as a method to limit the volatility of the floating rate component of the first mortgage loan. This interest rate cap had a nominal fair market value at March 30, 2014 and December 31, 2013, respectively, and therefore was excluded from the applicable tables within this footnote.

Fair Value Measurements on a Nonrecurring Basis

In 2013, the Company completed an assessment of its restaurant base. As a result of this assessment, the Company decided to close 22 underperforming locations. In connection with this initiative, the Company incurred pre-tax asset impairment charges of approximately $18.7 million in the fourth quarter of 2013. During the thirteen weeks ended March 30, 2014, the Company recognized expenses of $4.9 million, which included direct costs associated with the restaurant closures and severance-related obligations, partially offset by the reversal of deferred rent liabilities.

The following table presents the components of these charges and the line item within the Consolidated Statement of Operations and Comprehensive Income in which each component was recognized during the thirteen weeks ended March 30, 2014 (in thousands):



DESCRIPTION	LOCATION OF CHARGE IN THE CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME	AMOUNT
Restaurant closure expenses	Provision for impaired assets and restaurant closings	$	5,972
Severance and other liabilities	General and administrative	1,035
Deferred rent liability write-off	Other restaurant operating	(2,078		)
		$	4,929

During the thirteen weeks ended March 30, 2014, the Company recorded $6.1 million of impairment and restaurant closing expenses as a result of the fair value measurement on a nonrecurring basis of its long-lived assets held and used, which were primarily comprised of $6.0 million in charges associated with the restaurant closure initiative discussed above.

The Company recorded $1.1 million of impairment charges as a result of the fair value measurement on a nonrecurring basis of its long-lived assets held and used during the three months ended March 31, 2013, primarily related to certain specifically identified restaurant locations that were closed or relocated. The impaired long-lived assets had $4.4 million of remaining fair value at March 31, 2013. Restaurant closure and related expenses of $0.8 million were recognized for the three months ended March 31, 2013. Impairment losses for long-lived assets held and used and restaurant closure expenses were recognized in Provision for impaired assets and restaurant closings in the Consolidated Statements of Operations and Comprehensive Income.

The following table presents losses related to the Company’s assets and liabilities that were measured at fair value on a nonrecurring basis during the three months ended March 31, 2013 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):



	MARCH 31, 2013
			REMAINING FAIR VALUE						THREE MONTHS ENDED MARCH 31, 2013
	CARRYING VALUE		LEVEL 1		LEVEL 2		LEVEL 3		TOTAL LOSSES
Long-lived assets held and used	$	4,434	$	—	$	3,383	$	1,051	$	1,082

The Company used a third-party market appraisal (Level 2) and discounted cash flow models (Level 3) to estimate the fair value of the long-lived assets included in the table above. Projected future cash flows, including discount rate and growth rate assumptions, are derived from current economic conditions, expectations of management and projected trends of current operating results.

The following table presents quantitative information related to the range of unobservable inputs used in the Company’s Level 3 fair value measurements for the impairment losses incurred for the three months ended March 31, 2013:



UNOBSERVABLE INPUT		THREE MONTHS ENDED MARCH 31, 2013
Weighted-average cost of capital		9.5%
Long-term growth rates		2.0%
Annual revenue growth rates (1)		2.4% - 3.0%

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(1)	Weighted average of the annual revenue growth rates unobservable input range was 2.6%.

Interim Disclosures about Fair Value of Financial Instruments

The Company’s non-derivative financial instruments at March 30, 2014 and December 31, 2013 consist of cash equivalents, restricted cash, accounts receivable, accounts payable and current and long-term debt. The fair values of cash equivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts reported in the Consolidated Balance Sheets due to their short duration.

The fair value of OSI’s senior secured term loan B facility is determined based on quoted market prices in inactive markets. The fair value of New PRP’s commercial mortgage-backed securities is based on assumptions derived from current conditions in the real estate and credit markets, changes in the underlying collateral and expectations of management. Fair value estimates for other notes payable are derived using a discounted cash flow approach. Discounted cash flow inputs primarily include cost of debt rates which are used to derive the present value factors for the determination of fair value. These inputs represent assumptions impacted by economic conditions and management expectations and may change in the future based on period-specific facts and circumstances.

The following tables include the carrying value and fair value of the Company’s financial instruments at March 30, 2014 and December 31, 2013 aggregated by the level in the fair value hierarchy in which those measurements fall (in thousands):



	MARCH 30, 2014
			FAIR VALUE
	CARRYING VALUE		LEVEL 1		LEVEL 2		LEVEL 3
Senior secured term loan B facility (1)	$	925,000	$	—	$	922,688	$	—
Mortgage loan (2)	309,612		—		—		319,103
First mezzanine loan (2)	85,862		—		—		85,862
Second mezzanine loan (2)	86,519		—		—		87,384
Other notes payable (1)	4,170		—		—		3,953



	DECEMBER 31, 2013
			FAIR VALUE
	CARRYING VALUE		LEVEL 1		LEVEL 2		LEVEL 3
Senior secured term loan B facility (1)	$	935,000	$	—	$	936,169	$	—
Mortgage loan (2)	311,644		—		—		318,787
First mezzanine loan (2)	86,131		—		—		86,131
Second mezzanine loan (2)	86,704		—		—		87,571
Other notes payable (1)	6,186		—		—		5,912

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(1)	Represents obligations of OSI.


(2)	Represents obligations of New PRP.