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Fair Value Measurements
 12 Months Ended
Dec. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 8 – Fair Value Measurements

Financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable and long-term debt. The carrying amounts of cash and cash equivalents, accounts and notes receivable, and accounts payable approximate fair value because of the short-term maturities of these financial instruments. For discussion of the fair value measurements related to goodwill and long-lived asset impairment charges, refer to Note 5, Goodwill and Other Intangible Assets, and Note 6, Restructuring Charges and Asset Impairment. At December 30, 2017 and December 31, 2016, the book value and estimated fair value of the Company’s debt instruments, excluding debt financing costs, were as follows:

 

 

December 30,

 

 

December 31,

 

(In thousands)

2017

 

 

2016

 

Book value of debt instruments, excluding debt financing costs:

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt and capital lease obligations

$

 

9,196

 

 

$

 

17,424

 

Long-term debt and capital lease obligations

 

 

747,172

 

 

 

 

421,940

 

Total book value of debt instruments

 

 

756,368

 

 

 

 

439,364

 

Fair value of debt instruments, excluding debt financing costs

 

 

757,966

 

 

 

 

440,759

 

Excess of fair value over book value

$

 

1,598

 

 

$

 

1,395

 

 

The estimated fair value of debt is based on market quotes for instruments with similar terms and remaining maturities (Level 2 inputs and valuation techniques).

 

ASC 820 prioritizes the inputs to valuation techniques used to measure fair value into the following hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing.

Certain of the Company’s business combinations involve the potential for the receipt or payment of future contingent consideration upon the shortfall or achievement of various operating thresholds, respectively. The additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified EBITDA levels. An asset or liability is recorded for the estimated fair value of the contingent consideration at the acquisition date and is re-measured each reporting period, with changes in fair value recognized as income or expense within operating expenses in the consolidated statements of operations. The Company measures the asset and liability on a recurring basis using Level 3 inputs.

The fair value of contingent consideration is measured using a discounted cash flow model incorporating projected payment dates, discount rates, probabilities of payment, and projected EBITDA. Projected EBITDA amounts are based on initial deal model forecasts at the time of acquisition as well as the Company’s most recent internal operational budget, and include a probability weighted range of outcomes. Changes in projected EBITDA, probabilities of payment, discount rates, or projected payment dates may result in higher or lower fair value measurements. The recurring Level 3 fair value measurements of contingent consideration include the following significant unobservable inputs as of December 30, 2017:

 

Unobservable Input

Range

 

Discount rate

11.80%

 

Probability of payments

0% - 100%

 

Projected year(s) of payments

2017 - 2019

 

As of December 30, 2017, the fair value of contingent consideration receivable and payable associated with the Caito and BRT acquisition was $18.4 million and $3.4 million, respectively. The net receivable of $15 million was recorded in other assets, net in the consolidated balance sheets as there is a right of offset for the payable and receivable. Upon payment, the portion of the contingent consideration related to the acquisition date fair value is reported as a financing activity in the consolidated statements of cash flows. Amounts received or paid in excess of the acquisition date fair value are reported as an operating activity in the consolidated statements of cash flows.