Cracker Barrel 2011 Annual Report Download - page 43

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equity. is guidance affects only the presentation of compre-
hensive income and does not change the components of
comprehensive income. is guidance is effective for fiscal
years beginning aer December 15, 2011 on a retrospective
basis. e Company does not expect that the adoption of this
accounting guidance in the first quarter of 2013 will have a
significant impact on its Consolidated Financial Statements.
FAIR VALUE MEASUREMENTS
e Company’s assets and liabilities measured at fair value
on a recurring basis at July 29, 2011 were as follows:
Quoted Prices Significant
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Markets for Observable Unobservable as of
Identical Assets Inputs Inputs July 29,
(Level 1) (Level 2) (Level 3) 2011
Cash equivalents* $29,548 $ — $ — $29,548
Deferred
compensation
plan assets** 29,665 — — 29,665
Total assets at fair value $59,213 $ — $ — $59,213
Interest rate swap
liability (see Note 6) $ — $51,604 $ — $51,604
Total liabilities at
fair value $ — $51,604 $ — $51,604
e Company’s assets and liabilities measured at fair value
on a recurring basis at July 30, 2010 were as follows:
Quoted Prices Significant
JO "DUJWF0UIFS 4JHOJėDBOU 'BJS 7BMVF
Markets for Observable Unobservable as of
Identical Assets Inputs Inputs July 30,
(Level 1) (Level 2) (Level 3) 2010
Cash equivalents* $35,250 $ — $ — $35,250
Deferred
compensation
plan assets** 25,935 — — 25,935
Total assets at fair value $61,185 $ — $ — $61,185
Interest rate swap
liability (see Note 6) $ — $66,281 $ — $66,281
Total liabilities at
fair value $ — $66,281 $ — $66,281
**Consists of money market fund investments.
** Represents plan assets invested in mutual funds established under a
Rabbi Trust for the Company’s non-qualified savings plan and is included
in the Consolidated Balance Sheets as other assets (see Note 12).
e Company’s money market fund investments and
deferred compensation plan assets are measured at fair value
using quoted market prices. e fair value of the Company’s
interest rate swap liability is determined based on the present
value of expected future cash flows. Since the Company’s
interest rate swap values are based on the LIBOR forward
curve, which is observable at commonly quoted intervals for
the full terms of the swaps, it is considered a Level 2 input.
Nonperformance risk is reflected in determining the fair
value of the interest rate swaps by using the Company’s credit
spread less the risk-free interest rate, both of which are
observable at commonly quoted intervals for the terms of the
swaps. us, the adjustment for nonperformance risk is
also considered a Level 2 input.
Assets and Liabilities Measured at Fair Value
on a Nonrecurring Basis
During 2011, the Company recorded an impairment charge
of $1,044 on office space which it expects to sell within one
year. e fair value of the office space was determined to be
$1,000 based upon market comparables, which are
considered Level 2 inputs. Additionally, during 2011, one
leased store was determined to be impaired. Fair value of the
leased store was determined by using a cash flow model.
Assumptions used in the cash flow model included projected
annual revenue growth rates and projected cash flows, which
can be affected by economic conditions and management’s
expectations. e Company has determined that the majority
of the inputs used to value its long-lived assets held and used
are unobservable inputs, and thus, are considered Level 3
inputs. Based on its analysis, the Company reduced the leased
store’s carrying value to zero, resulting in an impairment
charge of $2,175.
During 2010, one leased store was also determined to be
impaired using the same methodology and Level 3 inputs as
described above. Based on its analysis, the Company reduced
the leased store’s carrying value to zero, resulting in an
impairment charge of $2,263. Additionally, during 2010, the
Company closed one owned store and recorded an impairment
charge of $409 for the amount that the store’s carrying value
exceeded its fair value of $270. Fair value was determined
based upon market comparables, which as discussed above
are considered Level 2 inputs. is closed store was sold in
2011. See Note 9 for further information on the impairment
of these long-lived assets.
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