Ruth’s Hospitality Group, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 5 - Fair Value Measurements

Note 5 - Fair Value Measurements

12 Months Ended

Dec. 25, 2022

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

(5) Fair Value Measurements

Fair value is defined under FASB ASC Topic 820, Fair Value Measurements and Disclosures (Topic 820), as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. Topic 820 also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels of inputs are:

•	Level 1—quoted prices (unadjusted) for an identical asset or liability in an active market.

•	Level 2—quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

•	Level 3—unobservable and significant to the fair value measurement of the asset or liability.

The following were used to estimate the fair value of each class of financial instruments:

•	The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued expenses and other current liabilities are a reasonable estimate of their fair values due to their short duration.

•	Borrowings under the senior credit facility as of December 25, 2022 and December 26, 2021 have variable interest rates that reflect currently available terms and conditions for similar debt. The carrying amount of this debt is a reasonable estimate of its fair value (Level 2).

During fiscal year 2022, the Company determined that triggering events had occurred requiring an impairment evaluation of certain long-lived and inventory assets. In fiscal year 2022, the Company recorded a $574 thousand impairment charge at one restaurant location. In fiscal year 2021, the Company recorded $1.8 million of impairment losses related to long-lived assets at two restaurant locations and $88 thousand of impairment losses related to inventory at one closed restaurant. The impairments of long-lived assets were measured based on the amount by which the carrying amount of the assets exceeded fair value. Fair value was estimated based on the income approach utilizing market participant assumptions reflecting all available information as of the balance sheet date. The impairment losses are included in the loss on impairment caption in the accompanying condensed consolidated statement of operations. See Note 2(i) for a description of the valuation techniques used to measure fair value of long-lived assets, as well as information used to develop the inputs to the fair value measurements.

The Company’s non-financial assets measured at fair value on a non-recurring basis as of December 25, 2022 were as follows (in thousands):

		*Fair Value as of December 25, 2022*				*Significant Other Observable Inputs (Level 2)*				*Significant Unobservable Inputs (Level 3)*				*Total Losses on Impairment*
Long-lived assets		$	281			$	—			$	281			$	574

The Company’s non-financial assets measured at fair value on a non-recurring basis as of December 26, 2021 were as follows (in thousands):

		*Fair Value as of December 26, 2021*				*Significant Other Observable Inputs (Level 2)*				*Significant Unobservable Inputs (Level 3)*				*Total Losses on Impairment*
Long-lived assets		$	—			$	—			$	—			$	1,766