Fair Value Of Financial Instruments

9 Months Ended

Nov. 05, 2012

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents information on our financial instruments as of:



	November 5, 2012				January 31, 2012
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	139,723	$	139,723	$	64,555	$	64,555
Notes receivable	—		118		1,696		2,050
Financial liabilities:
Bank indebtedness and other long-term debt, including current portion	465,301		548,049		523,641		599,027

The fair value of cash and cash equivalents approximates its carrying amount due to its short maturity. The estimated fair value of notes receivable was determined by discounting future cash flows using current rates at which similar loans might be made to borrowers with similar credit ratings. The estimated fair value of the Senior Secured Notes was determined by using estimated market prices of our outstanding Senior Secured Notes. For all other long-term debt, the estimated fair value was determined by discounting future cash flows using rates currently available to us for debt with similar terms and remaining maturities.

Our non-financial assets, which include long-lived assets, including goodwill, intangible assets and property and equipment, are reported at carrying value and are not required to be measured at fair value on a recurring basis. However, on a periodic basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable, we assess our long-lived assets for impairment. When impairment has occurred, such long‑lived assets are written down to fair value.

During the forty weeks ended November 5, 2012, we determined that the assets at two underperforming company-operated Carl's Jr. restaurants were impaired. As a result, property and equipment with a carrying value of $1,265 was written down to fair value, resulting in impairment charges of $1,195. Additionally, during the forty weeks ended November 5, 2012, we determined that a property leased to a Hardee's franchisee was impaired due to a highway project that will eliminate direct access to the property, rendering it unfit for retail purposes. As a result, property and equipment with a carrying value of $1,250 was written down to fair value, resulting in an impairment charge of $1,204. We impaired each of the assets down to their respective fair values using measurements with significant unobservable inputs (Level 3). These fair value estimates are based on the assumption of the highest and best use of the asset group, or individual asset, and generally include estimates of future cash flows, assumptions of future same-store sales, projected operating expenses, and/or broker estimates of value, when readily available or determinable. These impairment charges were recorded to facility action charges, net in our accompanying unaudited Condensed Consolidated Statements of Operations (see Note 10).

- Definition

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.

+ References

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+ Details

CKE RESTAURANTS INC 10-Q