What is Hardees' definition of 'fair value' as it relates to financial instruments?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
aurants Acquisition (see Note 5). During fiscal 2025 and 2024, the CKE Securitization Entities paid total cash distributions of $144,118 and $133,746, respectively, to members.
NOTE 13 — FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents information on our financial instruments as of January 31, 2025 and 2024:
| _ | 20 | 25 | 2024 | | | | |-----------------------------------|--------------------|---------|------------|-------------------------|--|--| | | Carrying Amount | 0 | | Estimated Fair Value | | | | Financial liabilities: | _ | | | | | | | Series 2018-1 Class A-2-II Notes | | $ — | $ 329,928 | $ 315,044 | | | | Series 2018-1 Class A-2-III Notes | 232,031 | 227,297 | 234,366 | 222,070 | | | | Series 2020-1 Class A-2 Notes | 379,552 | 362,842 | 382,905 | 344,350 | | | | Series 2021-1 Class A-2 Notes | 171,186 | 154,454 | 172,625 | 146,543 | | | | Series 2024-1 Class A-2 Notes | 341,425 | 364,858 | _ | _ | | | The fair value of cash and cash equivalents and restricted cash and cash equivalents each approximate their respective carrying amounts due to the short maturity of the balances. The carrying amounts of notes receivable, net (both current and non-current) of related allowance for credit losses approximate fair value. The estimated fair values of our borrowings under the Class A-2 Notes were determined by obtaining estimated market prices from an investment banking firm as of the balance sheet dates.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Entities are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value based on the following fair value hierarchy:
Level 1 - Quoted prices in active markets for identical assets or liabilities;
- Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, also known as an exit price. This price is determined in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Hardees is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. This valuation is based on a hierarchy with three levels. Level 1 includes quoted prices in active markets for identical assets or liabilities. Level 2 includes observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 includes unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
For Hardees, non-financial long-lived assets, including 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, Hardees assesses these assets for impairment on a periodic basis, or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. When impairment has occurred, these long-lived assets are written down to fair value. The FDD references Note 16 for further information regarding impairment charges.