| Fair Value Measurements |
Note 4 - Fair Value Measurements The Company is required to categorize both financial and nonfinancial assets and liabilities based on the following fair value hierarchy. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable, and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor. • Level 1 - Quoted prices in active markets for identical assets or liabilities • - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including: ◦ quoted prices for similar assets or liabilities in active markets ◦ quoted prices for identical or similar assets in non-active markets ◦ inputs other than quoted prices that are observable for the asset or liability, and ◦ inputs derived principally from or corroborated by other observable market data • Level 3 - Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
The disclosure of fair value of certain financial assets and liabilities that are recorded at cost are as follows: Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable The carrying amount approximates fair value due to the short maturity of these instruments. Assets and Liabilities Measured at Fair Value on a Recurring Basis In accordance with the fair value hierarchy described above, the following table shows the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis as of August 29, 2026 and May 30, 2026 (in thousands):
Level 1 Level 2 Level 3 Balance Assets Municipal bonds $ — $ 6,270 $ — $ 6,270 — 19,225 — 19,225 — 457,652 — 457,652 — 2,738 — 2,738 US government and agency obligations — 135,226 — 135,226 — 32,939 — 32,939 Total assets measured at fair value $ — $ 654,050 $ — $ 654,050 Liabilities $ — $ — $ 19,000 $ 19,000 Total liabilities measured at fair value $ — $ — $ 19,000 $ 19,000
Level 1 Level 2 Level 3 Balance Assets Municipal bonds $ — $ 12,366 $ — $ 12,366 — 42,546 — 42,546 — 568,395 — 568,395 — 3,220 — 3,220 US government and agency obligations — 152,985 — 152,985 — 37,328 — 37,328 Total assets measured at fair value $ — $ 816,840 $ — $ 816,840 Liabilities $ — $ — $ 21,500 $ 21,500 Total liabilities measured at fair value $ — $ — $ 21,500 $ 21,500 Investment securities – available -for-sale are all classified as Level 2 and consist of securities with maturities of three months or longer when purchased. We classified these securities as current because amounts invested are readily available for current operations. Observable inputs for these securities are yields, credit risks, default rates, and volatility. Contingent consideration classified as Level 3 consists of the potential obligation to pay an earnout to Fassio Egg Farms, Inc. (“Fassio”) contingent on the acquired business meeting certain return on profitability milestones over a three-year commenced on the date of the acquisition in the second quarter of fiscal 2024. The fair value of the contingent consideration is estimated using a discounted cash flow model. Key assumptions and unobservable inputs that require significant judgment used in the estimate include weighted average cost of capital, egg prices, projected revenue and expenses over the period for which the contingent consideration is measured , and the probability assessments with respect to the likelihood of achieving the The following table shows the beginning and ending balances in fair value of the contingent consideration (in thousands):
Fassio Contingent Consideration $ 21,500 (2,500) $ 19,000 At August 29, 2026 , the contingent consideration is recorded within “Accrued expenses and other liabilities” in the condensed consolidated balance sheets. Adjustments to the fair value of contingent consideration are recorded within “Selling, general and administrative” expenses in the condensed consolidated statements of operations. |