Annual report pursuant to Section 13 and 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
12 Months Ended
Jan. 28, 2017
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

15.  FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three‑tier fair value hierarchy, categorizing the inputs used to measure fair value. The hierarchy can be described as follows: Level 1- observable inputs such as quoted prices in active markets; Level 2 - inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3- unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date 

 

 

 

 

 

 

Using

 

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

 

 

 

 

 

in Active

 

Significant

 

 

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

 

 

 

 

 

Identical

 

Observable

 

Unobservable

 

 

 

 

 

 

Instruments

 

Inputs

 

Inputs

 

 

 

 

(in thousands)

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

 

January 28, 2017—

 

 

    

 

 

    

 

 

    

 

 

    

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

460

 

$

 

$

460

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

2,413

 

$

 

$

2,413

 

January 30, 2016—

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

442

 

$

 

$

442

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

3,296

 

$

 

$

3,296

 

Derivative financial instruments are comprised of (1) foreign currency forward exchange contracts primarily entered into to minimize our foreign currency exposure related to forecasted purchases of certain inventories denominated in a currency different from the operating entity’s functional currency, (2) foreign currency forward exchange contracts primarily entered into to minimize our foreign currency exposure related to forecasted revenues from our UK operations denominated in a currency different from the UK’s functional currency and (3) an interest rate swap agreement to minimize our exposure to interest rate changes on our outstanding indebtedness. These derivative financial instruments are recorded in the consolidated balance sheets at fair value based upon observable market inputs. Derivative financial instruments in an asset position are included within other current assets in the consolidated balance sheets. Derivative financial instruments in a liability position are included within accrued expenses and other current liabilities or noncurrent liabilities in the consolidated balance sheets. See Note 16 for further information regarding our derivative instruments.

Assets and Liabilities that are Measured at Fair Value on a Non‑Recurring Basis

Long‑lived assets, such as property and equipment, goodwill and identifiable intangibles, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. As discussed in Note 1, during fiscal 2016 and 2015, we incurred $16.5 million and $27.5 million, respectively, of asset impairment charges related to our retail segment.  The estimated fair value of the impaired long-lived assets related to these stores was $0.9 million and $1.6 million as of January 28, 2017 and January 30, 2016, respectively.  We estimated the fair value of the long-lived assets based on an income approach using projected future cash flows discounted using a weighted-average cost of capital analysis that reflects current market conditions.    The fair values of long‑lived assets held‑for‑use are based on our own judgments about the assumptions that market participants would use in pricing the asset and on observable market data, when available. We classify these measurements as Level 3 within the fair value hierarchy.

In addition, during fiscal 2016, we recorded a $2.9 million impairment charge related to a long-lived asset reclassified as held for sale, which is included within asset impairment charges in our consolidated statement of earnings (loss).  We estimated the fair value of the asset held for sale, which is $2.1 million as of January 28, 2017, using market values for similar assets which would fall within Level 2 of the fair value hierarchy.

 

Fair Value of Financial Instruments

Our financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and other current liabilities and long-term debt. Management estimates that, as of January 28, 2017 and January 30, 2016, the carrying value of cash, accounts receivable, accounts payable and accrued expenses and other current liabilities approximated their fair value due to the highly liquid or short‑term nature of these instruments.

The fair values of our Term Loan were valued based upon observable market data provided by a third party for similar types of debt, which we classify as a Level 2 input within the fair value hierarchy.   The fair value of our Senior Notes is based on quoted prices in active markets, which we classify as Level 1 input within the fair value hierarchy.  The table below shows the fair value and carrying value of our long-term debt (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 28, 2017

 

January 30, 2016

 

 

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

 

 

Amount(1)

    

Fair Value

    

Amount(1)

    

Fair Value

 

Long-term debt, including current portion

 

$

1,595,529

 

$

1,556,200

 

$

1,655,924

 

$

1,410,651

 

(1) The carrying value of the long-term debt, including current portion is net of deferred financing costs of $22.1 million and $28.0 million as of January 28, 2017 and January 30, 2016, respectively.