Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.19.2
Fair Value Measurements
3 Months Ended
May 04, 2019
Fair Value Measurements  
FAIR VALUE MEASUREMENTS

14.  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

 

May 4, 2019—

 

 

    

 

 

    

 

 

    

 

 

    

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

1,864

 

$

 

$

1,864

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

14,803

 

$

 

$

14,803

 

May 5, 2018—

 

 

    

 

 

    

 

 

    

 

 

    

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

5,639

 

$

 

$

5,639

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

83

 

$

 

$

83

 

February 2, 2019—

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

3,074

 

$

 

$

3,074

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

$

 

$

9,307

 

$

 

$

9,307

 

At May 4, 2019, derivative financial instruments are comprised of (1) interest rate swap agreements to minimize our exposure to interest rate changes on our outstanding indebtedness, (2) 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 and (3) 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.

These derivative financial instruments are recorded in the condensed consolidated balance sheets at fair value based upon observable market inputs, primarily pricing models based on current market rates. Derivative financial instruments in an asset position are included within other current assets or other assets in the condensed consolidated balance sheets. Derivative financial instruments in a liability position are included within accrued expenses and other current liabilities or noncurrent liabilities in the condensed consolidated balance sheets. Please see Note 15 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, 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. 

 

During the three months ended May 4, 2019 and May 5, 2018, we incurred $0.2 million and $0.3 million of asset impairment charges, which is included within SG&A expenses in our condensed consolidated statement of earnings, related to underperforming stores.

 

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, which we classify as Level 3 within 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 our Term Loan and Senior Notes.  Management estimates that, as of May 4, 2019,  May 5, 2018, and February 2, 2019, the carrying value of our financial instruments, other than our Term Loan and Senior Notes, approximated their fair value due to the highly liquid or short-term nature of these instruments.  We believe that the borrowings under our ABL Facility approximate their fair value because interest rates are adjusted on a short-term basis.

 

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 a Level 1 input within the fair value hierarchy.  The table below shows the fair value and carrying value of our long-term debt, including current portion (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 4, 2019

 

May 5, 2018

 

February 2, 2019

 

 

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

Carrying

 

Estimated

 

 

    

Amount(1)

    

Fair Value

    

Amount(1)

    

Fair Value

    

Amount(1)

    

Fair Value

 

Term Loan and Senior Notes, including current portion

 

$

1,111,696

 

$

1,076,471

 

$

1,286,508

 

$

1,321,637

 

$

1,116,361

 

$

1,120,296

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The carrying value of the Term Loan and Senior Notes, including current portion is net of deferred financing costs of $3.0 million, $10.4 million and $3.2 million as of May 4, 2019, May 5, 2018 and February 2, 2019, respectively.