Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.19.1
FAIR VALUE MEASUREMENTS
3 Months Ended
May 04, 2019
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

2. FAIR VALUE MEASUREMENTS

 

As defined in Accounting Standards Codification (“ASC”) 820, Fair Value Measurements (“ASC 820”), fair value is 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. ASC 820 establishes a three-level valuation hierarchy for fair value measurements. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect less transparent active market data, as well as internal assumptions. These two types of inputs create the following fair value hierarchy:

 

·

Level 1—Quoted prices for identical instruments in active markets;

 

·

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and

 

·

Level 3—Instruments with significant unobservable inputs.

 

Impairment losses related to store-level operating lease assets and property and equipment are calculated using significant unobservable inputs including the present value of future cash flows expected to be generated using a risk-adjusted weighted-average cost of capital and comparable store sales growth assumptions and, therefore, are classified as a Level 3 measurement in the fair value hierarchy.

 

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximates their estimated fair values due to the short maturities of these instruments.

 

The table below provides the fair values of our senior secured term loan facility (“Amended and Restated Term Loan Credit Facility”), our 5.875% senior subordinated notes maturing in 2020 (“2020 Senior Subordinated Notes’’) and our interest rate swaps.

 

 

 

 

 

 

 

 

 

 

 

 

 

May 4,

 

February 2,

 

May 5,

 

 

2019

 

2019

 

2018

 

 

(in thousands)

Assets

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

 —

 

$

 —

 

$

1,106

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Term loan credit facility

 

$

2,187,467

 

$

2,177,098

 

$

2,237,256

Senior subordinated notes

 

 

511,275

 

 

511,913

 

 

518,925

Short-term portion of interest rate swaps

 

 

3,686

 

 

2,557

 

 

4,930

Long-term portion of interest rate swaps

 

 

5,408

 

 

3,809

 

 

 —

 

The fair values of our Amended and Restated Term Loan Credit Facility and our 2020 Senior Subordinated Notes were determined based on quoted market prices which are considered Level 1 inputs within the fair value hierarchy.

 

The fair value of our interest rate swaps was calculated using significant observable inputs including the present value of estimated future cash flows using the applicable interest rate curves and, therefore, were classified as Level 2 inputs within the fair value hierarchy. The short-term and long-term interest rate swap liabilities are recorded in accrued liabilities and other liabilities, respectively, in our consolidated balance sheets. The interest rate swap asset in fiscal 2018 is recorded in other assets  in our consolidated balance sheets.