Fair Value Measurements

6 Months Ended

Jan. 31, 2020

Fair Value Measurements [Abstract]

Fair Value Measurements

4.          Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis at January 31, 2020 were as follows:

	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents*	$	34,401	$	—	$	—	$	34,401
Deferred compensation plan assets**								32,758
Total assets at fair value							$	67,159
Interest rate swap liability (see Note 7)	$	—	$	13,479	$	—	$	13,479
Total liabilities at fair value	$	—	$	13,479	$	—	$	13,479

The Company’s assets and liabilities measured at fair value on a recurring basis at August 2, 2019 were as follows:

	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents*	$	46	$	—	$	—	$	46
Deferred compensation plan assets**								30,593
Total assets at fair value							$	30,639
Interest rate swap liability (see Note 7)	$	—	$	10,483	$	—	$	10,483
Total liabilities at fair value	$	—	$	10,483	$	—	$	10,483

*Consists of money market fund investments.

**Represents plan assets invested in mutual funds established under a rabbi trust for the Company’s non-qualified savings plan and is included in the Condensed Consolidated Balance Sheets as other assets.

The Company’s money market fund investments are measured at fair value using quoted market prices.  The fair values of the Company’s interest rate swap liabilities are determined based on the present value of expected future cash flows.  Since the values of the Company’s interest rate swaps are based on the LIBOR forward curve, which is observable at commonly quoted intervals for the full terms of the swaps, it is considered a Level 2 input.  Non-performance risk is reflected in determining the fair value of the interest rate swaps by using the Company’s credit spread less the risk-free interest rate, both of which are observable at commonly quoted intervals for the terms of the swaps.  Thus, the adjustment for non-performance risk is also considered a Level 2 input.  The Company’s deferred compensation plan assets are measured based on net asset value per share as a practical expedient to estimate fair value.

The fair values of the Company’s accounts receivable and accounts payable approximate their carrying amounts because of their short duration.  The fair value of the Company’s variable rate debt, based on quoted market prices, which are considered Level 1 inputs, approximates its carrying amount at January 31, 2020 and August 2, 2019.

Assets Measured at Fair Value on a Nonrecurring Basis

As part of the Company’s acquisition of MSBC effective October 10, 2019, the Company recorded MSBC’s property and equipment and the MSBC tradename at fair value.  The remaining identifiable assets and liabilities acquired were recorded at carrying value, which approximated their fair value at October 10, 2019.  Additionally, goodwill was recorded as the excess of fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired.  The fair value of MSBC’s property and equipment, tradename and the related goodwill are considered Level 3 inputs.  The valuation method used by the Company depends on the type of asset and the availability of data.

The Company’s assets measured at fair value on a nonrecurring basis as of October 10, 2019 were as follows:

	Level 1		Level 2		Level 3		Total Fair Value
Property and equipment	$	—	$	—	$	13,580	$	13,580
Tradename*		—		—		19,460		19,460
Goodwill		—		—		6,364		6,364
Total	$	—	$	—	$	39,404	$	39,404

*Included in the Condensed Consolidated Balance Sheets as other assets.

As noted in Note 2 above, the amounts recorded for these assets are estimated.  See Note 2 for further information in regards to the determination of goodwill.

The fair value of the property and equipment was determined by using the cost approach.  Assumptions used in the cost method included estimates of replacement costs for similar property and equipment.   Replacement cost was estimated to be approximately $500 per MSBC store.

The fair value of MSBC’s tradename was determined by using the present value of estimated cash flows from comparable industry royalty rates for MSBC’s estimated future revenue streams.  Assumptions used under this approach included an approximate 2.5% royalty rate and a discount rate of 12.0%.