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Fair Value Measurements
9 Months Ended
Oct. 31, 2015
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
We determine fair value based on a three-level valuation hierarchy as described below. Fair value is defined as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. The three-level hierarchy of inputs used to determine fair value is as follows:
Level 1 – Quoted prices in active markets for identical assets and liabilities.
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs (i.e. projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, and certain cash equivalents, specifically money market accounts. The money market accounts are valued based on quoted market prices in active markets. The marketable securities are valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third party entities.
During the thirteen and thirty-nine weeks ended October 31, 2015 and November 1, 2014, we did not make any transfers between Level 1 and Level 2 financial assets. We conduct reviews on a quarterly basis to verify pricing, assess liquidity and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.
From time to time, we measure certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment. We estimate the fair value of our long-lived assets using company-specific assumptions which would fall within Level 3 of the fair value hierarchy.
Financial Assets
We have categorized our financial assets based on the priority of the inputs to the valuation technique for the instruments as follows:
 
 
October 31, 2015
 
January 31, 2015
(in thousands)
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
Money market securities
$
42,540

 
$

 
$

 
$
34,433

 
$

 
$

Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
Commercial paper

 
29,951

 

 

 
34,957

 



Impairment of Long-Lived Assets

An impairment is recorded on a long-lived asset used in operations whenever events or changes in circumstances indicate that the net carrying amounts for such asset may not be recoverable. Factors considered important that could result in an impairment review include, but are not limited to, significant under-performance relative to historical or planned operating results, significant changes in the manner of use of the assets or significant changes in our business strategies. An evaluation is performed using estimated undiscounted future cash flows from operating activities compared to the carrying value of related assets for the individual stores. If the undiscounted future cash flows are less than the carrying value, an impairment loss is recognized for the difference between the carrying value and the estimated fair value of the assets based on the discounted cash flows of the assets using a rate that approximates our weighted average cost of capital. With regard to retail store assets, which are comprised of leasehold improvements, fixtures and computer hardware and software, we consider the assets at each individual retail store to represent an asset group. In addition, we have considered the relevant valuation techniques that could be applied without undue cost and effort and have determined that the discounted estimated future cash flow approach provides the most relevant and reliable means by which to determine fair value in this circumstance.
At least quarterly, we assess whether events or changes in circumstances have occurred that potentially indicate the carrying value of long-lived assets may not be recoverable. Based on Level 3 inputs of historical operating performance, including sales trends, gross margin rates, current cash flows from operations and the projected outlook for each of our stores, we determined that six stores would not be able to generate sufficient cash flows over the remaining term of the related leases to recover our investment in the respective stores. As a result, we recorded non-cash impairment charges during the thirteen and thirty-nine weeks ended October 31, 2015 of approximately $1.4 million and $1.7 million, respectively, to write-down the carrying value of certain long-lived store assets to their estimated fair values. We did not record any impairment charges in the first nine months of fiscal 2014.

 
Thirteen Weeks Ended
 
Thirty-Nine Weeks Ended
 
October 31, 2015
 
October 31, 2015
 
($ in thousands)
Carrying value of assets tested for impairment
$4,208
 
$10,434
Carrying value of assets with impairment
$1,710
 
$2,355
Fair value of assets impaired
$355
 
$634
Number of stores tested for impairment
12
 
14
Number of stores with impairment
6
 
6