FAIR VALUE MEASUREMENTS

12 Months Ended

Jan. 29, 2022

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

7. FAIR VALUE MEASUREMENTS

GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy defined in the standards are as follows:

Level 1 - Quoted prices are available in active markets for identical assets or liabilities;

Level 2 - Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable;

Level 3 - Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing an asset or liability.

For items carried at (or adjusted to) fair value in the consolidated financial statements, the following tables summarize the fair value of these instruments at January 29, 2022 and January 30, 2021:

January 29, 2022 Fair Value Measurements Using

	Quoted Prices in
	Active Markets
	for Identical
	Assets
	(Level 1)
Marketable Securities	$	1,054

January 30, 2021 Fair Value Measurements Using

	Quoted Prices in
	Active Markets		Significant
	for Identical		Unobservable
	Assets		Inputs
	(Level 1)		(Level 3)		Total
Marketable Securities	$	1,882	$	—	$	1,882
Other Investment		—		160		160
Total	$	1,882	$	160	$	2,042

Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of goodwill, other intangible assets, long-lived assets and in the valuation of store lease exit costs. The Company reviews goodwill and indefinite-lived intangible assets for impairment annually, during the fourth quarter of each fiscal year, and as circumstances indicate the possibility of impairment. See Note 2 for further discussion related to the Company’s carrying value of goodwill. Long-lived assets and store lease exit costs were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. See Note 1 for further discussion of the Company’s policies for impairments of long-lived assets and valuation of store lease exit costs. In 2021, long-lived assets with a carrying amount of $74 were written down to their fair value of $10, resulting in an impairment charge of $64. In 2020, long-lived assets with a carrying amount of $72 were written down to their fair value of $2, resulting in an impairment charge of $70.

Fair Value of Other Financial Instruments

Current and Long-term Debt

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence. If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at respective year-ends. At January 29, 2022, the fair value of total debt excluding obligation under finance leases was $13,189 compared to a carrying value of $11,745. At January 30, 2021, the fair value of total debt excluding obligation under finance leases was $14,680 compared to a carrying value of $12,410.

Contingent Consideration

As a result of the Home Chef merger, the Company recognized a contingent liability of $91 on the acquisition date. The contingent consideration was measured using unobservable (Level 3) inputs and was included in “Other long-term liabilities” within the Consolidated Balance Sheet. The Company estimated the fair value of the earnout liability by applying a Monte-Carlo simulation method using the Company’s projection of future operating results for both the online and offline businesses related to the Home Chef merger and the estimated probability of achievement of the earnout target metrics.  The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of the fair value of the earnout liability. The liability is remeasured to fair value using the Monte-Carlo simulation method at each reporting period, and the change in fair value, including accretion for the passage of time, is recognized in net earnings until the contingency is resolved. In 2020, the Company amended the contingent consideration agreement including the performance milestones to align with the Company’s current business strategies. In 2021 and 2020, the Company recorded adjustments to increase the contingent consideration liability for $66 and $189, respectively, in OG&A.

Cash and Temporary Cash Investments, Store Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Trade Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities

The carrying amounts of these items approximated fair value due to their short term nature.

Other Assets

The equity investment in Ocado Group plc is measured at fair value through net earnings. The fair value of all shares owned, which is measured using Level 1 inputs, was $987 and $1,808 as of January 29, 2022 and January 30, 2021, respectively, and is included in “Other assets” in the Company’s Consolidated Balance Sheets. The unrealized gain (loss) for this Level 1 investment was approximately ($821) and $1,032 for 2021 and 2020, respectively, and is included in “(Loss) Gain on investments” in the Company’s Consolidated Statements of Operations.

The Company held other equity investments without a readily determinable fair value. These investments are measured initially at cost and remeasured for observable price changes to fair value through net earnings. The value of these investments was $309 and $189 as of January 29, 2022 and January 30, 2021, respectively, and is included in “Other assets” in the Company’s Consolidated Balance Sheets.  During 2020, certain of these investments with a carrying value of $87 were remeasured to their fair value of $160, resulting in an unrealized gain of $73.  The gain was measured using Level 3 inputs and is included in “(Loss) Gain on investments” in the Company’s Consolidated Statements of Operations.  There were no observable price changes or impairments for these investments during 2021, and as such, they are excluded from the fair value measurements table above for January 29, 2022.

The following table presents the Company’s remaining other assets as of January 29, 2022 and January 30 2021:

	January 29, 2022		January 30, 2021
Other Assets
Equity method and other long-term investments	$	282	$	250
Notes receivable		191		240
Prepaid deposits under certain contractual arrangements		214		186
Implementation costs related to cloud computing arrangements		151		81
Funded asset status of pension plans		156		21
Other		120		129
Total	$	1,114	$	907