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Fair Value Measurements
6 Months Ended
May 01, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements
18
Fair Value Measurements
The company categorizes its assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Estimates of fair value for financial assets and financial liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value, and requires certain disclosures. The framework discusses valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flows), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities 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 reflecting management’s assumptions about the inputs used in pricing the asset or liability.
Recurring Fair Value Measurements
The company's derivative instruments consist of forward currency contracts that are measured at fair value on a recurring basis. The fair value of such forward currency contracts is determined based on observable market transactions of forward currency prices and spot currency rates as of the reporting date. There were no transfers between the levels of the fair value hierarchy during the three and six month periods ended May 1, 2020 and May 3, 2019, or the twelve months ended October 31, 2019.
The following tables present, by level within the fair value hierarchy, the company's financial assets and liabilities that are measured at fair value on a recurring basis as of May 1, 2020, May 3, 2019, and October 31, 2019, according to the valuation technique utilized to determine their fair values:
(Dollars in thousands)
 
 
 
Fair Value Measurements Using Inputs Considered as:
May 1, 2020
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Forward currency contracts
 
$
20,573

 
$

 
$
20,573

 
$

Total assets
 
$
20,573

 
$

 
$
20,573

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

Forward currency contracts
 
$
259

 
$

 
$
259

 
$

Total liabilities
 
$
259

 
$

 
$
259

 
$

(Dollars in thousands)
 
 
 
Fair Value Measurements Using Inputs Considered as:
May 3, 2019
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Forward currency contracts
 
$
12,861

 
$

 
$
12,861

 
$

Total assets
 
$
12,861

 
$

 
$
12,861

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Forward currency contracts
 
$
3

 
$

 
$
3

 
$

Total liabilities
 
$
3

 
$

 
$
3

 
$

(Dollars in thousands)
 
 
 
Fair Value Measurements Using Inputs Considered as:
October 31, 2019
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 

 
 

 
 

 
 

Forward currency contracts
 
$
10,898

 
$

 
$
10,898

 
$

Total assets
 
$
10,898

 
$

 
$
10,898

 
$

 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

Forward currency contracts
 
$
9

 
$

 
$
9

 
$

Total liabilities
 
$
9

 
$

 
$
9

 
$


Nonrecurring Fair Value Measurements
The company measures certain assets and liabilities at fair value on a nonrecurring basis. Assets and liabilities that are measured at fair value on a nonrecurring basis include long-lived assets, goodwill, and indefinite-lived intangible assets, which would generally be recorded at fair value as a result of an impairment charge. Assets acquired and liabilities assumed as part of business combinations are measured at fair value. For additional information on the company's business combinations and the related nonrecurring fair value measurement of the assets acquired and liabilities assumed, refer to Note 2, Business Combinations.
Other Fair Value Disclosures
The carrying amounts of the company's short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and short-term debt, including current maturities of long-term debt, when applicable, approximate their fair values due to their short-term nature.
As of May 1, 2020 and October 31, 2019, the company's long-term debt included $423.9 million of fixed-rate debt that is not subject to variable interest rate fluctuations. The fair value of such long-term debt is determined using Level 2 inputs by discounting the projected cash flows based on quoted market rates at which similar amounts of debt could currently be borrowed. As of May 1, 2020, the estimated fair value of long-term debt with fixed interest rates was $476.3 million compared to its carrying amount of $423.9 million. As of October 31, 2019, the estimated fair value of long-term debt with fixed interest rates was $493.8 million compared to its carrying amount of $423.9 million.