Fair Value

9 Months Ended

Nov. 02, 2019

Note 16 – Fair Value

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables provide a summary of the financial assets and liabilities that are measured at fair value as of November 2, 2019 and January 31, 2019:


Assets measured at fair value:	Fair value measurement at November 2 , 2019								Fair value measurement at January 31, 2019
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest Rate Swap Contract (included in Other Assets)	$	—	$	—	$	—	$	—	$	—	$	85	$	—	$	85

Total Assets	$	—	$	—	$	—	$	—	$	—	$	85	$	—	$	85


Liabilities measured at fair value:	Fair value measurement at November 2, 2019								Fair value measurement at January 31, 2019
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cross-Currency Interest Rate Swap Contract (included in Other Long-Term Liabilities)	$	—	$	329	$	—	$	329	$	—	$	600	$	—	$	600
Interest Rate Swap Contract (included in Other Long-Term Liabilities)		—		88		—		88		—		—		—		—
Earnout Liability (included in Other Long-Term Liabilities)		—		—		14		14		—		—		14		14

Total Liabilities	$	—	$	417	$	14	$	431	$	—	$	600	$	14	$	614

We use the market approach to measure fair value of our derivative instruments. Derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates and foreign exchange rates, and are classified as Level 2 because they are

over-the-counter

contracts with a bank counterparty that are not traded in an active market.

The fair value of the earnout liability incurred in connection with the Company’s acquisition of TrojanLabel was determined using the option approach methodology, which includes using significant inputs that are not observable in the market and therefore classified as Level 3. Key assumptions in estimating the fair value of the contingent consideration liability included (1) the estimated earnout targets over the next seven years, (2) the probability of success (achievement of the various contingent events) and (3) a risk-adjusted discount rate used to adjust the probability-weighted earnout payments to their present value. At each reporting period, the contingent consideration liability is recorded at its fair value with changes reflected in general and administrative expense in the condensed consolidated statements of operations. There was no change in the fair value of the earnout liability for the nine months ended November

, 2019.

Assets and Liabilities Not Recorded at Fair Value

The Company’s long-term debt, including the current portion of long-term debt not reflected in the financial statements at fair value, is reflected in the table below:


	November 2, 2019
	Fair Value Measurement								Carrying
(In thousands)	Level 1		Level 2		Level 3		Total		Value
Long-Term D ebt and related current maturities	$	—	$	—	$	14,545	$	14,545	$	14,244

	January 31, 2019
	Fair Value Measurement								Carrying
(In thousands)	Level 1		Level 2		Level 3		Total		Value
Long-Term D ebt and related current maturities	$	—	$	—	$	18,857	$	18,857	$	18,242

The fair value of the Company’s long-term debt, including the current portion, is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings and is classified as Level 3.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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