Fair value measurements

6 Months Ended

Jul. 29, 2017

Fair Value Disclosures [Abstract]

Fair value measurements

Fair value measurement

The estimated fair value of Signet’s financial instruments held or issued to finance Signet’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that Signet would realize upon disposition nor do they indicate Signet’s intent or ability to dispose of the financial instrument. Assets and liabilities that are carried at fair value are required to be classified and disclosed in one of the following three categories:

Level 1—quoted market prices in active markets for identical assets and liabilities

Level 2—observable market based inputs or unobservable inputs that are corroborated by market data

Level 3—unobservable inputs that are not corroborated by market data

Signet determines fair value based upon quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The methods Signet uses to determine fair value on an instrument-specific basis are detailed below:

	July 29, 2017								January 28, 2017								July 30, 2016
(in millions)	Carrying Value			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Carrying Value			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)			Carrying Value			Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)
Assets:
US Treasury securities	$	7.9		$	7.9	$	—		$	8.1		$	8.1	$	—		$	8.3		$	8.3	$	—
Corporate equity securities	4.1			4.1		—			3.8			3.8		—			3.6			3.6		—
Foreign currency contracts	0.5			—		0.5			3.2			—		3.2			2.8			—		2.8
Commodity contracts	1.4			—		1.4			—			—		—			4.0			—		4.0
Interest rate swaps	0.7					0.7			0.4			—		0.4			—			—		—
US government agency securities	5.3			—		5.3			4.4			—		4.4			4.3			—		4.3
Corporate bonds and notes	11.2			—		11.2			10.9			—		10.9			10.8			—		10.8
Total assets	$	31.1		$	12.0	$	19.1		$	30.8		$	11.9	$	18.9		$	33.8		$	11.9	$	21.9
Liabilities:
Foreign currency contracts	$	(1.1	)	$	—	$	(1.1	)	$	(0.2	)	$	—	$	(0.2	)	$	(0.1	)	$	—	$	(0.1	)
Commodity contracts	—			—		—			(3.4		)	—		(3.4		)	—			—		—
Interest rate swaps	—			—		—			—			—		—			(3.8		)	—		(3.8		)
Total liabilities	$	(1.1	)	$	—	$	(1.1	)	$	(3.6	)	$	—	$	(3.6	)	$	(3.9	)	$	—	$	(3.9	)

Investments in US Treasury securities and corporate equity securities are based on quoted market prices for identical instruments in active markets, and therefore were classified as Level 1 measurements in the fair value hierarchy. Investments in US government agency securities and corporate bonds and notes are based on quoted prices for similar instruments in active markets, and therefore were classified as Level 2 measurements in the fair value hierarchy. The fair value of derivative financial instruments has been determined based on market value equivalents at the balance sheet date, taking into account the current interest rate environment, foreign currency forward rates or commodity forward rates, and therefore were classified as Level 2 measurements in the fair value hierarchy. See Note 14 for additional information related to the Company’s derivatives.

The carrying amounts of cash and cash equivalents, accounts receivable, other receivables, accounts payable, accrued expenses, other liabilities, income taxes and the revolving credit facility approximate fair value because of the short-term maturity of these amounts.

The fair values of long-term debt instruments were determined using quoted market prices in inactive markets or discounted cash flows based upon current observable market interest rates and therefore were classified as Level 2 measurements in the fair value hierarchy. See Note 16 for classification between current and long-term debt. The carrying amount and fair value of outstanding debt at July 29, 2017, January 28, 2017 and July 30, 2016 were as follows:

	July 29, 2017				January 28, 2017				July 30, 2016
(in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt:
Senior notes (Level 2)	$	394.1	$	394.7	$	393.7	$	391.2	$	393.3	$	403.3
Securitization facility (Level 2)	599.8		600.0		599.7		600.0		599.5		600.0
Term loan (Level 2)	336.5		339.6		345.1		348.6		353.6		357.5
Capital lease obligations (Level 2)	—		—		—		—		0.1		0.1
Total	$	1,330.4	$	1,334.3	$	1,338.5	$	1,339.8	$	1,346.5	$	1,360.9

Financial instruments measured at fair value on a non-recurring basis

The portion of the Sterling Jewelers customer in-house finance receivables “held for sale” are recorded at the lower of cost (par) or fair value as disclosed in Note 3. The fair value of the accounts receivable held for sale has been determined based on a discounted cash flow model using estimates and assumptions regarding future in-house finance portfolio performance. This fair value estimate is primarily based on Level 3 inputs in the fair value hierarchy, including the discount rate, payment rate, credit losses, and finance charge income. Based on comparable market participant data, a discount rate of 13% has been utilized. Based on historical and expected portfolio performance, the following assumptions were utilized within the model:

– Monthly payment rate approximating 12%.

– Annual credit loss rate approximating 2%.

– Annual finance charge income approximating 15% of the underlying receivables.

The estimated fair value of accounts receivable held for sale approximated par. This value is solely derived from the contractual cash flows associated with our accounts receivable held for sale, does not encompass other terms or elements within our contract with Comenity and may not be representative of a gain or loss upon the consummation of the transaction. See Note 3 for additional information regarding the credit transaction entered into with Comenity on May 25, 2017.