Fair Value Measurements

3 Months Ended

May 31, 2014

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

        The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

• •

  Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

  •

  Level 2—Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

  •

  Level 3—Inputs to the valuation methodology are unobservable inputs based upon management's best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk.

Non-Financial Assets Measured on a Non-Recurring Basis

        Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 2 and Level 3 inputs as defined in the fair value hierarchy. The fair value of long-lived assets using Level 2 inputs is determined by evaluating the current economic conditions in the geographic area for similar use assets. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest (which is Level 1). The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. Significant increases or decreases in actual cash flows may result in valuation changes. During the thirteen week period ended May 31, 2014, long-lived assets from continuing operations with a carrying value of $358, primarily store assets, were written down to their fair value of $207, resulting in an impairment charge of $151. During the thirteen week period ended June 1, 2013, long-lived assets from continuing operations with a carrying value of $17,508, primarily store assets, were written down to their fair value of $12,907, resulting in an impairment charge of $4,601. If our actual future cash flows differ from our projections materially, certain stores that are either not impaired or partially impaired in the current period may be further impaired in future periods.

        The following table presents fair values for those assets measured at fair value on a non-recurring basis at May 31, 2014 and June 1, 2013:

Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total as of May 31, 2014
Long-lived assets held for use	$	—	$	—	$	207	$	207
Long-lived assets held for sale	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	207	$	207

	Level 1		Level 2		Level 3		Total as of June 1, 2013
Long-lived assets held for use	$	—	$	—	$	592	$	592
Long-lived assets held for sale	$	—	$	12,315	$	—	$	12,315
Total	$	—	$	12,315	$	592	$	12,907

        As of May 31, 2014 and June 1, 2013, the Company did not have any financial assets measured on a recurring basis.

Other Financial Instruments

        Financial instruments other than long-term indebtedness include cash and cash equivalents, accounts receivable and accounts payable. These instruments are recorded at book value, which we believe approximate their fair values due to their short term nature.

        The fair value for LIBOR-based borrowings under the Company's senior secured credit facility and first and second lien term loans are estimated based on the quoted market price of the financial instrument which is considered Level 1 of the fair value hierarchy. The fair values of substantially all of the Company's other long-term indebtedness are estimated based on quoted market prices of the financial instruments which are considered Level 1 of the fair value hierarchy. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $5,600,616 and $6,066,108, respectively, as of May 31, 2014. There were no outstanding derivative financial instruments as of May 31, 2014 and March 1, 2014.