Note 19 - Fair Value Measurements

12 Months Ended

Feb. 03, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

19. Fair Value Measurements

We categorize our financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants exclusive of any transaction costs. Our financial assets recorded at fair value are categorized as follows:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Observable inputs other than quoted prices included within Level 1, including quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.

Level 3 - Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.

Our auction rate security, classified as available-for-sale, is recorded within Other assets on the Consolidated Balance Sheet and is recorded at fair value with gains and losses reported in Other (expense) income, net in our Consolidated Statements of Operations. The fair value of the auction rate security is determined by using quoted prices for similar instruments in active markets and accordingly is classified as a Level 2 instrument.

The fair value of the contingent consideration liability associated with the atmos acquisition is estimated using an option pricing model simulation that determines an average projected payment value across numerous iterations. See Note 1 for further details.

Our derivative financial instruments are valued using market-based inputs to valuation models. These valuation models require a variety of inputs, including contractual terms, market prices, yield curves, and measures of volatility and therefore are classified as Level 2 instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

($ in millions)	February 3, 2024						January 28, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Available-for-sale security	$	—	$	6	$	—	$	—	$	6	$	—
Foreign exchange forward contracts		—		1		—		—		—		—
Cross-currency swap contract		—		7		—		—		—		—
Total assets	$	—	$	14	$	—	$	—	$	6	$	—
Liabilities:
Contingent consideration	$	—	$	—	$	—	$	—	$	—	$	4
Cross-currency swap contract		—		—		—		—		3		—
Total liabilities	$	—	$	—	$	—	$	—	$	3	$	4

There were no transfers into or out of Level 1, Level 2, or Level 3 for any of the periods presented.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Assets and liabilities recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant and equipment, operating lease right-of-use assets, goodwill, other intangible assets, and minority investments that are not accounted for under the equity method of accounting. These assets are measured using Level 3 inputs, if determined to be impaired.

We have a minority investment that is accounted for using the fair value measurement alternative, which is at cost adjusted for changes in observable prices minus impairment under the practicability exception. During 2023, we recognized a $478 million non-cash impairment charge related to our investment, thereby reducing the carrying value to $134 million. We estimated the fair value using both a discounted cash flow approach and a market approach, which consider forecasted cash flows provided by the investee's management, as well as assumptions over discount rates, terminal values, and selected comparable companies.

As of February 3, 2024, cumulative impairments on our portfolio of minority investments, including the impairment of $478 million recorded during 2023, were $531 million.

Long-Term Debt

The fair value of long-term debt is determined by using model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets and therefore are classified as Level 2. ​

	February 3,		January 28,
($ in millions)	2024		2023
Carrying value (1)	$	395	$	395
Fair value	$	337	$	338

(1) The carrying value of debt for both periods reflected $5 million of issuer’s discount and costs related to 4% Notes due in 2029.

The carrying values of cash and cash equivalents, restricted cash, and other current receivables and payables approximate their fair value.