Fair Value Measurements

9 Months Ended

Oct. 28, 2017

Fair Value Measurements

Fair Value Measurements

13.  Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a three-tier fair value hierarchy, categorizing the inputs used to measure fair value.  The hierarchy can be described as follows:  Level 1- observable inputs such as quoted prices in active markets; Level 2- inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3- unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.  The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

	Fair Value Measurements at Reporting Date
	Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Total
October 28, 2017—
Assets:
Derivative financial instruments	$	—	$	235	$	—	$	235
Liabilities:
Derivative financial instruments	$	—	$	2,198	$	—	$	2,198
January 28, 2017—
Assets:
Derivative financial instruments	$	—	$	460	$	—	$	460
Liabilities:
Derivative financial instruments	$	—	$	2,413	$	—	$	2,413
October 29, 2016—
Assets:
Derivative financial instruments	$	—	$	753	$	—	$	753
Liabilities:
Derivative financial instruments	$	—	$	2,520	$	—	$	2,520

Derivative financial instruments are comprised of (1) foreign currency forward exchange contracts primarily entered into to minimize our foreign currency exposure related to forecasted purchases of certain inventories denominated in a currency different from the operating entity's functional currency, (2) foreign currency forward exchange contracts primarily entered into to minimize our foreign currency exposure related to forecasted revenues from our UK operations denominated in a currency different from the UK's functional currency and (3) interest rate swap agreements to minimize our exposure to interest rate changes on our outstanding indebtedness. These derivative financial instruments are recorded in the condensed consolidated balance sheets at fair value based upon observable market inputs. Derivative financial instruments in an asset position are included within other current assets in the condensed consolidated balance sheets. Derivative financial instruments in a liability position are included within accrued expenses and other current liabilities or noncurrent liabilities in the condensed consolidated balance sheets. See Note 14 for further information regarding our derivative instruments.

Assets and Liabilities that are Measured at Fair Value on a Non-Recurring Basis

Long-lived assets, such as property and equipment, goodwill and identifiable intangibles, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset. 

During the nine months ended October 28, 2017, we incurred $2.9 million of asset impairment charges, which is included within SG&A expenses in our condensed consolidated statement of earnings, primarily related to underperforming stores as well as long-lived assets related to our now-terminated tuxedo rental license agreement with Macy's.  We estimated the fair value of the long-lived assets based on an income approach using projected future cash flows discounted using a weighted-average cost of capital analysis that reflects current market conditions, which we classify as Level 3 within the fair value hierarchy.

Fair Value of Financial Instruments

Our financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and other current liabilities and long-term debt.  Management estimates that, as of October 28, 2017,  October 29, 2016, and January 28, 2017, the carrying value of our financial instruments, other than long-term debt, approximated their fair value due to the highly liquid or short-term nature of these instruments.

The fair values of our Term Loan were valued based upon observable market data provided by a third party for similar types of debt, which we classify as a Level 2 input within the fair value hierarchy.   The fair value of our Senior Notes is based on quoted prices in active markets, which we classify as a Level 1 input within the fair value hierarchy.  The table below shows the fair value and carrying value of our long-term debt, including current portion (in thousands):

	October 28, 2017				October 29, 2016				January 28, 2017
	Carrying		Estimated		Carrying		Estimated		Carrying		Estimated
	Amount(1)		Fair Value		Amount(1)		Fair Value		Amount(1)		Fair Value
Long-term debt, including current portion	$	1,476,485	$	1,461,283	$	1,595,873	$	1,556,661	$	1,595,529	$	1,556,200
(1) The carrying value of the long-term debt, including current portion is net of deferred financing costs of $17.0 million, $23.3 million and $22.1 million as of October 28, 2017, October 29, 2016 and January 28, 2017, respectively.