Fair Value Measurements

3 Months Ended

May 04, 2013

Fair Value Measurements

4. Fair Value Measurements

ASC 820, Fair Value Measurement Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.

Financial Instruments

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs (i.e., projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of May 4, 2013 and April 28, 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis. These include cash equivalents and short-term investments.

In accordance with ASC 820, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of May 4, 2013 and April 28, 2012:

	Fair Value Measurements at May 4, 2013
(In thousands)	Carrying Amount		Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents:
Cash	$	302,188	$	302,188	$	—	$	—
Money-market		54,954		54,954		—		—
Commercial paper		20,000		20,000		—		—
Treasury bills		6,033		6,033		—		—
Total cash and cash equivalents	$	383,175	$	383,175	$	—	$	—
Short-term investments:
Treasury bills	$	103,144	$	103,144	$	—	$	—
Term-deposits		9,897		9,897		—		—
Total short-term investments	$	113,041	$	113,041	$	—	$	—
Total	$	496,216	$	496,216	$	—	$	—

	Fair Value Measurements at April 28, 2012
(In thousands)	Carrying Amount		Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents:
Cash	$	625,398	$	625,398	$	—	$	—
Money-market		51,915		51,915		—		—
Commercial paper		19,999		19,999		—		—
Treasury bills		16,131		16,131		—		—
Total cash and cash equivalents	$	713,443	$	713,443	$	—	$	—
Short-term investments:
State and local government ARS	$	5,500	$	—	$	—	$	5,500
Treasury bills		3,087		3,087		—		—
Total short-term investments	$	8,587	$	3,087	$	—	$	5,500
Total	$	722,030	$	716,530	$	—	$	5,500

The Company uses a discounted cash flow model to value its Level 3 investments. There were no Level 3 investments at May 4, 2013. At April 28, 2012, the assumptions in the Company’s model for Level 3 investments, included a recovery period of two months, a discount factor for yield of 0.1% and illiquidity of 0.5%. These assumptions are subjective. They are based on the Company’s current judgment and its view of current market conditions. The use of different reasonable assumptions would not result in a material change to the valuation.

As a result of the discounted cash flow analysis, no impairment loss was recorded for the 13 weeks ended April 28, 2012.

The reconciliation of the Company’s assets measured at fair value on a recurring basis using unobservable inputs (Level 3) for the 13 weeks ended April 28, 2012 is as follows:

	Level 3 (Unobservable inputs)
(In thousands)	Total		Auction-Rate Municipal Securities
Carrying value at January 28, 2012	$	5,500	$	5,500
Settlements		—		—
Balance at April 28, 2012	$	5,500	$	5,500

Non-Financial Assets

The Company’s non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required and the Company is required to evaluate the non-financial instrument for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the estimated fair value. As a result of the Company’s annual goodwill impairment test performed as of February 2, 2013, the Company concluded that its goodwill was not impaired.