Fair Value Measurements

9 Months Ended

Oct. 30, 2021

6. Fair Value Measurements

The Company accounts for fair value measurements in accordance with Topic No. 820, which defines fair value, establishes a framework for measurement and expands disclosure about fair value measurements. Topic No. 820 defines fair value 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 (exit price), and classifies the inputs used to measure fair value into the following hierarchy:

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

Level 2: Quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3: Pricing inputs that are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the assets and liabilities.

The inputs into the determination of fair value require significant management judgment or estimation.

The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.

Refer to Note 5, “Derivative Instruments and Hedging Activities,” for further discussion regarding the fair value of the Company’s interest rate swap contract.

Financial Assets

The fair values of the Company’s financial assets and the hierarchy of the level of inputs as of October 30, 2021, January 30, 2021 and October 31, 2020 are summarized below:


	(in thousands)
	Fair Value Measurements at
	October 30,		January 30,		October 31,
	2021		2021		2020
Level 1
Cash equivalents (including restricted cash)	$	701,607	$	1,001,475	$	1,001,416

Long-Lived Assets

Long-lived assets are measured at fair value on a non-recurring basis for purposes of calculating impairment using the fair value hierarchy of ASC 820. The fair value of the Company’s long-lived assets is generally calculated using discounted cash flows. During the three and nine months ended October 30, 2021, the Company recorded impairment charges of $1.5 million and $3.2 million, respectively, primarily related to declines in revenues and operating results at certain stores. These costs were recorded in the line item “Impairment charges – long-lived assets” in the Company’s Condensed Consolidated Statements of Income (Loss). The fixed assets related to these stores had a remaining fair value as of October 30, 2021 of $0.1 million, and would be categorized as Level 3 in the fair value hierarchy described above. During the three and nine months ended October 31, 2020, the Company recorded impairment charges of $2.6 million and $5.6 million, respectively, primarily related to declines in revenues and operating results for 10 stores and 14 stores, respectively.

Financial Liabilities

The fair values of the Company’s financial liabilities are summarized below:


	(in thousands)
	October 30, 2021				January 30, 2021				October 31, 2020
	Principal Amount		Fair Value		Principal Amount		Fair Value		Principal Amount		Fair Value
Term B-6 Loans	$	959,011	$	953,017	$	—	$	—	$	—	$	—
Term B-5 Loans		—		—		961,415		955,406		961,415		944,590
Convertible Notes		644,627		915,048		805,000		1,080,713		805,000		918,183
Secured Notes		—		—		300,000		320,625		300,000		314,625
ABL Line of Credit (a)		—		—		—		—		250,000		250,000
Total debt (b)	$	1,603,638	$	1,868,065	$	2,066,415	$	2,356,744	$	2,316,415	$	2,427,398

(a)

To the extent the Company has any outstanding borrowings under the ABL Line of Credit, the fair value would approximate its reported value, because the interest rate is variable and reflects current market rates, due to short term nature.

(b)

The table above excludes finance lease obligations, debt discount and deferred debt costs.

The fair values presented herein are based on pertinent information available to management as of the respective period end dates. The estimated fair values of the Company’s debt are classified as Level 2 in the fair value hierarchy, and are based on current market quotes received from inactive markets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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