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Fair Value Measurements | 6 Months Ended
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Oct. 27, 2018
Fair Value Measurements |
Fair Value Measurements | Note 15: Fair Value Measurements Accounting standards require that we put financial assets and liabilities into one of three categories based on the inputs we use to value them:
| · |  | Level 1 — Financial assets and liabilities the values of which are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.
| · |  | Level 2 — Financial assets and liabilities the values of which are based on quoted prices in markets that are not active or on model inputs that are observable for substantially the full term of the asset or liability.
| · |  | Level 3 — Financial assets and liabilities the values of which are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.
Accounting standards require that in making fair value measurements, we use observable market data when available. When inputs used to measure fair value fall within different levels of the hierarchy, we categorize the fair value measurement as being in the lowest level that is significant to the measurement. We recognize transfers between levels of the fair value hierarchy at the end of the reporting period in which they occur. In addition to assets and liabilities that we record at fair value on a recurring basis, we are required to record assets and liabilities at fair value on a non-recurring basis. We measure non-financial assets such as other intangible assets, goodwill, and other long-lived assets at fair value when there is an indicator of impairment, and we record them at fair value only when we recognize an impairment loss. The following table presents the fair value hierarchy for those assets we measured at fair value on a recurring basis at October 27, 2018, and April 28, 2018. There were no transfers into or out of Level 1, Level 2, or Level 3 for any of the periods presented.
At October 27, 2018 |  | Fair Value Measurements
(Unaudited, amounts in thousands) |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |  |
Marketable securities |  | $ | 969 |  | $ | 32,377 |  | $ | —
Held-to-maturity investments |  |  | 3,218 |  |  | — |  |  | —
Cost basis investments |  |  | — |  |  | — |  |  | 10,954
Total assets |  | $ | 4,187 |  | $ | 32,377 |  | $ | 10,954
Liabilities |  |  |  |  |  |  |  |  |
Contingent consideration liability |  | $ | — |  | $ | — |  | $ | 3,621
At April 28, 2018 |  | Fair Value Measurements
(Unaudited, amounts in thousands) |  | Level 1 |  | Level 2 |  | Level 3
Assets |  |  |  |  |  |  |  |  |
Marketable securities |  | $ | 1,141 |  | $ | 37,173 |  | $ | —
Held-to-maturity investments |  |  | 3,340 |  |  | — |  |  | —
Cost basis investment |  |  | — |  |  | — |  |  | 10,954
Total assets |  | $ | 4,481 |  | $ | 37,173 |  | $ | 10,954
Liabilities |  |  |  |  |  |  |  |  |
Contingent consideration liability |  | $ | — |  | $ | — |  | $ | 344
At October 27, 2018, and April 28, 2018, we held marketable securities intended to enhance returns on our cash and to fund future obligations of our non-qualified defined benefit retirement plan, as well as marketable securities to fund future obligations of our executive deferred compensation plan and our performance compensation retirement plan. We also held other fixed income and cost basis investments. The fair value measurements for our Level 1 and Level 2 securities are based on quoted prices in active markets, as well as through broker quotes and independent valuation providers, multiplied by the number of shares owned exclusive of any transaction costs. At October 27, 2018, our Level 3 investments included preferred shares of two privately-held companies, and a warrant to purchase common shares of one of these privately-held companies. Our Level 3 liability includes our contingent consideration liabilities on recent acquisitions. We estimated the provisional fair value of the $3.3 million contingent consideration liability for the acquisition of Joybird (see Note 2 for more information). The fair value of contingent consideration is based on future revenues and earnings in fiscal 2021 and fiscal 2023. The fair value was determined using a variation of the income approach, known as the real options method, whereby revenue and earnings was simulated over the earn-out periods in a risk-neutral framework using Geometric Brownian Motion. For each simulation path, the earn-out payments were calculated based on management’s probability estimates for achievement of the revenue and earnings milestones and then were discounted to the valuation date using a discount rate of 4.65% for the fiscal 2021 milestone and 5.05% for the fiscal 2023 milestone. We estimated the fair value of the remainder of our Level 3 contingent consideration liabilities using the present value of the probability-weighted future cash flows. There were no changes to the fair value of our Level 3 assets during the first six months of fiscal 2019. The following table is a reconciliation of our Level 3 liabilities recorded at fair value using significant unobservable inputs:
(Unaudited, amounts in thousands) |  | Level 3
Liabilities |  |  |
Balance at April 28, 2018 |  | $ | 344
Acquisitions |  |  | 3,300
Translation adjustment |  |  | (23)
Balance at October 27, 2018 |  | $ | 3,621
Our asset leveling presented above does not include certain marketable securities investments that are measured at fair value using net asset value per share under the practical expedient methodology. These investments are still included in the total fair value column of the table in our investment footnote (see Note 6). The fair value of the investments measured using net asset value at October 27, 2018, and April 28, 2018, was $6.8 million and $6.7 million, respectively.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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