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Fair Value Measurements
 12 Months Ended
Apr. 25, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements 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 April 25, 2020, and April 27, 2019. There were no transfers into or out of Level 1, Level 2, or Level 3 for any of the periods presented.

At April 25, 2020
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurements
(Amounts in thousands)
 
Level 1
 
Level 2
 
Level 3
 
NAV(1)
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Marketable securities
 
$
—

 
$
31,691

 
$
—

 
$
6,515

 
$
38,206

Held-to-maturity investments
 
3,337

 
—

 
—

 
—

 
3,337

Cost basis investments
 
—

 
—

 
6,479

 
—

 
6,479

Total assets
 
$
3,337

 
$
31,691

 
$
6,479

 
$
6,515

 
$
48,022

At April 27, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Measurements
(Amounts in thousands)
 
Level 1
 
Level 2
 
Level 3
 
NAV(1)
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
Marketable securities
 
$
5

 
$
34,390

 
$
—

 
$
7,706

 
$
42,101

Held-to-maturity investments
 
3,341

 
—

 
—

 
—

 
3,341

Cost basis investment
 
—

 
—

 
11,979

 
—

 
11,979

Total assets
 
$
3,346

 
$
34,390

 
$
11,979

 
$
7,706

 
$
57,421

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Contingent consideration liability
 
$
—

 
$
—

 
$
7,900

 
$
—

 
$
7,900

(1)
Certain marketable securities investments are measured at fair value using net asset value per share under the practical expedient methodology.
At April 25, 2020 and April 27, 2019, 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.
Our Level 3 assets included non-marketable preferred shares of two privately held start-up companies, and a warrant to purchase common shares of one of these privately held start-up companies. The fair value for our Level 3 investments is not readily determinable so we estimate the fair value as costs minus impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for identical or similar investments with the same issuer.
During the second quarter of fiscal 2020, we invested an additional $0.5 million in one of these privately held start-up companies. Subsequently and during the third quarter of fiscal 2020, with respect to the same investee, we recorded an impairment charge of $6.0 million to other expense, net in the consolidated statement of income for the full carrying value as it was determined the value of the investment was not recoverable. For non-marketable equity investments, the measurement of fair value requires significant judgment and includes quantitative and qualitative analysis of identified events or circumstances that impact the fair value of the investment. Among other factors, we assessed the investee’s ability to meet business milestones, its financial condition and near-term prospects (including the rate at which the investee was using its cash), the investee’s need for possible additional funding at a lower valuation, and the competitive environment in which the investee operates its business.
Our Level 3 liabilities included our contingent consideration liability from the Joybird acquisition. We estimated the fair value of the Joybird contingent consideration liability 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 were simulated over the earn-out periods in a risk-neutral framework using Geometric Brownian Motion. For each simulation path, the potential 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 4.2% for the fiscal 2021 milestone and 4.7% for the fiscal 2023 milestone.
During the fourth quarter of fiscal 2020, in connection with our annual impairment testing, we reduced the fair value of the contingent consideration liability by its full carrying value of $7.9 million, as we no longer expect any additional consideration amounts will be owed related to the acquisition of Joybird based on our most recent financial projections and the terms of the earnout agreement. Consistent with our goodwill impairment testing, the estimated revenues and earnings projections for Joybird used in our fair value assessment at the end of fiscal 2020 were lower than those used in prior periods due to integration activities taking longer than anticipated, a slower than anticipated growth rate due to a shifting focus on profitability, and most notably, the impact of the COVID-19 pandemic. The reduction in fair value was recorded to SG&A in the consolidated statement of income.
The following table is a reconciliation of our Level 3 assets and liabilities recorded at fair value using significant unobservable inputs:
(Amounts in thousands)
 
Assets
 
Liabilities
Balance at April 28, 2018
 
$
10,954

 
$
344

Purchases
 
1,025

 
—

Acquisitions
 
—

 
7,500

Write-up, net
 
—

 
74

Translation adjustment
 
—

 
(18
)
Balance at April 27, 2019
 
11,979

 
7,900

Purchases
 
500

 
—

Write-off
 
(6,000
)
 
(7,900
)
Balance at April 25, 2020
 
$
6,479

 
$
—