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Fair Value Measurements | 9 Months Ended
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Jan. 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 and liabilities we measured at fair value on a recurring basis at January 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 January 25, 2020 |  |  |  |  |  |  |  |  |  |
|  | Fair Value Measurements
(Unaudited, amounts in thousands) |  | Level 1 |  | Level 2 |  | Level 3 |  | NAV(1) |  | Total
Assets |  |  |  |  |  |  |  |  |  |
Marketable securities |  | $ | 4 |  |  | $ | 33,417 |  |  | $ | — |  |  | $ | 7,372 |  |  | $ | 40,793 |
Held-to-maturity investments |  | 3,542 |  |  | — |  |  | — |  |  | — |  |  | 3,542 |
Cost basis investments |  | — |  |  | — |  |  | 6,479 |  |  | — |  |  | 6,479 |
Total assets |  | $ | 3,546 |  |  | $ | 33,417 |  |  | $ | 6,479 |  |  | $ | 7,372 |  |  | $ | 50,814 |
Liabilities |  |  |  |  |  |  |  |  |  |
Contingent consideration liability |  | $ | — |  |  | $ | — |  |  | $ | 7,900 |  |  | $ | — |  |  | $ | 7,900 |
At April 27, 2019 |  |  |  |  |  |  |  |  |  |
|  | Fair Value Measurements
(Unaudited, 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 January 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. At January 25, 2020, 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 quarter ended October 26, 2019, we invested an additional $0.5 million in one of these privately held start-up companies. Subsequently and during the quarter ended January 25, 2020, with respect to the same investee, we recorded an impairment charge of $6.0 million 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. There were no other changes to the fair value of our Level 3 assets during the quarter and nine months ended January 25, 2020. Our Level 3 liability includes our contingent consideration liability from the Joybird acquisition. We estimated the 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. There were no changes to the fair value of our Level 3 liabilities during the first nine months of fiscal 2020. However, our integration efforts related to the acquired Joybird business are taking longer than anticipated. Consistent with our policy of testing of non-financial assets annually in the fourth quarter or more frequently, if an impairment indicator is identified, we will be undertaking a review of the Joybird business next quarter, which will include future revenue and earnings projections, and which could result in an adjustment to the fair value of the contingent consideration liability as well as intangible assets and goodwill related to Joybird.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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