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Fair Value of Financial Instruments
 9 Months Ended
Feb. 02, 2020
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

13. Fair Value of Financial Instruments

ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either level 1 or level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy. The hierarchy consists of three broad levels as follows:

Level 1 – Quoted market prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than level 1 inputs that are either directly or indirectly observable; and

Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use.

Recurring Basis

The following table presents information about assets measured at fair value on a recurring basis:

 

 

 

Fair value measurements at February 2, 2020 using:

 

 

 

Quoted prices

in active

markets for

identical

assets

 

 

Significant

other

observable

inputs

 

Significant

unobservable

inputs

 

 

 

 

(amounts in thousands)

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Premier Money Market Fund

 

$

6,334

 

 

N/A

 

N/A

 

$

6,334

 

Short Term Bond Funds

 

 

4,743

 

 

N/A

 

N/A

 

 

4,743

 

Inflation Protected Bond Funds

 

 

2,837

 

 

N/A

 

N/A

 

 

2,837

 

Strategic Income Fund

 

 

1,001

 

 

N/A

 

N/A

 

 

1,001

 

Growth Allocation Fund

 

 

239

 

 

N/A

 

N/A

 

 

239

 

Moderate Allocation Fund

 

 

138

 

 

N/A

 

N/A

 

 

138

 

Other

 

 

92

 

 

N/A

 

N/A

 

 

92

 

 

 

 

Fair value measurements at January 27, 2019 using:

 

 

 

Quoted prices

in active

markets for

identical

assets

 

 

Significant

other

observable

inputs

 

Significant

unobservable

inputs

 

 

 

 

(amounts in thousands)

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Premier Money Market Fund

 

$

6,433

 

 

N/A

 

N/A

 

$

6,433

 

Growth Allocation Fund

 

 

184

 

 

N/A

 

N/A

 

 

184

 

Moderate Allocation Fund

 

 

119

 

 

N/A

 

N/A

 

 

119

 

Other

 

 

98

 

 

N/A

 

N/A

 

 

98

 

 

 

 

Fair value measurements at April 28, 2019 using:

 

 

 

Quoted prices

in active

markets for

identical

assets

 

 

Significant

other

observable

inputs

 

Significant

unobservable

inputs

 

 

 

 

(amounts in thousands)

 

Level 1

 

 

Level 2

 

Level 3

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Premier Money Market Fund

 

$

6,639

 

 

N/A

 

N/A

 

$

6,639

 

Growth Allocation Fund

 

 

203

 

 

N/A

 

N/A

 

 

203

 

Moderate Allocation Fund

 

 

127

 

 

N/A

 

N/A

 

 

127

 

Other

 

 

112

 

 

N/A

 

N/A

 

 

112

 

 

The determination of where an asset or liability falls in the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter based on various factors and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare.

Short-Term and Long-Term Investments - Held-To-Maturity

Currently, our investments classified as held-to-maturity consist of investment grade U.S. corporate bonds, foreign bonds, and government bonds with remaining maturities that ranged from 1 to 3 years.  These investments were classified as held-to-maturity, as we have the positive intent and ability to hold these investments until maturity. Our held-to-maturity investments were recorded as either current or noncurrent in our Consolidated Balance Sheets, based on the contractual maturity date in relation to the respective reporting period, and were recorded at amortized cost.

At February 2, 2020, January 27, 2019, and April 28, 2019, our held-to-maturity investments recorded at amortized cost totaled $5.4 million, $13.5 million, and $5.0 million, respectively. The fair value of our held-to-maturity investments at February 2, 2020, January 27, 2019, and April 28, 2019, totaled $5.4 million, $13.5 million and $5.0 million, respectively.

Our bond investments were classified as level 2, as they were traded over the counter within a broker network and not on an active market. The fair value of our bonds was determined based on a published source that provided an average bid price. The average bid price was based on various broker prices that were determined based on market conditions, interest rates, and the rating of the bond.

Short-Term Investments Available for Sale

At February 2, 2020, our short-term investments classified as available for sale totaled $7.6 million and consisted of bond funds. Since these bond funds were classified as available for sale, these investments were recorded at their fair market value and their unrealized gains or losses are included in other comprehensive income (loss). Our bond funds had an accumulated unrealized gain totaling $48,000. At February 2, 2020, the fair value of our bond funds approximated its cost basis.

There were no short-term investments classified as available for sale held at January 27, 2019 and April 28, 2019.

Long-Term Investments - Rabbi Trust

We have a Rabbi Trust to set aside funds for participants of our deferred compensation plan (the “Plan”), which enables the participants to credit their contributions to various investment options of the Plan. The investments associated with the Rabbi Trust consist of a money market fund and various mutual funds that are classified as available for sale.

These long-term investments are recorded at their fair values of $7.8 million, $6.8 million, and $7.1 million at February 2, 2020, January 27, 2019, and April 28, 2019, respectively. Our long-term investments had an accumulated unrealized gain of $56,000, $9,000, and $40,000 at February 2, 2020, January 27, 2019, and April 28, 2019, respectively. The fair value of our long-term investments associated with our Rabbi Trust approximates their cost basis.

Other

The carrying amount of our cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses approximates fair value because of the short maturity of these financial instruments.

Nonrecurring Basis

As of February 2, 2020, we had certain assets and a contingent consideration – earn-out obligation that were required to be measured at fair value on a nonrecurring basis.

 

 

 

Fair value measurements at February 2, 2020 using:

 

 

 

Quoted prices

in active

markets for

identical

assets

 

Significant

other

observable

inputs

 

Significant

unobservable

inputs

 

 

 

 

 

(amounts in thousands)

 

Level 1

 

Level 2

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill (note 8)

 

N/A

 

N/A

 

$

2,442

 

 

$

2,442

 

Tradename (note 7)

 

N/A

 

N/A

 

 

4,121

 

 

 

4,121

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent Consideration – Earn-Out Obligation (note 3)

 

N/A

 

N/A

 

$

—

 

 

$

—

 

 

The goodwill was recorded at fair market value using the discounted cash flow method that used significant unobservable inputs and was classified as level 3.  The tradename was recorded at fair market value using the royalty from relief method that used significant unobservable inputs and was classified as level 3.

 

As of January 27, 2019, we had no assets that were required to be measured at fair value on a nonrecurring basis other than certain assets acquired and liabilities assumed in connection with the eLuxury business combination on June 22, 2018 (see note 3).

 

 

 

Fair value measurements at January 27, 2019 using:

 

 

 

Quoted prices

in active

markets for

identical

assets

 

Significant

other

observable

inputs

 

Significant

unobservable

inputs

 

 

 

 

 

(amounts in thousands)

 

Level 1

 

Level 2

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

N/A

 

N/A

 

$

13,653

 

 

$

13,653

 

Tradename

 

N/A

 

N/A

 

 

6,549

 

 

 

6,549

 

Equipment

 

N/A

 

N/A

 

 

2,179

 

 

 

2,179

 

Inventory

 

N/A

 

N/A

 

 

1,804

 

 

 

1,804

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent Consideration – Earn-Out Obligation

 

N/A

 

N/A

 

$

5,600

 

 

$

5,600

 

 

The tradename was recorded at fair market value using the royalty from relief method that used significant unobservable inputs and was classified as level 3. The contingent consideration – earn-out obligation was recorded at fair market value using the Black Scholes pricing model.

Additionally, we acquired certain current assets, such as accounts receivable and prepaid expenses, and assumed certain liabilities, such as accounts payable and accrued expenses. Based on the nature of these items and their short maturity, the carrying amount of these items approximated their fair values. See note 3 for the final allocation of the acquisition cost to the assets acquired and liabilities assumed based on their fair values.