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.

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.

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.

The following tables present information about assets measured at fair value on a recurring basis:

Fair value measurements as of October 31, 2021, using:

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

U.S. Government Money Market Fund

8,351

N/A

8,351

Bond Mutual Funds

4,384

N/A

4,384

Inflation Protected Bond Mutual Funds

2,975

N/A

2,975

Mortgage Securities Mutual Funds

1,118

N/A

1,118

Large Cap Equity Mutual Funds

694

N/A

694

Growth Allocation Mutual Funds

449

N/A

449

Preferred Securities Mutual Fund

282

N/A

282

U.S. Event Driven Equity Mutual Fund

203

N/A

203

Moderate Allocation Mutual Fund

N/A

Other

201

N/A

201

Fair value measurements as of November 1, 2020, using:

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

Premier Money Market Fund

7,665

N/A

7,665

Bond Mutual Funds

5,462

N/A

5,462

Growth Allocation Mutual Funds

255

N/A

255

Moderate Allocation Mutual Fund

N/A

Other

N/A

Fair value measurements as of May 2, 2021, using:

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

Premier Money Market Fund

7,879

N/A

7,879

Bond Mutual Funds

4,101

N/A

4,101

Inflation Protected Bond Mutual Funds

722

N/A

722

Mortgage Securities Mutual Fund

719

N/A

719

Growth Allocation Mutual Funds

339

N/A

339

Moderate Allocation Mutual Fund

N/A

Other

111

N/A

111

Our short-term investments classified as available for sale consisted of various types of bond and equity mutual funds and had an accumulated unrealized gain totaling $116,000 and $24,000 as of October 31, 2021 and May 2, 2021, respectively, and an unrealized loss totaling $29,000 as of November 1, 2020. Our short-term investments classified as available for sale were recorded at their fair values of $9.7 million, $5.5 million, and $5.5 million as of October 31, 2021, November 1, 2020, and May 2, 2021, respectively. As of October 31, 2021, November 1, 2020, and May 2, 2021, the fair value of our short-term investments classified as available for sale approximated their cost basis.

Our investments classified as held-to-maturity consisted of investment grade U.S. corporate bonds, foreign bonds, and government bonds with remaining maturities of less than 4 years as of October 31, 2021. 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 on our Consolidated Balance Sheets, based on the maturity date in relation to the respective reporting period, and were recorded at amortized cost.

As of October 31, 2021, November 1, 2020, and May 2, 2021, our held-to-maturity investments recorded at amortized cost totaled $9.9 million, $5.8 million, and $4.3 million, respectively. The fair value of our held-to-maturity investments as of October 31, 2021, November 1, 2020, and May 2, 2021, totaled $9.9 million, $5.8 million, and $4.3 million, respectively.

Our bond investments were classified as level 2 within the fair value hierarchy as they were traded over the counter within a broker network and not on an active market. The fair value of our bond investments 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 respective bond investment.

Current Expected Credit Loses (“CECL”)- Available for Sale and Held-To-Maturity Investments

As of October 31, 2021, November 1, 2020, and May 2, 2021, we did not record an allowance for credit losses related to our short-term available for sale or held-to-maturity investments, which are comprised of high-grade U.S. and foreign corporate bonds, U.S. Treasury bonds, and bond and equity mutual funds.

We determined that our credit loss exposure was immaterial as we have experienced historically low unrealized losses and gains during past reporting periods. In addition, it is not our intention to sell, and it is not likely that we will be required to sell, our held-to-maturity investments before the recovery of their amortized cost basis.

As of October 31, 2021, we reported an accumulated unrealized gain of $116,000 associated with our short-term investments classified as available for sale. As mentioned above, it is not our intention to sell nor is it likely that we will be required to sell, our held-to-maturity investments before the recovery of their amortized cost basis. Accordingly, we did not record any credit loss expense during the six-month period ending October 31, 2021. In addition, we did not record any credit loss expense during the six-month period ending November 1, 2020.

We have a rabbi trust for the participants of our deferred compensation plan (the “Plan”), that enables our participants to credit their contributions to various investment options of the Plan. The investments associated with the rabbi trust consist of a U.S. Government money market fund and various equity related mutual funds that are classified as available for sale.

Our long-term investments associated with our rabbi trust are classified as available for sale and recorded at their fair values of $9.0 million, $8.1 million, and $8.4 million as of October 31, 2021, November 1, 2020, and May 2, 2021, respectively. The long-term investments associated with our rabbi trust had an accumulated unrealized gain of $169,000, $55,000, and $122,000 as of October 31, 2021, November 1, 2020, and May 2, 2021, respectively. The fair value of our long-term investments associated with our rabbi trust approximates their cost basis.

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

During the three-month period ending May 2, 2021, we had assets and liabilities that were required to be measured at fair value on a nonrecurring basis that pertained to assets acquired and certain liabilities that were assumed in connection with the CIH business combination effective February 1, 2021. See Note 3 of the consolidated financial statements for further details regarding this business combination.

Fair value measurements on February 1, 2021, using:

Quoted prices

Significant

in active

other

Significant

markets for

observable

unobservable

identical assets

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

Right of use assets

N/A

2,544

N/A

2,544

Equipment and leasehold improvements

N/A

846

Inventory

N/A

The fair value of our right of use assets was based on our analysis of a recent appraisal of annual lease rates per square foot for industrial buildings that are similar in nature and within the same locale. We believe the annual lease rates per square foot presented in our recent appraisal represent significant observable inputs and therefore the right of use assets were classified as level 2.

Additionally, in connection with the CIH business combination effective February 1, 2021, we acquired cash, accounts receivable, and certain other current assets, and we assumed accounts payable. Based on the nature of these items and their short-term maturity, the carrying amount of these items approximated their fair values. See Note 3 of the consolidated financial statements for the final allocation of the acquisition cost to assets acquired and liabilities assumed based on their fair values.