Fair Value Measurements

6 Months Ended

Jul. 28, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

(4) Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets and liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of July 28, 2012, the Company held company-owned life insurance measured at fair value on a recurring basis.

The Company has equity and fixed income investments related to its company-owned life insurance. The fair value of the investments is the estimated amount that the Company would receive if the policy was terminated, taking into consideration the current creditworthiness of the insurer. The fair value of the company-owned life insurance is determined by inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Additionally, the change in the fair value of the company-owned life insurance is marked to market through income.

The Company occasionally enters into interest rate swap agreements with financial institutions to manage the exposure to changes in interest rates. When doing so, the fair value of interest rate swap agreements is the estimated amount that the Company would pay or receive to terminate the swap agreement, taking into account the current creditworthiness of the swap counterparties. The fair values of swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The Company has consistently applied these valuation techniques in all periods presented. Additionally, the change in the fair value of a swap designated as a cash flow hedge is marked to market through accumulated other comprehensive income.

The Company’s assets and liabilities measured at fair value on a recurring basis at July 28, 2012 and January 28, 2012, respectively, were as follows:

	Fair Value at July 28, 2012								Fair Value at January 28, 2012
Description	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets measured at fair value
Company-owned life insurance (a)	$	—	$	22,649	$	—	$	22,649	$	—	$	15,884	$	—	$	15,884
Liabilities measured at fair value
Interest rate swap liability (b)	$	—	$	—	$	—	$	—	$	—	$	1,685	$	—	$	1,685

(a) Amounts are presented net of loans that are secured by some of these policies of $135.2 million and $137.3 million at July 28, 2012 and January 28, 2012, respectively.

(b) On July 12, 2012, the underlying $80.0 million floating rate senior note matured and was repaid using cash on hand. It became current as of July 2011, and the interest rate swap liability was reclassified to accrued liabilities in the current liabilities section as presented in the condensed consolidated balance sheet.

Certain long-lived assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). The fair value measurements related to long-lived assets are determined using expected future cash flow analyses. The Company estimates future cash flows based on historical experience and its expectation of future performance. The analyses use discounted cash flows and take into consideration any anticipated salvage value or sales price for the store. The analyses also assume available option periods through 20 years unless there is a real estate event. The Company classifies these measurements as Level 3. There were no significant impairments of long-lived assets for the three and six months ended July 28, 2012 and July 30, 2011.

The following table presents the carrying amounts and estimated fair values of financial instruments not recorded at fair value in the condensed consolidated balance sheets. The Company classifies these measurements as Level 2. As of July 28, 2012, these included the Company’s fixed rate long-term debt, including the current portion.

	July 28, 2012				January 28, 2012
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	(in thousands)
Long-term debt, including current portion (excluding capitalized leases)	$	392,780	$	415,867	$	492,780	$	527,735

The fair value of the Company’s fixed rate long-term debt is estimated based on the current rates offered to the Company for debt of the same remaining maturities.