FAIR VALUE MEASUREMENTS

12 Months Ended

Jul. 31, 2013

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

2. FAIR VALUE MEASUREMENTS

        Fair value is defined as 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 at the measurement date. In determining fair value, ASC 820, Fair Value Measurement, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair values. These tiers include:

Level 1	–	Quoted prices for identical instruments in active markets;
Level 2	–	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and
Level 3	–	Instruments whose significant inputs are unobservable.

• Assets that are Measured at Fair Value on a Recurring Basis

        The following tables include our assets that are measured at fair value on a recurring basis (in thousands):

	Fair Value as of July 31, 2013
	Level 1		Level 2		Level 3
U.S. Treasury securities	$	14,436	$	—	$	—
U.S. government agency securities		—		2,687		—
Corporate bonds and notes		—		828		—
Corporate equity securities		2,669		—		—
	$	17,105	$	3,515	$	—

	Fair Value as of July 31, 2012
	Level 1		Level 2		Level 3
U.S. Treasury securities	$	21,109	$	—	$	—
U.S. government agency securities		—		2,920		—
Corporate bonds and notes		—		1,314		—
Corporate equity securities		3,993		—		—
	$	25,102	$	4,234	$	—

        Investments in U.S. Treasury securities and corporate equity securities are based on quoted market prices for identical instruments in active markets, and therefore were classified as a Level 1 measurement in the fair value hierarchy. Investments in U.S. government agency securities and corporate bonds and notes are based on quoted prices for similar instruments in active markets, and therefore were classified as a Level 2 measurement in the fair value hierarchy (see Note 7 for additional information related to our investments).

• Assets that are Measured at Fair Value on a Nonrecurring Basis

        Impairment losses related to store-level property and equipment are calculated using significant unobservable inputs including the present value of future cash flows expected to be generated using a risk-adjusted weighted-average cost of capital of 15.3 percent to 17.5 percent and positive comparable store sales growth assumptions, and therefore are classified as a Level 3 measurement in the fair value hierarchy. For the fiscal year ended July 31, 2013, store-level property and equipment of $1.2 million was written down to their fair value of $0.1 million, resulting in an impairment charge of $1.1 million. For the fiscal year ended July 31, 2012, store-level property and equipment of $2.2 million was written down to their fair value of $0.4 million, resulting in an impairment charge of $1.8 million.

• Other Financial Instruments

        As cash and short-term cash investments, trade payables and certain other short-term financial instruments are all short-term in nature, their carrying amount approximates fair value. The outstanding principal of our revolving credit agreement and senior secured term loan approximates fair value as of July 31, 2013. The fair value of the revolving credit agreement and the senior secured term loan were based on estimates of current interest rates for similar debt, a Level 3 input.