FAIR VALUE MEASUREMENTS

3 Months Ended

Oct. 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, Accounting Standards Codification ("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 and Liabilities that are Measured at Fair Value on a Recurring Basis

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

	Fair Value as of October 31, 2013
	Level 1		Level 2		Level 3
Assets
U.S. Treasury securities	$	14,430	$	—	$	—
U.S. government agency securities		—		2,102		—
Corporate bonds and notes		—		4,189		—
Corporate equity securities		2,601		—		—
	$	17,031	$	6,291	$	—
Liabilities
Interest rate swaps	$	—	$	2,516	$	—

	Fair Value as of October 31, 2012
	Level 1		Level 2		Level 3
Assets
U.S. Treasury securities	$	22,623	$	—	$	—
U.S. government agency securities		—		2,875		—
Corporate bonds and notes		—		1,018		—
Corporate equity securities		4,133		—		—
	$	26,756	$	3,893	$	—

        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 3 for additional information related to our investments).

        The fair value of our interest rate swaps are calculated using significant observable inputs including the present value of estimated future cash flows using interest rate curves, and therefore were classified as a Level 2 measurement in the fair value hierarchy (see Note 4 for additional information related to our interest rate swaps).

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

        Assets that are measured at fair value on a nonrecurring basis primarily relate to our goodwill and store-level property and equipment. Potential impairment losses related to these assets 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 and positive comparable store sales growth assumptions, and therefore are classified as a Level 3 measurement in the fair value hierarchy. There were no impairments related to our goodwill and property and equipment for the three months ended October 31, 2013 and 2012.

• 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 October 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.