Fair Value Measurements

3 Months Ended

May 02, 2020

5. Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market at the measurement date. Fair value is established according to a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. Level 3 inputs are given the lowest priority in the fair value hierarchy.

As of May 2, 2020, the Company’s investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following (in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair Market
	Cost		Gains		Losses		Value
Short-term:
Obligations of the U.S. Treasury and U.S. government agencies (Level 1)	$	5	$	—	$	—	$	5
	$	5	$	—	$	—	$	5

As of February 1, 2020, the Company’s investment securities were classified as held-to-maturity and consisted of the following (in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair Market
	Cost		Gains		Losses		Value
Short-term:
Obligations of the U.S. Treasury and U.S. government agencies (Level 1)	$	17,277	$	8	$	(2)	$	17,283
Bank certificates of deposit (Level 2)		10,285		—		—		10,285
	$	27,562	$	8	$	(2)	$	27,568
Long-term:
Obligations of the U.S. Treasury (Level 1)	$	1,908	$	—	$	(1)	$	1,907
Bank certificates of deposit (Level 2)		13,767		—		—		13,767
	$	15,675	$	—	$	(1)	$	15,674

The amortized cost and fair market value of investment securities as of February 1, 2020 by contractual maturity were as follows (in thousands):


			Fair
	Amortized		Market
	Cost		Value
Mature in one year or less	$	27,562	$	27,568
Mature after one year through five years		15,675		15,674
	$	43,237	$	43,242

During the thirteen weeks ended May 2, 2020, in response to the COVID-19 pandemic and in order to enhance its liquidity position, the Company sold substantially all of its investment securities which were classified as held-to-maturity as of February 1, 2020. Net gains from the sales of investment securities were $38,300 and $12,500 for short-term and long-term investment securities, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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