Fair Value Measurements

12 Months Ended

Jan. 30, 2021

Note 4. Fair Value Measurements

We define the fair value of a financial instrument as the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions. The Company’s financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy as follows:

	Level 1—		quoted market prices in active markets for identical assets or liabilities

	Level 2—		observable market-based inputs (quoted prices for similar assets and liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active) or inputs that are corroborated by observable market data

	Level 3—		significant unobservable inputs that reflect the Company’s assumptions and are not substantially supported by market data

The Company did not have any non-financial assets or non-financial liabilities recognized at fair value on a recurring basis at January 30, 2021 or February 1, 2020. At January 30, 2021 and February 1, 2020, the Company believes that the carrying values of cash and cash equivalents, receivables, and accounts payable approximate fair value, due to the short-term maturity of these instruments. The Company’s debt obligations with a carrying value of $85,897 as of January 30, 2021 are at variable interest rates. Borrowings under the Company’s 2018 Revolving Credit Facility are recorded at carrying value, which approximates fair value due to the frequency nature of such borrowings and repayments. The Company considers this as a Level 2 input. The fair value of the Company’s 2018 Term Loan Facility and the Third Lien Credit Facility was approximately $25,000 and $21,000, respectively, as of January 30, 2021, based upon estimated market value calculations that factor principal, time to maturity, interest rate, and current cost of debt. The Company considers this a Level 3 input.

The Company’s non-financial assets, which primarily consist of goodwill, intangible assets, ROU lease assets, and property and equipment, are not required to be measured at fair value on a recurring basis and are reported at their carrying values. However, on a periodic basis whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial assets are assessed for impairment, and if applicable, written down to (and recorded at) fair value.

Determining the fair value of goodwill and other intangible assets is judgmental in nature and requires the use of significant estimates and assumptions, including projected revenues, EBITDA margins growth rates and operating margins, long-term growth rates, working capital, royalty rates in the category of intellectual property, discount rates and future market conditions, among others, as applicable. The inputs used in determining the fair value of the ROU lease assets were the current comparable market rents for similar properties and a store discount rate. The fair value of the property and equipment was based on its estimated liquidation value. The measurement of fair value of these assets are considered Level 3 valuations as certain of these inputs are unobservable and are estimated to be those that would be used by market participants in valuing these or similar assets.

The following tables present the non-financial assets the Company measured at fair value on a non-recurring basis in fiscal 2020 and fiscal 2019, based on such fair value hierarchy:

	Net Carrying Value as of		Fair Value Measured and Recorded at Reporting Date Using:						Total Losses - Year Ended
(in thousands)	January 30, 2021		Level 1		Level 2		Level 3		January 30, 2021
Property and equipment	$	8,922	$	—	$	—	$	8,922	$	4,470	⁽¹⁾
Goodwill		31,973		—		—		31,973		9,462	⁽²⁾
Tradenames - Indefinite-lived		71,800		—		—		71,800		4,386	⁽²⁾
ROU Assets		76,101		—		—		76,101		8,556	⁽¹⁾

	Net Carrying Value as of		Fair Value Measured and Recorded at Reporting Date Using:						Total Losses - Year Ended
(in thousands)	February 1, 2020		Level 1		Level 2		Level 3		February 1, 2020
Property and equipment	$	—	$	—	$	—	$	—	$	641	⁽¹⁾
Goodwill		—		—		—		—		2,129	⁽²⁾
Tradenames - Indefinite-lived		5,086		—		—		5,086		3,550	⁽²⁾
Tradenames - Definite-lived		544		—		—		544		7,697	⁽²⁾
Customer Lists		—		—		—		—		6,115	⁽²⁾
ROU Assets		788		—		—		788		177	⁽¹⁾

⁽¹⁾Recorded within Impairment of long-lived assets on the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 1 “Description of Business and Summary of Significant Accounting Policies – (K) Impairment of Long-lived Assets” for additional information.

⁽²⁾ Recorded within Impairment of goodwill and intangible assets on the Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 1 “Description of Business and Summary of Significant Accounting Policies – (K) Impairment of Long-lived Assets and (L) Goodwill and Other Intangible Assets” for additional information.

- 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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