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Fair Value Measurements - Notes to Financial Statements

9 Months Ended

Nov. 02, 2019

NOTE 7 – FAIR VALUE MEASUREMENTS:

The following tables set forth information regarding the Company’s financial assets and liabilities that are measured at fair value (in thousands) as of November 2, 2019 and February 2, 2019:

			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	November 2, 2019		Assets		Inputs		Inputs
Description	November 2, 2019		Level 1		Level 2		Level 3
Assets:
State/Municipal Bonds	$	45,469	$	-	$	45,469	$	-
Corporate Bonds		88,992		-		88,992		-
U.S. Treasury/Agencies Notes and Bonds		36,235		-		36,235		-
Cash Surrender Value of Life Insurance		10,300		-		-		10,300
Asset-backed Securities (ABS)		34,244		-		34,244		-
Corporate Equities		737		737		-		-
Certificates of Deposit		100		100		-		-
Total Assets	$	216,077	$	837	$	204,940	$	10,300

Liabilities:
Deferred Compensation		(10,246)		-		-		(10,246)
Total Liabilities	$	(10,246)	$	-	$	-	$	(10,246)

			Quoted
			Prices in
			Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
		February 2, 2019	Assets		Inputs		Inputs
Description		February 2, 2019	Level 1		Level 2		Level 3
Assets:
State/Municipal Bonds	$	54,346	$	-	$	54,346	$	-
Corporate Bonds		90,891		-		90,891		-
U.S. Treasury/Agencies Notes and Bonds		17,236		-		17,236		-
Cash Surrender Value of Life Insurance		9,093		-		-		9,093
Asset-backed Securities (ABS)		23,334		-		23,334		-
Corporate Equities		690		690		-		-
Certificates of Deposit		101		101		-		-
Total Assets	$	195,691	$	791	$	185,807	$	9,093

Liabilities:
Deferred Compensation		(8,908)		-		-		(8,908)
Total Liabilities	$	(8,908)	$	-	$	-	$	(8,908)

The Company’s investment portfolio was primarily invested in corporate bonds and tax-exempt and taxable governmental debt securities held in managed accounts with underlying ratings of A or better at November 2, 2019 and February 2, 2019. The state, municipal and corporate bonds have contractual maturities which range from one month to 6.0 years. The U.S. Treasury Notes and Certificates of Deposit have contractual maturities which range from 13 days to 3.0 years. These securities are classified as available-for-sale and are recorded as Short-term investments, Restricted cash and Restricted short-term investments on the accompanying Condensed Consolidated Balance Sheets. These assets are carried at fair value with unrealized gains and losses reported net of taxes in Accumulated other comprehensive income. The asset-backed securities are bonds comprised of auto loans and bank credit cards that carry AAA ratings. The auto loan asset-backed securities are backed by static pools of auto loans that were originated and serviced by captive auto finance units, banks or finance companies. The bank credit card asset-backed securities are backed by revolving pools of credit card receivables generated by account holders of cards from American Express, Citibank, JPMorgan Chase, Capital One and Discover.

Additionally, at November 2, 2019, the Company had $0.7 million of corporate equities and deferred compensation plan assets of $10.3 million. At February 2, 2019, the Company had $0.7 million of corporate equities and deferred compensation plan assets of $9.1 million. All of these assets are recorded within Other assets in the Condensed Consolidated Balance Sheets.

Level 1 category securities are measured at fair value using quoted active market prices. Level 2 investment securities include corporate bonds, municipal bonds and asset-backed securities for which quoted prices may not be available on active exchanges for identical instruments. Their fair value is principally based on market values determined by management with assistance of a third-party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the pricing service using observable market information such as quotes from less active markets and/or quoted prices of securities with similar characteristics, among other factors.

Deferred compensation plan assets consist of life insurance policies. These life insurance policies are valued based on the cash surrender value of the insurance contract, which is determined based on such factors as the

fair value of the underlying assets and discounted cash flow and are therefore classified within Level 3 of the valuation hierarchy. The Level 3 liability associated with the life insurance policies represents a deferred compensation obligation, the value of which is tracked via underlying insurance funds’ net asset values, as recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. These funds are designed to mirror mutual funds and money market funds that are observable and actively traded.

The following tables summarize the change in fair value of the Company’s financial assets and liabilities measured using Level 3 inputs as of November 2, 2019 and February 2, 2019 (in thousands):

	Fair Value
	Measurements Using
	Significant Unobservable
	Asset Inputs (Level 3)
	Cash Surrender Value
Beginning Balance at February 2, 2019	$	9,093
Additions		706
Total gains or (losses)
Included in interest and other income (or changes in net assets)		501
Included in other comprehensive income		-
Ending Balance at November 2, 2019	$	10,300

	Fair Value
	Measurements Using
	Significant Unobservable
	Liability Inputs (Level 3)
	Deferred Compensation
Beginning Balance at February 2, 2019	$	(8,908)
Additions		(645)
Total (gains) or losses
Included in interest and other income (or changes in net assets)		(693)
Included in other comprehensive income		-
Ending Balance at November 2, 2019	$	(10,246)

	Fair Value
	Measurements Using
	Significant Unobservable
	Asset Inputs (Level 3)
	Cash Surrender Value
Beginning Balance at February 3, 2018	$	8,900
Additions		596
Total gains or (losses)
Included in interest and other income (or changes in net assets)		(403)
Included in other comprehensive income		-
Ending Balance at February 2, 2019	$	9,093

	Fair Value
	Measurements Using
	Significant Unobservable
	Liability Inputs (Level 3)
	Deferred Compensation
Beginning Balance at February 3, 2018	$	(8,951)
Additions		(105)
Total (gains) or losses
Included in interest and other income (or changes in net assets)		148
Included in other comprehensive income		-
Ending Balance at February 2, 2019	$	(8,908)