FAIR VALUE MEASUREMENTS

3 Months Ended

Apr. 01, 2017

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

5.    FAIR VALUE MEASUREMENTS

The Company utilizes the following three level hierarchy that defines the assumptions used to measure certain assets and liabilities at fair value:

Level 1 –	Quoted market prices in active markets for identical assets or liabilities;
Level 2 –	Inputs other than Level 1 inputs that are either directly or indirectly observable; and
Level 3 –	Unobservable inputs developed using estimates and assumptions developed by the Company, which reflect those that a market participant would use.

The following table presents the financial assets and liabilities the Company measured at fair value on a recurring basis, based on the fair value hierarchy:

	Level 2
In thousands	April 1, 2017		December 31, 2016		April 2, 2016
Financial Assets:
Derivatives	$	1,308	$	2,399	$	137
Financial Liabilities:
Derivatives	$	(523)	$	(413)	$	(967)

The fair values of the Company’s Level 2 derivative instruments were primarily based on observable forward exchange rates. Unobservable quantitative inputs used in the valuation of the Company’s derivative instruments included volatilities, discount rates and estimated credit losses.

The following table presents the non‑financial assets the Company measured at fair value on a non‑recurring basis in 2017, based on such fair value hierarchy:

	Net Carrying		Fair Value Measured and Recorded at						Total Losses for the
	Value as of		Reporting Date Using:						Three Months Ended
In thousands	April 1, 2017		Level 1		Level 2		Level 3		April 1, 2017
Property and equipment	$	3,978	$	—	$	—	$	—	$	6,620

As a result of a decline in the respective future anticipated cash flows of certain kate spade new york retail locations, the Company determined that a portion of the carrying values of such assets exceeded their fair values, resulting in impairment charges, which were recorded in Selling, general & administrative expense (“SG&A”) on the accompanying Condensed Consolidated Statement of Income.

The fair values of the Company’s Level 3 Property and equipment are based on either a market approach or an income approach using the Company’s forecasted cash flows over the estimated useful lives of such assets, as appropriate.

The fair values and carrying values of the Company’s debt instruments are detailed as follows:

	April 1, 2017				December 31, 2016				April 2, 2016
			Carrying				Carrying				Carrying
In thousands	Fair Value		Value		Fair Value		Value		Fair Value		Value
Term Loan credit facility, due April 2021 (a)	$	390,644	$	385,105	$	393,405	$	385,794	$	388,883	$	386,952
ABL Facility (b)		—		—		—		—		—		—

^(a) Carrying values include aggregate unamortized debt discount and deferred financing fees.

^(b) Borrowings under the ABL Facility bear interest based on market rate; accordingly its fair value approximates its carrying value.

The fair values of the Company’s debt instruments were estimated using market observable inputs, including quoted prices in active markets, market indices and interest rate measurements. Within the hierarchy of fair value measurements, these are Level 2 fair values. The fair values of cash and cash equivalents, receivables and accounts payable approximate their carrying values due to the short-term nature of these instruments.