Fair Value Measurements

6 Months Ended

Aug. 01, 2015

Fair Value Measurements [Abstract]

Fair Value Measurements

Fair Value Measurements

The following table provides a summary of the carrying value and estimated fair value of long-term debt as of August 1, 2015, January 31, 2015 and August 2, 2014:

	August 1, 2015		January 31, 2015		August 2, 2014
	(in millions)
Carrying Value	$	4,759	$	4,765	$	4,972
Estimated Fair Value (a)	5,233		5,305		5,443

 _______________

(a) The estimated fair value of the Company’s publicly traded debt is based on reported transaction prices which are considered Level 2 inputs in accordance with ASC Topic 820, Fair Value Measurements and Disclosure. The estimates presented are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The authoritative guidance included in ASC Topic 820, establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

• Level 1 – Quoted market prices in active markets for identical assets or liabilities.

• Level 2 – Observable inputs other than quoted market prices included in Level 1, such as quoted prices of similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following table provides a summary of assets and liabilities measured in the consolidated financial statements at fair value on a recurring basis as of August 1, 2015, January 31, 2015 and August 2, 2014:

	Level 1		Level 2		Level 3		Total
	(in millions)
As of August 1, 2015
Assets:
Cash and Cash Equivalents	$	780	$	—	$	—	$	780
Marketable Securities	50		—		—		50
Interest Rate Designated Fair Value Hedges	—		7		—		7
Cross-currency Cash Flow Hedges	—		25		—		25
As of January 31, 2015
Assets:
Cash and Cash Equivalents	$	1,681	$	—	$	—	$	1,681
Interest Rate Designated Fair Value Hedges	—		12		—		12
Cross-currency Cash Flow Hedges	—		21		—		21
Liabilities:
Lease Guarantees	—		—		1		1
As of August 2, 2014
Assets:
Cash and Cash Equivalents	$	1,147	$	—	$	—	$	1,147
Interest Rate Designated Fair Value Hedges	—		3		—		3
Liabilities:
Cross-currency Cash Flow Hedges	—		26		—		26
Lease Guarantees	—		—		1		1

The Company's Level 1 fair value measurements use unadjusted quoted prices in active markets for identical assets. In March 2015, the Company invested in marketable securities which consist of U.S. Treasury Bills. These securities are classified as Level 1 fair value measurements as they are traded with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

The marketable securities have an original maturity greater than 90 days but less than one year and are classified as available-for-sale. Available-for-sale securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a component of accumulated other comprehensive income. Unrealized holding gains were not significant as of August 1, 2015.

The Company’s Level 2 fair value measurements use market approach valuation techniques. The primary inputs to these techniques include benchmark interest rates and foreign currency exchange rates, as applicable to the underlying instruments.

The Company’s Level 3 fair value measurements use income approach valuation techniques. The primary inputs to these techniques include the guaranteed lease payments, residual values, discount rates, as well as the Company’s assessment of the risk of default on guaranteed leases and the assessment of the risk of decline in residual value on the residual value guarantees.

Management believes that the carrying values of accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturity.

The following table provides a reconciliation of the Company’s lease guarantees measured at fair value on a recurring basis using unobservable inputs (Level 3) for the second quarter and year-to-date 2015 and 2014:

	Second Quarter				Year-to-Date
	2015		2014		2015			2014
	(in millions)
Beginning Balance	$	—	$	1	$	1		$	1
Change in Estimated Fair Value Reported in Earnings	—		—		(1		)	—
Ending Balance	$	—	$	1	$	—		$	1

The Company’s lease guarantees include minimum rent and additional payments covering taxes, common area costs and certain other expenses and relate to leases that commenced prior to the disposition of certain businesses. The fair value of these lease guarantees is impacted by economic conditions, probability of rent obligation payments, period of obligation and the discount rate utilized. For additional information, see Note 12, “Commitments and Contingencies.”