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Fair value measurement
12 Months Ended
Feb. 01, 2020
Fair Value Disclosures [Abstract]  
Fair value measurement Fair value measurement
The estimated fair value of Signet’s financial instruments held or issued to finance Signet’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that Signet would realize upon disposition nor do they indicate Signet’s intent or ability to dispose of the financial instrument. Assets and liabilities that are carried at fair value are required to be classified and disclosed in one of the following three categories:
Level 1—quoted market prices in active markets for identical assets and liabilities
Level 2—observable market based inputs or unobservable inputs that are corroborated by market data
Level 3—unobservable inputs that are not corroborated by market data
Signet determines fair value based upon quoted prices when available or through the use of alternative approaches, such as discounting the expected cash flows using market interest rates commensurate with the credit quality and duration of the investment. The methods Signet uses to determine fair value on an instrument-specific basis are detailed below:
 
February 1, 2020
 
February 2, 2019
(in millions)
Carrying Value
 
Quoted prices in
active
markets for
identical assets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
 
Carrying Value
 
Quoted prices in
active
markets for
identical assets
(Level 1)
 
Significant
other
observable
inputs
(Level 2)
Assets:
 
 
 
 
 
 
 
US Treasury securities
$
7.2

 
$
7.2

 
$

 
$
4.7

 
$
4.7

 
$

Corporate equity securities

 

 

 
2.4

 
2.4

 

Foreign currency contracts
0.6

 

 
0.6

 
0.9

 

 
0.9

Commodity contracts
11.8

 

 
11.8

 
5.7

 

 
5.7

Interest rate swaps

 

 

 
0.6

 

 
0.6

US government agency securities
4.7

 

 
4.7

 
2.5

 

 
2.5

Corporate bonds and notes
8.5

 

 
8.5

 
5.2

 

 
5.2

Total assets
$
32.8

 
$
7.2

 
$
25.6

 
$
22.0

 
$
7.1

 
$
14.9

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency contracts
$
(0.9
)
 
$

 
$
(0.9
)
 
$
(0.2
)
 
$

 
$
(0.2
)
Total liabilities
$
(0.9
)
 
$

 
$
(0.9
)
 
$
(0.2
)
 
$

 
$
(0.2
)

Investments in US Treasury securities and corporate equity securities are based on quoted market prices for identical instruments in active markets, and therefore were classified as Level 1 measurements in the fair value hierarchy. Investments in US government agency securities and corporate bonds and notes are based on quoted prices for similar instruments in active markets, and therefore were classified as Level 2 measurements in the fair value hierarchy. See Note 19 for additional information related to the Company’s available-for-sale investments. The fair value of derivative financial instruments has been determined based on market value equivalents at the balance sheet date, taking into account the current interest rate environment, foreign currency forward rates or commodity forward rates, and therefore were classified as Level 2 measurements in the fair value hierarchy. See Note 20 for additional information related to the Company’s derivatives.
During the second quarter of Fiscal 2019, the Company completed the sale of all eligible non-prime in-house accounts receivable. Upon closing, 5% of the purchase price was deferred until the second anniversary of the closing date. Final payment of the deferred purchase price is contingent upon the non-prime portfolio achieving a pre-defined yield. The Company recorded an asset related to this deferred payment within other assets at fair value and will adjust the asset to fair value in each subsequent period through the performance period through AOCI until settled. This estimated fair value was derived from a discounted cash flow model using unobservable inputs, including estimated yields derived from historic performance, loss rates, payment rates and discount rates to estimate the fair value associated with the accounts receivable. As of February 1, 2020, the fair value of the deferred payment was $21.9 million, which is recorded within other assets on the consolidated balance sheet. See Note 4 and Note 14 for additional information.
Goodwill and other indefinite-lived intangible assets, are evaluated for impairment annually or more frequently if events or conditions were to indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may be greater than its fair value. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. During Fiscal 2020 and 2019, the Company performed interim and annual impairment tests for goodwill and indefinite-lived intangible assets. The fair value was calculated using a combination of discounted cash flow and guideline public company methodologies for the reporting units and the relief from royalty method for the indefinite-lived intangible assets, respectively. The fair value of goodwill and indefinite-lived intangible assets is a Level 3 valuation based on certain unobservable inputs including projected cash flows and estimated risk-adjusted rates of return that would be utilized by market participants in valuing these assets or prices of similar assets. See Note 18 for additional information.
The carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued expenses and other liabilities, and income taxes approximate fair value because of the short-term maturity of these amounts.
The fair values of long-term debt instruments, excluding revolving credit facilities, were determined using quoted market prices in inactive markets or discounted cash flows based upon current observable market interest rates and therefore were classified as Level 2 measurements in the fair value hierarchy. The carrying value of the ABL Revolving Facility (as defined in Note 23) approximates fair value. The following table provides a summary of the carrying amount and fair value of outstanding debt:
 
February 1, 2020
 
February 2, 2019
(in millions)
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
Long-term debt
 
 
 
 
 
 
 
Senior Notes (Level 2)
$
146.4

 
$
144.8

 
$
395.3

 
$
340.3

Term loans (Level 2)
99.5

 
100.0

 
293.0

 
294.9

Total
$
245.9

 
$
244.8

 
$
688.3

 
$
635.2