Fair Value Measurements

3 Months Ended

Jun. 02, 2012

Fair Value Measurements

Fair Value Measurements

7. Fair Value Measurements

        The Company utilizes the three-level valuation hierarchy for the recognition and disclosure of fair value measurements. The categorization of assets and liabilities within this hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy consist of the following:

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  Level 1—Inputs to the valuation methodology are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

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  Level 2—Inputs to the valuation methodology are quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active or inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

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  Level 3—Inputs to the valuation methodology are unobservable inputs based upon management's best estimate of inputs market participants could use in pricing the asset or liability at the measurement date, including assumptions about risk.

Non-Financial Assets Measured on a Non-Recurring Basis

        Long-lived assets were measured at fair value on a nonrecurring basis using mostly Level 3 inputs as defined in the fair value hierarchy. Fair value of long-lived assets is determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest (which is Level 1). The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located. Significant increases or decreases in actual cash flows may result in valuation changes. During the first quarter of fiscal 2013, long-lived assets from continuing operations with a carrying value of $1,096, primarily store assets, were written down to their fair value of $601, resulting in an impairment charge of $495. During the first quarter of fiscal 2012, long-lived assets with a carrying value of $2,218, primarily store assets, were written down to their fair value of $1,484, resulting in an impairment charge of $734. If our actual future cash flows differ from our projections materially, certain stores that are either not impaired or partially impaired in the current period may be further impaired in future periods.

        The following table presents fair values for those assets measured at fair value on a non-recurring basis at June 2, 2012 and May 28, 2011 (in thousands):

Fair Value Measurement Using
	Level 1		Level 2		Level 3		Total
Long-lived assets held for use
At June 2, 2012	$	—	$	—	$	601	$	601
At May 28, 2011	$	—	$	—	$	1,484	$	1,484

Other Financial Instruments

        Financial instruments other than long-term indebtedness include cash and cash equivalents, accounts receivable and accounts payable. These instruments are recorded at book value, which we believe approximate their fair values due to their short term nature.

        The fair value for LIBOR-based borrowings under the credit facility, term loans and term notes are estimated based on the quoted market price of the financial instrument which is considered Level 1 of the fair value hierarchy. The fair values of substantially all of the Company's other long-term indebtedness are estimated based on quoted market prices of the financial instruments which are considered Level 1 of the fair value hierarchy. The carrying amount and estimated fair value of the Company's total long-term indebtedness was $6,037,055 and $6,003,057, respectively, as of June 2, 2012. There were no outstanding derivative financial instruments as of June 2, 2012 and March 3, 2012.