11. Fair Value Measurements
The Company uses 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:
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Level 1 – Quoted prices in active markets for identical assets or liabilities. |
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Level 2 – Observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
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Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
Financial assets and liabilities
The fair value of the Company’s debt is estimated to be $1,617 million and $1,542 million at February 2, 2013 and January 28, 2012 based on quoted market prices of the debt (level 1 inputs).
In April 2011, the Company entered into interest rate cap and swap agreements in order to hedge the variability of cash flows related to a portion of the Company’s floating rate indebtedness, which are measured in the financial statements at fair value on a recurring basis. See note 10 for more information regarding the fair value of these financial assets and liabilities.
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts payable and other current liabilities approximate fair value because of their short-term nature.
Non-financial assets and liabilities
Except for certain leasehold improvements, the Company does not have any non-financial assets or liabilities as of February 2, 2013 or January 28, 2012 that are measured in the financial statements at fair value.
The Company performs impairment tests of certain long-lived assets whenever there are indicators of impairment. These tests typically contemplate assets at a store level (e.g. leasehold improvements). The Company recognizes an impairment loss when the carrying value of a long-lived asset is not recoverable in light of the undiscounted future cash flows and measures an impairment loss as the difference between the carrying amount and fair value of the asset based on discounted future cash flows. The Company has determined that the future cash flow approach (level 3 inputs) provides the most relevant and reliable means by which to determine fair value in this circumstance.
A summary of the impact of the impairment of certain long-lived assets on financial condition and results of operations is as follows:
| For the Year Ended | For the Period | For the Year Ended | ||||||||||||||||
| February 2, 2013 | March 8, 2011 to January 28, 2012 |
January 30, 2011 to March 7, 2011 |
January 29, 2011 | |||||||||||||||
| (Successor) | (Successor) | (Predecessor) | (Predecessor) | |||||||||||||||
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Carrying value of long-term assets written down to fair value |
$ | 631 | $ | 1,908 | $ | — | $ | 535 | ||||||||||
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Impairment charge |
$ | 631 | $ | 1,908 | $ | — | $ | 535 | ||||||||||
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