Fair Value Measurements | 6 Months Ended |
Jan. 03, 2015 |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | FAIR VALUE MEASUREMENTS |
The FASB has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
As of January 3, 2015, the Company held financial instruments that are measured at fair value on a recurring basis. These included cash equivalents and available for sale securities. Cash equivalents consist of money market funds. Short term available for sale securities consist of certificates of deposit. Long term available for sale securities consist of ARS. These ARS consist of federally insured student loan backed securities. |
The Company determined the estimated fair value of its investment in ARS as of January 3, 2015 by reviewing trading activity for similar securities in secondary markets as well as by using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for liquidity (average of LIBOR +5.27%), interest rates (weighted average of 0.2%), timing (range from 11 – 14 years), credit ratings and amount of cash flows and expected holding periods of the ARS and recent trading activity in the secondary marketplace. |
The following items are measured at fair value on a recurring basis as of January 3, 2015: |
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Description | January 3, | | Using Quoted Prices | | Significant | | Significant |
2015 | in | Other | Unobservable |
| Active Markets for | Observable | Inputs |
| Identical Assets | Inputs | |
| | | (Level 1) | | (Level 2) | | (Level 3) |
| Fair value measurements at reporting date |
| (In thousands) |
Cash and cash equivalents | $ | 75,214 | | | $ | 75,214 | | | $ | — | | | $ | — | |
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Current available for sale securities | 19,996 | | | — | | | 19,996 | | | — | |
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Non-current available for sale securities | 5,455 | | | — | | | — | | | 5,455 | |
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Total | $ | 100,665 | | | $ | 75,214 | | | $ | 19,996 | | | $ | 5,455 | |
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The following items are measured at fair value on a recurring basis as of July 5, 2014: |
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Description | July 5, 2014 | | Using Quoted Prices | | Significant | | Significant |
in | Other | Unobservable |
Active Markets for | Observable | Inputs |
Identical Assets | Inputs | |
| | | (Level 1) | | (Level 2) | | (Level 3) |
| Fair value measurements at reporting date |
| (In thousands) |
Cash and cash equivalents | $ | 46,423 | | | $ | 46,423 | | | $ | — | | | $ | — | |
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Current available for sale securities | 18,665 | | | — | | | 18,665 | | | — | |
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Non-current available for sale securities | 11,941 | | | — | | | — | | | 11,941 | |
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Total | $ | 77,029 | | | $ | 46,423 | | | $ | 18,665 | | | $ | 11,941 | |
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The following items are measured at fair value on a recurring basis as of January 4, 2014: |
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Description | 4-Jan-14 | | Using Quoted Prices | | Significant | | Significant |
in | Other | Unobservable |
Active Markets for | Observable | Inputs |
Identical Assets | Inputs | |
| | | (Level 1) | | (Level 2) | | (Level 3) |
| Fair value measurements at reporting date |
| (In thousands) |
Cash and cash equivalents | $ | 46,409 | | | $ | 46,409 | | | $ | — | | | $ | — | |
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Current available for sale securities | 21,977 | | | — | | | 21,977 | | | — | |
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Non-current available for sale securities | 11,124 | | | — | | | — | | | 11,124 | |
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Total | $ | 79,510 | | | $ | 46,409 | | | $ | 21,977 | | | $ | 11,124 | |
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During the quarter ended January 3, 2015, there were no transfers of assets and liabilities between Level 1 (quoted prices in active markets for identical assets) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy. An impairment charge has been recorded in accumulated other comprehensive income that reduces the carrying amount of the applicable non-current assets of $9.0 million to their fair value of $5.5 million as of January 3, 2015. |
The following table presents the Company’s activity for assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months and six months ended January 3, 2015: |
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| Three Months Ended | | Six Months Ended January 3, 2015 | | | | | | | | |
January 3, 2015 | | | | | | | | |
| (In thousands) | | | | | | | | |
Balance at beginning of period | $ | 5,403 | | | $ | 11,941 | | | | | | | | | |
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Total gains or (losses) (realized or unrealized) | | | | | | | | | | | |
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Included in net loss | — | | | — | | | | | | | | | |
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Included in accumulated other comprehensive income | 52 | | | 89 | | | | | | | | | |
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Settlements | — | | | (6,575 | ) | | | | | | | | |
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Balance at end of period | $ | 5,455 | | | $ | 5,455 | | | | | | | | | |
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Non-Financial Assets: |
The Company measures certain non-financial assets and liabilities, including long-lived assets, at fair value on a non-recurring basis. During the three months ended January 3, 2015 and January 4, 2014, the Company recorded impairment charges of approximately $0.2 million and $0.7 million, respectively, related to under-performing stores. During the six months ended January 3, 2015 and January 4, 2014, the Company recorded impairment charges of approximately $0.2 million and $0.9 million, respectively, related to under-performing stores. |
The following table presents the Company’s considerations of at-risk assets for the three month and six month periods ended January 3, 2015 and January 4, 2014, respectively (amounts in millions, except for store count): |
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| Three Months Ended | | Six Months Ended |
| 3-Jan-15 | | 4-Jan-14 | | 3-Jan-15 | | 4-Jan-14 |
Number of stores identified as at risk and evaluated for impairment | 16 | | | 24 | | | 21 | | | 26 | |
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Total carrying amount of stores identified as at risk prior to any impairment charges taken | $ | 2.7 | | | $ | 4.1 | | | $ | 3.4 | | | $ | 4.3 | |
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Less: impairment charges recorded during the period | 0.2 | | | 0.7 | | | 0.2 | | | 0.9 | |
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Remaining carrying amount of stores identified as at risk after impairment charges taken | $ | 2.5 | | | $ | 3.4 | | | $ | 3.2 | | | $ | 3.4 | |
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Number of stores considered at risk, but not impaired | 12 | | | 18 | | | 17 | | | 19 | |
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Total carrying amount of stores identified as at risk, but not impaired | $ | 2.5 | | | $ | 3.3 | | | $ | 3.2 | | | $ | 3.3 | |
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The fair market value of these assets was determined using the income approach and level 3 inputs, which require management to make significant estimates about future operating plans and projected cash flows. Management estimates the amount and timing of future cash flows based on its experience and knowledge of the retail market in which each store operates. The assumptions used in preparing the discounted cash flow model and the related sensitivity analysis around the discounted cash flow model include estimates for weighted average cost of capital 11.0% and annual revenue growth rates (range from 2.0% – 5.0%). The stores not impaired had undiscounted cash flows that exceeded their net carrying amount at a weighted average of 182% and 130% for the three and six month period ended January 3, 2015, respectively. For the three and six month periods ended January 4, 2014, the stores not impaired had undiscounted cash flows that exceeded their net carrying amount at a weighted average of 145% and 154%, respectively. |
The impairment charge is included in selling, general and administrative expenses (“SG&A”) in the accompanying condensed consolidated statements of operations and comprehensive loss. The Company was not required to measure any other significant non-financial assets and liabilities at fair value. |