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9. Fair Value
ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either level 1 or level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy.
The hierarchy consists of three broad levels as follows:
Level 1 – Quoted market prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than level 1 inputs that are either directly or indirectly observable, and
Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use.
The determination of where an asset or liability falls in the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter based on various factors, and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare.
Recurring Basis
The following tables present information about assets measured at fair value on a recurring basis:
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Fair value measurements as of July 31, 2022, using: |
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Quoted prices |
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Significant |
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|
|
|
|
|
|
|
|
in active |
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other |
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Significant |
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|
|
|
|
|
markets for |
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observable |
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unobservable |
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|
|
|
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identical assets |
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|
inputs |
|
inputs |
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|
|
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(amounts in thousands) |
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Level 1 |
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Level 2 |
|
Level 3 |
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Total |
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Assets: |
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|
|
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U.S. Government Money Market Fund |
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$ |
8,853 |
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N/A |
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N/A |
|
$ |
8,853 |
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Growth Allocation Mutual Funds |
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|
464 |
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|
N/A |
|
N/A |
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|
464 |
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|
Moderate Allocation Mutual Fund |
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82 |
|
|
N/A |
|
N/A |
|
|
82 |
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Other |
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|
168 |
|
|
N/A |
|
N/A |
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|
168 |
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|
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Fair value measurements as of August 1, 2021, using:
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Quoted prices |
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Significant |
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|
|
|
|
|
|
|
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in active |
|
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other |
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Significant |
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|
|
|
|
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markets for |
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observable |
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unobservable |
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|
|
|
|
|
|
identical assets |
|
|
inputs |
|
inputs |
|
|
|
|
|
(amounts in thousands) |
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Level 1 |
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|
Level 2 |
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Level 3 |
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Total |
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Assets: |
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|
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|
|
|
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|
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U.S. Government Money Market Fund |
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$ |
8,205 |
|
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N/A |
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N/A |
|
$ |
8,205 |
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Bond Mutual Funds |
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4,656 |
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N/A |
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N/A |
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4,656 |
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Inflation Protected Bond Mutual Funds |
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2,979 |
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N/A |
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N/A |
|
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2,979 |
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Mortgage Securities Mutual Funds |
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1,124 |
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N/A |
|
N/A |
|
|
1,124 |
|
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Large Cap Equity Mutual Funds |
|
|
708 |
|
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N/A |
|
N/A |
|
|
708 |
|
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Growth Allocation Mutual Funds |
|
|
419 |
|
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N/A |
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N/A |
|
|
419 |
|
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U.S. Event Driven Equity Mutual Fund |
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|
194 |
|
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N/A |
|
N/A |
|
|
194 |
|
|
Moderate Allocation Mutual Fund |
|
|
91 |
|
|
N/A |
|
N/A |
|
|
91 |
|
|
Other |
|
|
163 |
|
|
N/A |
|
N/A |
|
|
163 |
|
|
|
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Fair value measurements as of May 1, 2022, using:
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Quoted prices |
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Significant |
|
|
|
|
|
|
|
|
|
in active |
|
|
other |
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Significant |
|
|
|
|
|
|
|
markets for |
|
|
observable |
|
unobservable |
|
|
|
|
|
|
|
identical assets |
|
|
inputs |
|
inputs |
|
|
|
|
|
(amounts in thousands) |
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Level 1 |
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|
Level 2 |
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Level 3 |
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Total |
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Assets: |
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|
|
|
|
|
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|
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|
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U.S. Government Money Market Fund |
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$ |
8,683 |
|
|
N/A |
|
N/A |
|
$ |
8,683 |
|
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Growth Allocation Mutual Funds |
|
|
435 |
|
|
N/A |
|
N/A |
|
|
435 |
|
|
Moderate Allocation Mutual Fund |
|
|
81 |
|
|
N/A |
|
N/A |
|
|
81 |
|
|
Other |
|
|
158 |
|
|
N/A |
|
N/A |
|
|
158 |
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Short-Term Investments – Available for Sale
During the fourth quarter of fiscal 2022, we sold all of our remaining short-term investments classified as available-for-sale, and therefore we did not report short-term investments classified as available-for-sale in the accompanying Consolidated Balance Sheets as of July 31, 2022, and May 1, 2022. As of August 1, 2021, our short-term investments classified as available-for-sale (i) consisted of various types of bond and equity mutual funds, (ii) were recorded at their fair value totaling $9.7 million, (iii) had an unrealized gain of $143,000, (iv) approximated their cost basis, and (v) resided with our U.S. operations.
Short-Term and Long-Term Investments - Held-To-Maturity
During the fourth quarter of fiscal 2022, we sold all of our remaining investments classified as held-to-maturity, and therefore we did not report short-term or long-term investments classified as held-to-maturity in the accompanying Consolidated Balance Sheets as of July 31, 2022, and May 1, 2022. As of August 1, 2021, our investments classified as held-to-maturity consisted of investment grade U.S. corporate bonds, foreign bonds, and government bonds. These investments were classified as held-to-maturity as we had the positive intent and ability to hold these investments until maturity. Our held-to-maturity investments were recorded as either current or noncurrent in our Consolidated Balance Sheets, based on the maturity date in relation to the respective reporting period and were recorded at amortized cost.
As of August 1, 2021, our held-to-maturity investments had an amortized cost and fair value totaling $8.3 million and resided with our U.S. operations.
Our held-to-maturity investments were classified as level 2 within the fair value hierarchy as they were traded over the counter within a broker network and not on an active market. The fair values of our held-to-maturity investments were determined based on a published source that provided an average bid price. The average bid price was based on various broker prices that were determined based on market conditions, interest rates, and the rating of the respective bond investment.
Long-Term Investments - Rabbi Trust
We have a rabbi trust for the participants of our deferred compensation plan (the “Plan”), that enables participants to credit their contributions to various investment options under the Plan. The investments associated with the rabbi trust consist of a U.S. Government money market fund and various equity related mutual funds that are classified as available-for-sale.
Our long-term investments associated with our rabbi trust are classified as available-for-sale and recorded at their fair values of $9.6 million, $8.8 million, and $9.4 million as of July 31, 2022, August 1, 2021, and May 1, 2022, respectively. The long-term investments associated with our rabbi trust had an accumulated unrealized gain of $25,000, $151,000, and $32,000, as of July 31, 2022, August 1, 2021, and May 1, 2022, respectively. The fair value of our long-term investments associated with our rabbi trust approximates their cost basis.
Other
The carrying amount of our cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses approximated their fair value because of the short maturity of these financial instruments.
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