Old COPPER Company, Inc. - 10-K filing on 2014-03-21

Fair Value Disclosures

12 Months Ended

Feb. 01, 2014

In determining fair value, the accounting standards establish a three level hierarchy for inputs used in measuring fair value, as follows:


•	Level 1 — Quoted prices in active markets for identical assets or liabilities.


•	Level 2 — Significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 — Significant unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.

REIT Assets Measured on a Recurring Basis

During 2013 and 2012, we sold all of our investments in public REIT assets (see Note 17). The market values of our investment in public REIT assets were accounted for as available-for-sale securities and were carried at fair value on an ongoing basis in Other assets in the Consolidated Balance Sheets. We determined the fair value of our investment in public REIT assets using quoted market prices. There were no transfers in or out of any levels during any period presented.

Our REIT assets measured at fair value are as follows:



			REIT Assets - Fair Value Measurements at Reporting Date Using
($ in millions)	Cost Basis		Quoted Prices in Active Markets of Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of February 1, 2014	$	—	$	—	$	—	$	—
As of February 2, 2013	7		33		—		—

Other Non-Financial Assets Measured on a non-Recurring Basis

The following table presents fair values for those assets measured at fair values and gains or losses during 2013 and 2012 on a non-recurring basis, and remaining on our Consolidated Balance Sheet:



			Fair Value Measurements at Reporting Date Using
($ in millions)	Carrying Value		Quoted Prices in Active Markets of Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Gains (Losses)
As of February 1, 2014
Store assets	$	2	$	—	$	—	$	2	$	(18	)
Intangible asset (Note 6)	5		—		—		5		(9		)
Total	$	7	$	—	$	—	$	7	$	(27	)
As of February 2, 2013
Store assets	8		—		—		8		(26		)
Total	$	8	$	—	$	—	$	8	$	(26	)

In 2013, assets of 25 underpeforming department stores that continued to operate with carrying values of $20 million were written down to their estimated fair values of $2 million resulting in impairment charges of $18 million. In 2012, assets of 13 underpeforming department stores that continued to operate with carrying values of $34 million were written down to their estimated fair values of $8 million, resulting in impairment charges of $26 million. These impairment charges are recorded in the line item Real estate and other, net in the Consolidated Statements of Operations. Key assumptions used to determine fair values were future cash flows including, among other things, expected future operating performance and changes in economic conditions as well as other market information obtained from brokers.

During the fourth quarter of 2013, as a result of sales performance below our expectations, we decided to reduce our future product offerings under the monet trade name, indicating a possible impairment. We tested our indefinite-lived intangible asset monet utilizing the relief from royalty method to determine the estimated fair value. The relief from royalty method estimates our theoretical royalty savings from ownership of the intangible asset. Key assumptions in determining relief from royalty include, among other things, discount rates, royalty rates, growth rates, sales projections and terminal value rates. In 2013, our ownership of the U.S. and Puerto Rico rights of the monet trade name, with a carrying amount of $14 million, was written down to its estimated fair value of $5 million, resulting in an impairment charge of $9 million recorded in the line item Real estate and other, net in the Consolidated Statements of Operations.

Other Financial Instruments

Carrying values and fair values of financial instruments that are not carried at fair value in the Consolidated Balance Sheets are as follows:



	As of February 1, 2014				As of February 2, 2013
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current maturities	$	4,862	$	4,209	$	2,868	$	2,456
Cost investment (Note 16)	—		—		36		—

The fair value of long-term debt is estimated by obtaining quotes from brokers or is based on current rates offered for similar debt. The cost investment was for equity securities that were not registered and freely tradable shares and their fair values were not readily determinable; however, we believe the carrying value approximated or was less than the fair value.

As of February 1, 2014 and February 2, 2013, the fair values of cash and cash equivalents, accounts payable and short-term borrowings approximate their carrying values due to the short-term nature of these instruments. In addition, the fair values of the capital lease commitments and the note payable approximate their carrying values. These items have been excluded from the table above.

Concentrations of Credit Risk

We have no significant concentrations of credit risk.