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5. Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market at the measurement date. Fair value is established according to a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. Level 3 inputs are given the lowest priority in the fair value hierarchy.
As of July 28, 2012, the Company’s investment securities are classified as held-to-maturity since the Company has the intent and ability to hold the investments to maturity. Such securities are carried at amortized cost plus accrued interest and consist of the following (in thousands):
|
|
|
Amortized
Cost |
|
Gross
Unrealized
Gains |
|
Gross
Unrealized
Losses |
|
Fair Market
Value |
|
|
Short-term: |
|
|
|
|
|
|
|
|
|
|
Obligations of states and municipalities (Level 2) |
|
$ |
259 |
|
$ |
1 |
|
$ |
— |
|
$ |
260 |
|
|
Bank certificates of deposit (Level 2) |
|
3,052 |
|
3 |
|
— |
|
3,055 |
|
|
|
|
$ |
3,311 |
|
$ |
4 |
|
$ |
— |
|
$ |
3,315 |
|
|
Long-term: |
|
|
|
|
|
|
|
|
|
|
Obligations of the U. S. Treasury (Level 1) |
|
$ |
4,989 |
|
$ |
56 |
|
$ |
— |
|
$ |
5,045 |
|
|
Obligations of states and municipalities (Level 2) |
|
1,511 |
|
12 |
|
— |
|
1,523 |
|
|
Bank certificates of deposit (Level 2) |
|
9,897 |
|
4 |
|
— |
|
9,901 |
|
|
|
|
$ |
16,397 |
|
$ |
72 |
|
$ |
— |
|
$ |
16,469 |
|
The amortized cost and fair market value of investment securities as of July 28, 2012 by contractual maturity are as follows (in thousands):
|
|
|
Amortized
Cost |
|
Fair
Market
Value |
|
|
Mature in one year or less |
|
$ |
3,311 |
|
$ |
3,315 |
|
|
Mature after one year through five years |
|
16,397 |
|
16,469 |
|
|
|
|
$ |
19,708 |
|
$ |
19,784 |
|
As of January 28, 2012, the Company’s investment securities were classified as held-to-maturity and consisted of the following (in thousands):
|
|
|
Amortized
Cost |
|
Gross
Unrealized
Gains |
|
Gross
Unrealized
Losses |
|
Fair
Market
Value |
|
|
Short-term: |
|
|
|
|
|
|
|
|
|
|
Bank certificates of deposit (Level 2) |
|
$ |
902 |
|
$ |
1 |
|
$ |
— |
|
$ |
903 |
|
|
Long-term: |
|
|
|
|
|
|
|
|
|
|
Obligations of the U. S. Treasury (Level 1) |
|
$ |
4,986 |
|
$ |
77 |
|
$ |
— |
|
$ |
5,063 |
|
|
Obligations of states and municipalities (Level 2) |
|
1,809 |
|
19 |
|
— |
|
1,828 |
|
|
Bank certificates of deposit (Level 2) |
|
12,045 |
|
— |
|
1 |
|
12,044 |
|
|
|
|
$ |
18,840 |
|
$ |
96 |
|
$ |
1 |
|
$ |
18,935 |
|
The amortized cost and fair market value of investment securities as of January 28, 2012 by contractual maturity were as follows (in thousands):
|
|
|
Amortized
Cost |
|
Fair
Market
Value |
|
|
Mature in one year or less |
|
$ |
902 |
|
$ |
903 |
|
|
Mature after one year through five years |
|
18,840 |
|
18,935 |
|
|
|
|
$ |
19,742 |
|
$ |
19,838 |
|
There were no changes among the levels in the twenty-six weeks ended July 28, 2012.
Fair market values of Level 2 investments are determined by management with the assistance of a third party pricing service. Since quoted prices in active markets for identical assets are not available, these prices are determined by the third party pricing service using observable market information such as quotes from less active markets and quoted prices of similar securities.
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