Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.5.0.2
Fair Value Measurements
9 Months Ended
Oct. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
3. Fair Value Measurements

Definition and Hierarchy

The applicable accounting guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance establishes a framework for measuring fair value and expands required disclosure about the fair value measurements of assets and liabilities. This guidance requires us to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a non-recurring basis in periods subsequent to initial measurement, in a fair value hierarchy.

The fair value hierarchy is broken down into three levels based on the reliability of inputs and requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required, as well as the assets and liabilities that we value using those levels of inputs:

 

    Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

 

    Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not very active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

    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. The fair value of the contingent consideration obligations related to our business acquisitions are valued using Level 3 inputs.

Valuation Techniques

Inputs to valuation techniques are observable and unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. When developing fair value estimates for certain financial assets and liabilities, we maximize the use of observable inputs and minimize the use of unobservable inputs. When available, we use quoted market prices, market comparables and discounted cash flow projections. Financial assets include money market funds, U.S. treasury notes or bonds and U.S. government agency bonds.

In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine fair value. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs that are observable either directly or indirectly. In periods of market inactivity, the observability of prices and inputs may be reduced for certain instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

 

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following tables set forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of October 31, 2016 and January 31, 2016. There were no fair value measurements of our financial assets and liabilities using significant Level 3 inputs for the periods presented:

 

            Fair Value at October 31, 2016 Using  
            Quoted         
            Prices in      Significant  
            Active      Other  
            Markets for      Observable  
     October 31,      Identical Assets      Inputs  
     2016      (Level 1)      (Level 2)  
     (Amounts in thousands)  

Financial assets:

        

Money market accounts (a)

   $ 2,721       $ 2,721       $ —     

Available-for-sale marketable securities:

        

Current marketable securities:

        

U.S. treasury notes and bonds - conventional

     4,256         4,256         —     

Non-current marketable securities:

        

U.S. treasury notes and bonds - conventional

     2,004         2,004         —     

U.S. government agency issues

     4,010         —           4,010   
  

 

 

    

 

 

    

 

 

 

Total

   $ 12,991       $ 8,981       $ 4,010   
  

 

 

    

 

 

    

 

 

 

 

            Fair Value at January 31, 2016 Using  
            Quoted         
            Prices in      Significant  
            Active      Other  
            Markets for      Observable  
     January 31,      Identical Assets      Inputs  
     2016      (Level 1)      (Level 2)  
     (Amounts in thousands)  

Financial assets:

        

Money market accounts (a)

   $ 3,654       $ 3,654       $ —     

Available-for-sale marketable securities:

        

Current marketable securities:

        

U.S. treasury notes and bonds - conventional

     502         502         —     

U.S. government agency issues

     1,002         —           1,002   

Non-current marketable securities:

        

U.S. treasury notes and bonds - conventional

     7,762         7,762      

U.S. government agency issues

     3,002         —           3,002   
  

 

 

    

 

 

    

 

 

 

Total

   $ 15,922       $ 11,918       $ 4,004   
  

 

 

    

 

 

    

 

 

 

 

(a) Money market funds and U.S. treasury bills are included in cash and cash equivalents on the accompanying consolidated balance sheets and are valued at quoted market prices for identical instruments in active markets.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible property and equipment, goodwill, and other intangible assets, which are re-measured when the derived fair value is below carrying value on our consolidated balance sheets. For these assets and liabilities, we do not periodically adjust carrying value to fair value except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded to loss from impairment in our consolidated statements of operations and comprehensive loss. During the three and nine months ended October 31, 2016, we recorded a $0.1 million loss on impairment of long-lived assets in our consolidated statements of operations and comprehensive loss. This impairment was taken on an asset group classified as an asset held for sale on our consolidated balance sheet as of October 31, 2016, (as disclosed in Note 5, “Consolidated Balance Sheet Detail”). This impairment was determined based on Level 2 inputs, as the valuation methodologies used to determine impairment considered a purchase and sale agreement from a potential buyer of the asset group.

We also have direct investments in privately-held companies accounted for under the cost method of accounting, of which we do not have significant influence over their operating and financial activities. Management periodically assesses these investments for other-than-temporary impairment considering available information provided by the investees and any other readily available market data. If we determine that an other-than-temporary impairment has occurred, we write down the investment to its fair value. For the three and nine months ended October 31, 2016, we determined there were no other-than-temporary impairments on our cost method investments.

Available-For-Sale Securities

We determine the appropriate classification of debt investment securities at the time of purchase and reevaluate such designation as of each balance sheet date. Our investment portfolio consists of money market funds, U.S. treasury notes and bonds, and U.S. government agency notes and bonds as of October 31, 2016 and January 31, 2016. All highly liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. All cash equivalents are carried at cost, which approximates fair value. Our marketable securities are classified as available-for-sale and are reported at fair value with unrealized gains and losses, net of tax, reported in stockholders’ equity as a component of accumulated other comprehensive loss. The amortization of premiums and accretion of discounts to maturity are computed under the effective interest method and are included in other (expenses) income, net, in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in other (expenses) income, net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other (expenses) income, net. We provide fair value measurement disclosures of available-for-sale securities in accordance with one of three levels of fair value measurement mentioned above.

 

The following is a summary of cash, cash equivalents and available-for-sale securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for short- and long-term marketable securities portfolio as of October 31, 2016 and January 31, 2016:

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 
     (Amounts in thousands)  

October 31, 2016:

           

Cash

   $ 24,763       $ —         $ —         $ 24,763   

Cash equivalents

     2,721         —           —           2,721   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents

     27,484         —           —           27,484   
  

 

 

    

 

 

    

 

 

    

 

 

 

U.S. treasury notes and bonds - short-term

     4,250         6         —           4,256   

U.S. treasury notes and bonds - long-term

     2,004         1         (1      2,004   

U.S, government agency issues - long-term

     3,987         23         —           4,010   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents and marketable securities

   $ 37,725       $ 30       $ (1    $ 37,754   
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2016:

           

Cash

   $ 55,079       $ —         $ —         $ 55,079   

Cash equivalents

     3,654         —           —           3,654   
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and cash equivalents

     58,733         —           —           58,733   
  

 

 

    

 

 

    

 

 

    

 

 

 

U.S. treasury notes and bonds - short-term

     503         —           (1      502   

U.S. treasury notes and bonds - long-term

     7,756         6         —           7,762   

U.S, government agency issues - short-term

     1,001         1         —           1,002   

U.S, government agency issues - long-term

     2,977         25            3,002   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash, cash equivalents and marketable securities

   $ 70,970       $ 32       $ (1    $ 71,001   
  

 

 

    

 

 

    

 

 

    

 

 

 

The gross realized gains and losses on sale of available-for-sale securities as of October 31, 2016 and January 31, 2016 were immaterial. For purposes of determining gross realized gains and losses, the cost of securities is based on specific identification.

Contractual maturities of available-for-sale investments as of October 31, 2016 are as follows (amounts in thousands):

 

     Estimated
Fair Value
 

Maturity of one year or less

   $ 4,256   

Maturity between one and five years

     6,014   
  

 

 

 

Total

   $ 10,270   
  

 

 

 

Cash, Cash Equivalents and Marketable Securities

Cash and cash equivalents consist primarily of highly liquid investments in money market mutual funds, government sponsored enterprise obligations, treasury bills, commercial paper and other money market securities with remaining maturities at date of purchase of 90 days or less.

The fair value of cash, cash equivalents, restricted cash and marketable securities at October 31, 2016 and January 31, 2016 was $37.9 million and $71.1 million, respectively.

The Company believes that existing funds and cash provided by future operating activities are adequate to satisfy our working capital, potential acquisitions and capital expenditure requirements and other contractual obligations for the foreseeable future, including at least the next 12 months.

Restricted Cash

At times, we may be required to maintain cash held as collateral for performance obligations with our customers which we classify as restricted cash on our consolidated balance sheets. As of October 31, 2016 and January 31, 2016 we had $0.1 million in restricted cash related to performance obligations.