3. Fair Value Measurements

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 January 31, 2017 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 January 31, 2017 Using
		January 31, 2017				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)
		(Amounts in thousands)
Financial assets:
Money market accounts (a)		$	2,726			$	2,726			$	—
Available-for-sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds—conventional			4,253				4,253				—
U.S. government agency issues			1,000				—				1,000
Non-current marketable securities:
U.S. treasury notes and bonds—conventional			1,997				1,997				—
U.S. government agency issues			2,994				—				2,994
Total		$	12,970			$	8,976			$	3,994

 

						Fair Value at January 31, 2016 Using
		January 31, 2016				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (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 of long-lived assets in our consolidated statements of operations and comprehensive loss.

In the third quarter of fiscal 2017, we finalized our “Step 1” analysis of our annual goodwill impairment test. Our forecast indicated that the estimated fair value of our reporting unit’s net assets may be less than its carrying value which is a potential indicator of impairment. As such, we were required to perform “Step 2” of the impairment test during which we compared the implied fair value of our goodwill to its carrying value. We completed the goodwill impairment testing of our reporting unit during the fourth quarter of fiscal 2017 and recorded an impairment charge of $23.5 million to loss on impairment of long-lived assets in our consolidated statements of operations and comprehensive loss (see Note 6, “Goodwill and Intangible Assets” to this Form 10-K for more information). This impairment was determined based on Level 2 inputs, as we used a third-party valuation firm to assist in the calculation of fair value.

In January 2017, after a potential buyer declined to purchase our facility in Greenville, New Hampshire, we determined that the sale of this facility was not imminent due to the location of the building and the overall market conditions in the area and decided to fully impair the facility because the carrying amount was greater than the fair value. As a result, we recorded a $0.3 million loss on impairment of long-lived assets in our consolidated statements of operations and comprehensive loss.

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. This impairment was determined based on Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value.

In the fourth quarter of fiscal 2017, we determined that the fair value of a certain cost-method investments was less than its carrying value. Accordingly, we recorded a $0.5 million impairment charge in January 2017 which is included in loss on investment in affiliates in our consolidated statements of operations and comprehensive loss. The cost-method investment is a privately-held entity without quoted market prices and therefore, falls within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine its fair value. In determining the fair value of this cost-method investment, we considered many factors including, but not limited to, operating performance of the investee, the amount of cash that the investee has on hand and the overall market conditions in which the investee operates.

As of January 31, 2016, the Company reviewed the projected future cash flows of the Timeline Labs operations and determined that the carrying amount was greater than the fair value. As a result, all long-term assets related to Timeline Labs were fully impaired and reflected as a $21.9 million loss on impairment of long-lived assets in our consolidated statements of operations and comprehensive loss for the fiscal year ended January 31, 2016 which included: i) $15.8 million relating to the Timeline Labs acquired goodwill, ii) $5.2 million of acquired intangible assets, and iii) $0.9 million of capitalized internal use software. Additionally, we reduced the contingent consideration liability associated with the Timeline Labs acquisition to zero, as we determined the defined performance criteria would not be achieved. Therefore, we recorded the reversal of the liability of $0.4 million to the loss on impairment of assets.

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 January 31, 2017 and 2016. All highly liquid investments with an original maturity of three months or less when purchased are 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 accretions of discounts to maturity are computed under the effective interest method and is included in other expenses, net, in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in other expenses, net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other expenses, 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 unrealized gains and losses, for short-and long-term marketable securities portfolio as of January 31, 2017 and 2016:

 

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
		(Amounts in thousands)
January 31, 2017:
Cash		$	25,576			$	—			$	—			$	25,576
Cash equivalents			2,726				—				—				2,726
Cash and cash equivalents			28,302				—				—				28,302
U.S. treasury notes and bonds—short-term			4,248				5				—				4,253
U.S. treasury notes and bonds—long-term			2,003				—				(6	)			1,997
U.S. government agency issues—short-term			991				9				—				1,000
U.S. government agency issues—long-term			2,996				—				(2	)			2,994
Total cash, cash equivalents and marketable securities		$	38,540			$	14			$	(8	)		$	38,546
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 for fiscal 2017, 2016 and 2015 were immaterial. For purposes of determining gross realized gains and losses, the cost of securities sold is based on specific identification.

Contractual maturities of available-for-sale debt securities at January 31, 2017 are as follows (amounts in thousands):

 

		Estimated Fair Value
Maturity of one year or less		$	5,253
Maturity between one and five years			4,991
Total		$	10,244

We concluded that there were no other-than-temporary declines of available-for-sale securities as of January 31, 2017, 2016 and 2015. The unrealized holding losses, net of tax, on available-for-sale securities, which are not material for the periods presented, have been included in stockholders’ equity as a component of accumulated other comprehensive loss.

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 January 31, 2017 and 2016 was $38.7 million and $71.1 million, respectively.

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 January 31, 2017 and 2016, we had $0.1 million in restricted cash related to performance obligations.