Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.7.0.1
Fair Value Measurements
6 Months Ended
Jul. 31, 2017
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.

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, U.S. government agency bonds and Corporate 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 July 31, 2017 and January 31, 2017. There were no fair value measurements of our financial assets and liabilities using significant Level 3 inputs for the periods presented:

 

 

 

 

 

 

 

Fair Value at July 31, 2017 Using

 

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

Significant

 

 

 

 

 

 

 

Active

 

 

Other

 

 

 

 

 

 

 

Markets for

 

 

Observable

 

 

 

July 31,

 

 

Identical Assets

 

 

Inputs

 

 

 

2017

 

 

(Level 1)

 

 

(Level 2)

 

 

 

(Amounts in thousands)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (a)

 

$

2,701

 

 

$

1,998

 

 

$

703

 

Available-for-sale marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

Current marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury notes and bonds - conventional

 

 

1,547

 

 

 

1,547

 

 

 

 

U.S. government agency issues

 

 

2,996

 

 

 

 

 

 

2,996

 

Non-current marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury notes and bonds - conventional

 

 

2,986

 

 

 

2,986

 

 

 

 

U.S. government agency issues

 

 

996

 

 

 

 

 

 

996

 

Corporate bonds

 

 

1,762

 

 

 

 

 

 

1,762

 

Total

 

$

12,988

 

 

$

6,531

 

 

$

6,457

 

 

 

 

 

 

 

 

Fair Value at January 31, 2017 Using

 

 

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

 

 

Prices in

 

 

Significant

 

 

 

 

 

 

 

Active

 

 

Other

 

 

 

 

 

 

 

Markets for

 

 

Observable

 

 

 

January 31,

 

 

Identical Assets

 

 

Inputs

 

 

 

2017

 

 

(Level 1)

 

 

(Level 2)

 

 

 

(Amounts in thousands)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents (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

 

 

(a)

Money market funds and U.S. treasury bills are included in cash and cash equivalents on the accompanying consolidated balance sheets.

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. If 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.

We also have direct investments in privately-held companies, over which we do not have significant influence of their operating and financial activities and account for under the cost-method of accounting. 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. Our ability to realize value from these investments depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

During the three and six months ended July 31, 2017, the Company did not recognize any impairment charges related to goodwill, intangible assets, long-lived assets or 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, U.S. government agency notes and bonds and corporate bonds as of July 31, 2017 and January 31, 2017. 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 income (expenses), net, in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in other income (expenses), net. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other income (expenses), net. We provide fair value measurement disclosures of available-for-sale securities in accordance with one of the 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 July 31, 2017 and January 31, 2017:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

 

(Amounts in thousands)

 

July 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

22,594

 

 

$

 

 

$

 

 

$

22,594

 

Cash equivalents

 

 

2,698

 

 

 

3

 

 

 

 

 

 

2,701

 

Cash and cash equivalents

 

 

25,292

 

 

 

3

 

 

 

 

 

 

25,295

 

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

 

 

1,548

 

 

 

1

 

 

 

(2

)

 

 

1,547

 

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

 

 

2,992

 

 

 

 

 

 

(6

)

 

 

2,986

 

U.S. government agency issues - short-term

 

 

2,983

 

 

 

15

 

 

 

(2

)

 

 

2,996

 

U.S. government agency issues - long-term

 

 

1,003

 

 

 

 

 

 

(7

)

 

 

996

 

Corporate bonds - long-term

 

 

1,763

 

 

 

 

 

 

(1

)

 

 

1,762

 

Total cash, cash equivalents and marketable securities

 

$

35,581

 

 

$

19

 

 

$

(18

)

 

$

35,582

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

The gross realized gains and losses on sale of available-for-sale securities as of July 31, 2017 and January 31, 2017 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 July 31, 2017 are as follows (amounts in thousands):

 

 

 

Estimated

 

 

 

Fair Value

 

Maturity of one year or less

 

$

4,543

 

Maturity between one and five years

 

 

5,744

 

Total

 

$

10,287

 

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 July 31, 2017 and January 31, 2017 was $35.6 million and $38.7 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.