Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
 3 Months Ended
Apr. 30, 2013
Investments In Marketable Securities Disclosure [Abstract]  
Fair Value Disclosures [Text Block]

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. Assets utilizing Level 1 inputs include money market funds and U.S. government securities.
· 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. We did not have any Level 2 assets or liabilities at April 30, 2013 or January 31, 2013.
· 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 measurements of the contingent consideration obligations related to the acquisitions of Flashlight, VividLogic and eventIS are valued using Level 3 inputs.

 

Valuation Techniques

 

We measure certain financial assets and liabilities at fair value based on valuation techniques using the best information available, which may include quoted market prices, market comparables and discounted cash flow projections. Financial instruments include money market funds, corporate debt investments, asset-backed securities, government-sponsored enterprises and state municipal obligations.

 

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. There were no reclassifications from Level 1 to Level 2 at April 30, 2013 and January 31, 2013.

 

Marketable Securities

 

We determine the appropriate classification of debt investment securities at the time of purchase and re-evaluate such designation as of each balance sheet date. Our investment portfolio consists primarily of money market funds as of April 30, 2013 and January 31, 2013, but can consist of corporate debt investments, asset-backed securities and government-sponsored enterprises. 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 income or loss. The amortization of premiums and accretion of discounts to maturity are computed under the effective interest method and are included in interest income in our consolidated statements of operations and comprehensive loss. Interest on securities is recorded as earned and is also included in interest income. Any realized gains or losses would be shown in the accompanying consolidated statements of operations and comprehensive loss in other income or expense. We provide fair value measurement disclosures of available-for-sale securities in accordance with one of three levels of fair value measurement mentioned above.

  

Our financial assets and liabilities that are measured at fair value on a recurring basis as of April 30, 2013 and January 31, 2013 are as follows:

 

          Fair Value at April 30, 2013 Using  
          Quoted              
          Prices in     Significant        
          Active     Other     Significant  
          Markets for     Observable     Unobservable  
    April 30,     Identical Assets     Inputs     Inputs  
    2013     (Level 1)     (Level 2)     (Level 3)  
    (Amounts in thousands)  
Financial assets:                        
Cash   $ 105,525     $ 105,525     $ -     $ -  
Money market accounts (a)     3,664       3,664       -       -  
Available for sale marketable securities:                                
Current marketable securities:                                
U.S. government agency issues     5,037       5,037       -       -  
Non-current marketable securities:                                
U.S. government agency issues     7,154       7,154       -       -  
Total   $ 121,380     $ 121,380     $ -     $ -  
                                 
Other liabilities:                                
Acquisition-related consideration (b)   $ 2,388     $ -     $ -     $ 2,388  

 

          Fair Value at January 31, 2013 Using  
          Quoted              
          Prices in     Significant        
          Active     Other     Significant  
          Markets for     Observable     Unobservable  
    January 31,     Identical Assets     Inputs     Inputs  
    2013     (Level 1)     (Level 2)     (Level 3)  
    (Amounts in thousands)  
Financial assets:                        
Cash   $ 104,109     $ 104,109     $ -     $ -  
Money market accounts (a)     2,612       2,612       -       -  
Available for sale marketable securities:                                
Current marketable securities:                                
U.S. government agency issues     6,104       6,104       -       -  
Non-current marketable securities:                                
U.S. government agency issues     7,169       7,169       -       -  
Total   $ 119,994     $ 119,994     $ -     $ -  
                                 
Other liabilities:                                
Acquisition-related consideration (b)   $ 5,656     $ -     $ -     $ 5,656  

 

(a) Money market funds and U.S. government agency securities, included in cash and cash equivalents on the 
accompanying consolidated balance sheet, are valued at quoted market prices for identical instruments in active
 markets.
(b) The fair value of our contingent consideration arrangement is determined based on our evaluation as to the 
probability and amount of any earn-out that will be achieved based on expected future performance by the
acquired entity, as well as the fair value of fixed purchase price.

  

The following table sets forth a reconciliation of liabilities measured at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) for the three months ended April 30, 2013 (amounts in thousands):

 

    Level 3  
    Accrued Contingent  
    Consideration  
       
Ending balance January 31, 2013   $ 5,656  
Change in fair value of contingent consideration     20  
Contingency payment     (3,206 )
Translation adjustment     (82 )
Ending balance April 30, 2013   $ 2,388  

 

The following is a summary of available-for-sale securities, including the cost basis, aggregate fair value and gross unrealized gains and losses, for cash equivalents, short- and long-term marketable securities portfolio as of April 30, 2013 and January 31, 2013:

 

    Amortized
Cost		     Gross
Unrealized
Gains		     Gross
Unrealized
Losses		     Estimated
Fair Value		  
    (Amounts in thousands)  
April 30, 2013:                        
Cash   $ 105,525     $ -     $ -     $ 105,525  
Cash equivalents     3,664       -       -       3,664  
Cash and cash equivalents     109,189       -       -       109,189  
U.S. government agency issues     5,030       7       -       5,037  
Corporate debt securities     -       -       -       -  
Marketable securities—short-term     5,030       7       -       5,037  
                                 
U.S. government agency issues     7,127       27       -       7,154  
Marketable securities—long-term     7,127       27       -       7,154  
Total cash equivalents and marketable securities   $ 121,346     $ 34     $ -     $ 121,380  
                                 
January 31, 2013:                                
Cash   $ 104,109     $ -     $ -     $ 104,109  
Cash equivalents     2,612       -       -       2,612  
Cash and cash equivalents     106,721       -       -       106,721  
U.S. government agency issues     6,043       61       -       6,104  
Corporate debt securities     -       -       -       -  
Marketable securities—short-term     6,043       61       -       6,104  
                                 
U.S. government agency issues     7,147       22       -       7,169  
Marketable securities—long-term     7,147       22       -       7,169  
Total cash equivalents and marketable securities   $ 119,911     $ 83     $ -     $ 119,994  

 

The following is a schedule of the contractual maturities of available-for-sale investments:

 

    Estimated  
    Fair Value  
Maturity of one year or less   $ 5,037  
Maturity between one and five years     7,154  
Total   $ 12,191