4. Investments in Marketable Securities

Fair Value Measurements of Assets and Liabilities

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, 2014 and January 31, 2013:

 

						Fair Value at January 31, 2014 Using
		January 31, 2014				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(Amounts in thousands)
Financial assets:
Cash		$	112,271			$	112,271			$	—			$	—
Money market accounts (a)			3,463				3,463				—				—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds—conventional			3,545				3,545				—				—
U.S. government agency issues			2,010				—				2,010				—
Non-current marketable securities:
U.S. government agency issues			6,814				—				6,814				—
Total		$	128,103			$	119,279			$	8,824			$	—

 

						Fair Value at January 31, 2013 Using
		January 31, 2013				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
		(Amounts in thousands)
Financial assets (b):
Cash		$	104,109			$	104,109			$	—			$	—
Money market accounts (a)			2,612				2,612				—				—
Available for sale marketable securities:
Current marketable securities:
U.S. treasury notes and bonds—conventional			2,016				2,016				—				—
U.S. government agency issues			4,034				—				4,034				—
Non-current marketable securities:
U.S. treasury notes and bonds—conventional			2,071				2,071				—				—
U.S. government agency issues			5,098				—				5,098				—
Total		$	119,940			$	110,808			$	9,132			$	—
Other liabilities:
Acquisition-related consideration (c)		$	5,656			$	—			$	—			$	5,656

 

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

b)	The above table reflects a revision to reclassify $9.1 million of investments in U.S. treasury notes and bonds held as of January 31, 2013 from Level 1 to Level 2. Management believes this revision is not significant to the financial statements.

c)	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 fiscal year ended January 31, 2014 (amounts in thousands):

 

		Level 3 Accrued Contingent Consideration
Ending balance January 31, 2013		$	5,656
Change in fair value of contingent consideration			(60	)
Contingency payment/Issuance of stock			(5,619	)
Translation adjustment			23
Ending balance January 31, 2014		$	—

 

Available-for-Sale Securities

We rely on mark to market valuations to record the fair value of our available for sale security assets which are measured under a Level 1 input. These assets are publicly-traded equity securities for which market prices are readily observable and recorded. At January 31, 2014 and 2013, we had $5.6 million and $6.1 million, respectively, in short-term marketable securities and $6.8 million and $7.2 million, respectively, in long-term marketable securities.

We determine the appropriate classification of debt 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. 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 accretions of discounts to maturity are computed under the effective interest method and is included in interest income. 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 (expenses) income, net.

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 January 31, 2014 and 2013:

 

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
		(Amounts in thousands)
January 31, 2014:
Cash		$	112,271			$	—			$	—			$	112,271
Cash equivalents			3,463				—				—				3,463
Cash and cash equivalents			115,734				—				—				115,734
U.S. treasury notes and bonds—short-term			3,540				5								3,545
U.S. government agency issues—short-term			2,005				5				—				2,010
U.S. government agency issues—long-term			6,806				8								6,814
Total cash, cash equivalents and marketable securities		$	128,085			$	18			$	—			$	128,103
January 31, 2013:
Cash		$	104,109			$	—			$	—			$	104,109
Cash equivalents			2,612				—				—				2,612
Cash and cash equivalents			106,721				—				—				106,721
U.S. treasury notes and bonds—short-term			2,015				1								2,016
U.S. treasury notes and bonds—long-term			2,064				7								2,071
U.S. government agency issues—short-term			4,027				7				—				4,034
U.S. government agency issues—long-term			5,083				15								5,098
Total cash, cash equivalents and marketable securities		$	119,910			$	30			$	—			$	119,940

The gross realized gains and losses on sale of available-for-sale securities for fiscal years 2014, 2013 and 2012 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, 2014 are as follows (amounts in thousands):

 

		Estimated Fair Value
Maturity of one year or less		$	5,555
Maturity between one and five years			6,814
Total		$	12,369

We concluded that there were no other than temporary declines in investments recorded as of January 31, 2014, 2013 and 2012. The unrealized holding losses, net of tax, on available-for-sale securities in the amount of approximately $12,000, approximately $6,000 and $0.1 million for the years ended January 31, 2014, 2013 and 2012, respectively, 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 (including restricted cash), cash equivalents and marketable securities at January 31, 2014 and 2013 was $128.1 million and $120.9 million, respectively.