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Fair Value
 6 Months Ended
Jul. 31, 2012
Fair Value

4. Fair Value

The Company utilizes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach that relate to its financial assets and financial liabilities). The levels of the hierarchy are described as follows:

 

  •  

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

 

  •  

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

  •  

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

 

Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and liabilities and their placement within the fair value hierarchy. The Company’s financial assets that are accounted for at fair value on a recurring basis are presented in the tables below:

 

     Marketable Securities Fair Value as of
July 31, 2012		  
     Level 1      Level 2      Level 3      Total  

Assets:

            

Corporate bonds

    $ 101,813       $ —         $ —         $ 101,813   

Municipal and pre-refunded municipal bonds

      —           52,808         —           52,808   

Treasury bills

      30,295         —           —           30,295   

Certificate of deposit

      —           25,198         —           25,198   

Commercial paper

      —           7,287         —           7,287   

Federal government agencies

      5,823         —           —           5,823   

Auction rate securities

      —           —           4,330         4,330   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 137,931       $ 85,293       $ 4,330       $ 227,554   
  

 

 

     

 

 

     

 

 

     

 

 

  
     Marketable Securities Fair Value as of
January 31, 2012		  
     Level 1      Level 2      Level 3      Total  

Assets:

            

Corporate bonds

    $ 95,935       $ —         $ —         $ 95,935   

Municipal and pre-refunded municipal bonds

      —           60,234         —           60,234   

Treasury bills

      14,988         —           —           14,988   

Certificates of deposit

      —           12,194         —           12,194   

Commercial paper

      —           3,592         —           3,592   

Federal government agencies

      9,627         —           —           9,627   

Auction rate securities

      —           —           20,197         20,197   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 120,550       $ 76,020       $ 20,197       $ 216,767   
  

 

 

     

 

 

     

 

 

     

 

 

  
     Marketable Securities Fair Value as of
July 31, 2011		  
     Level 1      Level 2      Level 3      Total  

Assets:

            

Corporate bonds

    $ 145,121       $ —         $ —         $ 145,121   

Municipal and pre-refunded municipal bonds

      —           124,343         —           124,343   

Treasury bills

      19,829         —           —           19,829   

Federal government agencies

      57,404         —           —           57,404   

Auction rate securities

      —           —           23,504         23,504   

Certificate of deposit

      5,143         —           —           5,143   

FDIC insured corporate bonds

      4,004         —           —           4,004   

Variable rate demand notes

      —           2,901         —           2,901   
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 231,501       $ 127,244       $ 23,504       $ 382,249   
  

 

 

     

 

 

     

 

 

     

 

 

  

Level 1 assets consist of financial instruments whose value has been based on inputs that use as their basis, readily observable market data that are actively quoted and are validated through external sources, including third-party pricing services and brokers.

 

Level 2 assets consist of financial instruments whose value has been based on quoted prices for similar securities in active markets as well as quoted prices for identical or similar securities in markets that are not active.

Level 3 assets consist of financial instruments where there was no active market. As of July 31, 2012, all of the Company’s Level 3 financial instruments consisted of ARS that failed at auction. There was insufficient observable market information to determine fair value for these financial instruments. The Company estimated the fair values for these securities by incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included credit quality, collateralization, final stated maturity, estimates of the probability of being called or becoming liquid prior to final maturity, redemptions of similar ARS, previous market activity for the same investment security, impact due to extended periods of maximum auction rates and valuation models.

Based on these fair value estimates, the Company determined its ARS to have a temporary impairment of $595, $2,778, and $3,021 as of July 31, 2012, January 31, 2012 and July 31, 2011, respectively. The estimated fair values could change significantly based on future market conditions. A hypothetical 100 basis point decline in fair value of ARS at July 31, 2012 would have resulted in a temporary impairment of $645. The Company will continue to assess the fair value of its ARS for substantive changes in relevant market conditions, changes in its financial condition or other changes that may alter its estimates described above.

Below is a reconciliation of the beginning and ending ARS balances that the Company valued using a Level 3 valuation for the periods shown.

 

     Three Months Ended
July 31, 2012		     Fiscal Year Ended
January 31, 2012		     Three Months Ended
July 31, 2011		  

Balance at beginning of period

    $ 4,330      $ 29,462      $ 26,716   

Total gains (losses) realized/unrealized:

       

Included in earnings

      —          —          —     

Included in other comprehensive income

      —          1,010        413   

Settlements

      —          (10,275 )      (3,625 ) 

Transfers in and/or out of Level 3

      —          —          —     
  

 

 

    

 

 

    

 

 

  

Balance at end of period

    $ 4,330      $ 20,197      $ 23,504   
  

 

 

    

 

 

    

 

 

  

Unrealized losses included in accumulated other comprehensive loss related to assets still held at reporting date

    $ (595 )    $ (2,778 )    $ (3,021 ) 
  

 

 

    

 

 

    

 

 

  

Total gains for the period included in earnings attributable to the change in unrealized gains or losses related to assets still held at reporting date

    $ —        $ —        $ —     

 

     Six Months Ended
July 31, 2012		     Six Months Ended
July 31, 2011		  

Balance at beginning of period

    $ 20,197      $ 29,462   

Total gains (losses) realized/unrealized:

     

Included in earnings

      —          —     

Included in other comprehensive income

      2,183        767   

Settlements

      (18,050 )      (6,725 ) 

Transfers in and/or out of Level 3

      —          —     
  

 

 

    

 

 

  

Balance at end of period

    $ 4,330      $ 23,504   

Unrealized losses included in accumulated other comprehensive loss related to assets still held at reporting date

    $ (595 )    $ (3,021 ) 
  

 

 

    

 

 

  

Total gains for the period included in earnings attributable to the change in unrealized gains or losses related to assets still held at reporting date

    $ —        $ —     

The fair value of cash and cash equivalents (Level 1) approximate carrying value since cash and cash equivalents consist of short-term highly liquid investments with maturities of three months or less. As of July 31, 2012, cash and cash equivalents included cash on hand, cash in banks and money market accounts.