(17) Fair Value

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Fair value is applied to our financial assets and liabilities including money market funds, available for sale securities, derivative instruments and a contingent consideration liability relating to an earnout payment on future TrojanLabel operating results.

The following tables provide a summary of the financial assets and liabilities that are measured at fair value as of April 28, 2018 and January 31, 2018:


Assets measured at fair value:	Fair value measurement at April 28, 2018								Fair value measurement at January 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money Market Funds (included in Cash and Cash Equivalents)	$	4	$	—	$	—	$	4	$	1,798	$	—	$	—	$	1,798
State and Municipal Obligations (included in Securities Available for Sale)		—		—		—		—		—		1,511		—		1,511
Swap Contracts (included in Other Assets)				176				176		—		101		—		101

Total assets	$	4	$	176	$	—	$	180	$	1,798	$	1,612	$	—	$	3,410


Liabilities measured at fair value:	Fair value measurement at April 28, 2018								Fair value measurement at January 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Swap Contracts (included in Other Liabilities)	$	—	$	1,166	$	—	$	1,166	$	—	$	1,513	$	—	$	1,513
Earnout liability (included in Other Liabilities)		—		—		15		15		—		—		15		15

Total liabilities	$	—	$	1,166	$	15	$	1,181	$	—	$	1,513	$	15	$	1,528

For our money market funds and municipal obligations, we utilize the market approach to measure fair value. The market approach is based on using quoted prices for identical or similar assets.

We also use the market approach to measure fair value of our derivative instruments. Derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates and foreign exchange rates, and is classified as Level 2 because they are an over-the-counter contract with a bank counterparty that is not traded in an active market.

The fair value of the earnout liability incurred in connection with the Company’s acquisition of TrojanLabel was determined using the option approach methodology which includes using significant inputs that are not observable in the market and therefore classified as Level 3. Key assumptions in estimating the fair value of the contingent consideration liability included (1) the estimated earnout targets over the next seven years of $0.5 million-$1.4 million, (2) the probability of success (achievement of the various contingent events) from 0.0%-0.9% and (3) a risk-adjusted discount rate of approximately 2.68%-4.9% used to adjust the probability-weighted earnout payments to their present value. At each reporting period, the contingent consideration liability is recorded at its fair value with changes reflected in general and administrative expense in the condensed consolidated statements of operations. There was no change in the fair value of the earnout liability for the quarter ended April 28, 2018.

Assets and Liabilities Not Recorded at Fair Value

As of April 28, 2018, the Company’s long-term debt, including the current portion of long-term debt not reflected in the financial statements at fair value, is reflected in the table below:


	Fair Value Measurement at April 28, 2018
(In thousands)	Level 1		Level 2		Level 3		Total		Carrying Value
Long-Term debt and related current maturities	$	—	$	—	$	22,825	$	22,825	$	21,596

The fair value of the Company’s long-term debt, including the current portion, is estimated by discounting the future cash flows using current interest rates at which similar borrowings with the same maturities would be made to borrowers with similar credit ratings and is classified as Level 3.