9. Fair Value of Financial Instruments

ASC Topic 820 establishes a fair value hierarchy that distinguishes between assumptions based on market data (observable inputs) and the company’s assumptions (unobservable inputs). Determining where an asset or liability falls within that hierarchy depends on the lowest level input that is significant to the fair value measurement as a whole. An adjustment to the pricing method used within either level 1 or level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy. The hierarchy consists of three broad levels as follows:

Level 1 – Quoted market prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than level 1 inputs that are either directly or indirectly observable, and

Level 3 – Unobservable inputs developed using the company’s estimates and assumptions, which reflect those that market participants would use.

Recurring Basis

The following table presents information about assets measured at fair value on a recurring basis:

	Fair value measurements at October 29, 2017 using:
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(amounts in thousands)	Level 1		Level 2		Level 3		Total
Assets:
U.S. Corporate Bonds	$	-	$	30,773	$	-	$	30,773
Premier Money Market Fund		6,153		N/A		N/A		6,153
Low Duration Bond Fund		1,087		N/A		N/A		1,087
Intermediate Term Bond Fund		765		N/A		N/A		765
Strategic Income Fund		626		N/A		N/A		626
Large Blend Fund		393		N/A		N/A		393
Growth Allocation Fund		153		N/A		N/A		153
Moderate Allocation Fund		107		N/A		N/A		107
Other		115		N/A		N/A		115

Fair value measurements at October 30, 2016 using:

Quoted prices in

active markets for

identical assets

Significant other

observable inputs

Significant

unobservable

inputs

(amounts in thousands)

Level 1

Level 2

Level 3

Total

Assets:

Cash and Cash Equivalents

23,940

N/A

23,940

U.S. Corporate Bonds

7,110

N/A

7,110

Premier Money Market Fund

4,421

N/A

4,421

Low Duration Bond Fund

1,075

N/A

1,075

Intermediate Term Bond Fund

750

N/A

750

Strategic Income Fund

605

N/A

605

Large Blend Fund

319

N/A

319

Growth Allocation Fund

102

N/A

102

Other

152

N/A

152

	Fair value measurements at April 30, 2017 using:
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
(amounts in thousands)	Level 1		Level 2		Level 3		Total
Assets:
U.S. Corporate Bonds	$	-	$	30,831	$	-	$	30,831
Premier Money Market Fund		4,811		N/A		N/A		4,811
Low Duration Bond Fund		1,081		N/A		N/A		1,081
Intermediate Term Bond Fund		751		N/A		N/A		751
Strategic Income Fund		611		N/A		N/A		611
Large Blend Fund		365		N/A		N/A		365
Growth Allocation Fund		126		N/A		N/A		126
Moderate Allocation Fund		88		N/A		N/A		88
Other		76		N/A		N/A		76

Our U.S. corporate bonds were classified as level 2 as they are traded over the counter within a broker network and not on an active market. The fair value of our U.S. corporate bonds is determined based on a published source that provides an average bid price. The average bid price is based on various broker prices that are determined based on market conditions, interest rates, and the rating of the respective U.S. corporate bond.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter based on various factors and it is possible that an asset or liability may be classified differently from quarter to quarter. However, we expect that changes in classifications between different levels will be rare.

Short-Term Investments – Available for Sale

At October 29, 2017, October 30, 2016, and April 30, 2017, our short-term investments classified as available for sale totaled $2.5 million, $2.4 million, and $2.4 million, respectively, and consisted of short-term bond funds. Since these short-term bond funds are classified as available for sale, these investments are recorded at their fair market value and their unrealized gains or losses are included in other comprehensive income (loss). Our short-term bond investments had an accumulated unrealized loss totaling $36,000, $45,000, and $47,000 at October 29, 2017, October 30, 2016, and April 30, 2017, respectively. At October 29, 2017, October 30, 2016, and April 30, 2017, the fair value of our short-term bond funds approximated its cost basis.

Short-Term and Long-Term Investments - Held-To-Maturity

During the second quarter of fiscal 2017, management decided to invest approximately $31.0 million in investment grade U.S. Corporate bonds with maturities that ranged from 2 to 2.5 years. The purpose of this investment was to earn a higher rate of return on our excess cash located in the Cayman Islands. These investments are classified as held-to-maturity as we have the positive intent and ability to hold these investments until maturity. Our held-to-maturity investments will be recorded as either current or noncurrent on our Consolidated Balance Sheets, based on contractual maturity date as of a respective reporting period and stated at amortized cost.

At October 29, 2017 and April 30, 2017, our held-to-maturity investments totaled $30.9 million and consisted of U.S. Corporate bonds. At October 30, 2016, our held-to-maturity investments totaled $31.0 million and consisted of invested cash and cash equivalents of $23.9 million and U.S. Corporate bonds of $7.1 million. The $23.9 million in invested cash and cash equivalents were used to purchase U.S. Corporate bonds during our third quarter of fiscal 2017. The fair value of our held-to-maturity investments at October 29, 2017, October 30, 2016, and April 30, 2017 totaled $30.8 million, $31.0 million, and $30.8 million, respectively.

Long-Term Investments - Rabbi Trust

We have a Rabbi Trust to set aside funds for participants of our deferred compensation plan (the “Plan”) and enable the participants to credit their contributions to various investment options of the Plan. The investments associated with the Rabbi Trust consist of a money market fund and various mutual funds that are classified as available for sale.

These long-term investments are recorded at their fair values of $6.9 million, $5.0 million, and $5.5 million at October 29, 2017, October 30, 2016, and April 30, 2017, respectively. Our long-term investments had an accumulated unrealized gain of $96,000, $1,000 and $43,000 at October 29, 2017, October 30, 2016, and April 30, 2017, respectively. The fair value of our long-term investments associated with our Rabbi Trust approximates its cost basis.

Other

The carrying amount of our cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued expenses, and line of credit approximates fair value because of the short maturity of these financial instruments.