Note 4 - Fair Value Measurements

6 Months Ended

Jul. 31, 2021

Notes to Financial Statements

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

4. FAIR VALUE MEASUREMENTS

When determining fair value, the Company uses a three-tier value hierarchy which prioritizes the inputs used in measuring fair value. Whenever possible, the Company uses observable market data. The Company relies on unobservable inputs only when observable market data is not available. Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

• Level 1 – The assets are recorded at fair value based upon quoted market prices.

• Level 2 - The asset or liability related to the interest rate swap is recorded at fair value based upon a valuation model that uses relevant observable market inputs at quoted intervals, such as forward yield curves. The Company’s mortgage note payable bears a variable market interest rate commensurate with the Company’s credit standing. Therefore, the carrying amount outstanding under the mortgage note payable reasonably approximates fair value based on Level 2 inputs. The carrying value of the note payable for FTZ Corp. acquisition bears interest at a rate set forth in the terms of the promissory note. Therefore, the note payable for FTZ Corp. acquisition reasonably approximates fair value based on Level 2 inputs.

• Level 3 - The contingent liability associated with acquisitions is recorded at fair value using a Monte Carlo valuation approach, as well as inputs that are not observable in the market. This measurement includes an assessment of the probability of achieving certain cloud bookings-growth milestones and discounting the amount of each potential payment accordingly.

The following table sets forth the financial assets and liabilities, measured at fair value, as of July 31, 2021 and January 31, 2021:

	Fair value measurement at reporting date using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in thousands)
As of July 31, 2021
Money market mutual funds	$	98,630
Certificates of deposit	$	12,453
Note payable for FTZ Corp. acquisition			$	2,431
Liability related to the interest rate swap			$	(207	)
Contingent liability associated with acquisitions						$	(6,217	)
As of January 31, 2021
Money market mutual funds	$	80,611
Certificates of deposit	$	9,262
Liability related to the interest rate swap			$	(325	)
Contingent liability associated with acquisitions						$	(4,751	)

Money market mutual funds and certificates of deposit are classified as part of “Cash and equivalents” in the accompanying Condensed Consolidated Balance Sheets. The amount of cash and equivalents deposited with commercial banks was $25.4 million and $52.6 million at July 31, 2021 and January 31, 2021, respectively.

The note payable for FTZ Corp. acquisition is classified as part of “Other liabilities” in the accompanying Condensed Consolidated Balance Sheets. The carrying value of the note approximates fair value. See Note 8 for additional details.

The contingent liability associated with acquisitions is classified as part of “Other current liabilities” and “Other liabilities” in the accompanying Condensed Consolidated Balance Sheets and the change in fair value is reported in “General and administrative” in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The change in fair value of the contingent consideration recognized in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income was $0.9 million for both the three and six months ended July 31, 2021.

There have been no transfers between fair value measurement levels during the six months ended July 31, 2021.

Derivative Instruments

The Company entered into an interest rate swap in May 2012 to mitigate the exposure to the variability of one month LIBOR for its floating rate mortgage described in Note 8 “Debt” within these Notes to Condensed Consolidated Financial Statements. The fair value of the interest rate swap is reflected as an asset or liability in the Condensed Consolidated Balance Sheets and the change in fair value is reported in “Other expense (income), net” in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The fair value of the interest rate swap is estimated as the net present value of projected cash flows based upon forward interest rates at the balance sheet date.

The fair values of the derivative instrument at July 31, 2021 and January 31, 2021 were as follows (in thousands):

	Liability
		Fair Value
	Balance Sheet Location	July 31, 2021			January 31, 2021
Derivative instrument:
Long-term interest rate swap	Other liabilities	$	-		$	(325	)
Short-term interest rate swap	Current portion of long-term debt		(207	)		-
Total		$	(207	)	$	(325	)

The change in fair value of the interest rate swap recognized in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income was $54,000 and $118,000 for the three and six months ended July 31, 2021, respectively; compared to $32,000 and $(219,000) for the three and six months ended July 31, 2020, respectively.