urbn-10q_20170731.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July 31, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                      

Commission File No. 000-22754

 

Urban Outfitters, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Pennsylvania

23-2003332

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

5000 South Broad Street, Philadelphia, PA

19112-1495

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (215) 454-5500

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

  (Do not check if a smaller reporting company)

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common shares, $0.0001 par value—109,831,672 shares outstanding on August 31, 2017.

 

 

 


TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

Condensed Consolidated Balance Sheets as of July 31, 2017, January 31, 2017 and July 31, 2016

1

 

 

 

 

Condensed Consolidated Statements of Income for the three and six months ended July 31, 2017 and 2016

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 31, 2017 and 2016

3

 

 

 

 

Condensed Consolidated Statement of Shareholders’ Equity for the six months ended July 31, 2017

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2017 and 2016

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

 

 

 

Item 4.

Controls and Procedures

24

 

 

 

PART II

OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

25

 

 

 

Item 1A.

Risk Factors

25

 

 

 

Item 2.

Unregistered Sales of Equity Securities and the Use of Proceeds

25

 

 

 

Item 6.

Exhibits

26

 

 

 

 

Signatures

27

 

 


 

PART I

FINANCIAL INFORMATION

Item  1.

Financial Statements

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)

 

 

 

July 31,

 

 

January 31,

 

 

July 31,

 

 

 

2017

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

276,759

 

 

$

248,140

 

 

$

243,116

 

Marketable securities

 

 

110,195

 

 

 

111,067

 

 

 

59,231

 

Accounts receivable, net of allowance for doubtful accounts of

   $592, $588 and $876, respectively

 

 

75,530

 

 

 

54,505

 

 

 

95,003

 

Inventory

 

 

365,176

 

 

 

338,590

 

 

 

367,197

 

Prepaid expenses and other current assets

 

 

110,017

 

 

 

129,095

 

 

 

94,663

 

Total current assets

 

 

937,677

 

 

 

881,397

 

 

 

859,210

 

Property and equipment, net

 

 

843,058

 

 

 

867,786

 

 

 

878,607

 

Marketable securities

 

 

25,960

 

 

 

44,288

 

 

 

26,000

 

Deferred income taxes and other assets

 

 

115,906

 

 

 

109,166

 

 

 

110,279

 

Total Assets

 

$

1,922,601

 

 

$

1,902,637

 

 

$

1,874,096

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

159,756

 

 

$

119,537

 

 

$

134,825

 

Accrued expenses, accrued compensation and other current

   liabilities

 

 

210,399

 

 

 

233,391

 

 

 

222,352

 

Total current liabilities

 

 

370,155

 

 

 

352,928

 

 

 

357,177

 

Long-term debt

 

 

 

 

 

 

 

 

50,000

 

Deferred rent and other liabilities

 

 

243,633

 

 

 

236,625

 

 

 

221,901

 

Total Liabilities

 

 

613,788

 

 

 

589,553

 

 

 

629,078

 

Commitments and contingencies (see Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares; $.0001 par value, 10,000,000 shares authorized,

   none issued

 

 

 

 

 

 

 

 

 

Common shares; $.0001 par value, 200,000,000 shares authorized,

   111,280,653, 116,233,781 and 117,136,520 shares issued and

   outstanding, respectively

 

 

11

 

 

 

12

 

 

 

12

 

Additional paid-in-capital

 

 

 

 

 

 

 

 

7,112

 

Retained earnings

 

 

1,332,145

 

 

 

1,347,141

 

 

 

1,264,821

 

Accumulated other comprehensive loss

 

 

(23,343

)

 

 

(34,069

)

 

 

(26,927

)

Total Shareholders’ Equity

 

 

1,308,813

 

 

 

1,313,084

 

 

 

1,245,018

 

Total Liabilities and Shareholders’ Equity

 

$

1,922,601

 

 

$

1,902,637

 

 

$

1,874,096

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 31,

 

 

July 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net sales

 

$

872,931

 

 

$

890,568

 

 

$

1,634,121

 

 

$

1,653,145

 

Cost of sales

 

 

575,588

 

 

 

548,057

 

 

 

1,096,998

 

 

 

1,048,743

 

Gross profit

 

 

297,343

 

 

 

342,511

 

 

 

537,123

 

 

 

604,402

 

Selling, general and administrative expenses

 

 

222,163

 

 

 

224,299

 

 

 

440,907

 

 

 

435,707

 

Income from operations

 

 

75,180

 

 

 

118,212

 

 

 

96,216

 

 

 

168,695

 

Other income (expense), net

 

 

1,736

 

 

 

1,071

 

 

 

2,055

 

 

 

(506

)

Income before income taxes

 

 

76,916

 

 

 

119,283

 

 

 

98,271

 

 

 

168,189

 

Income tax expense

 

 

27,001

 

 

 

42,368

 

 

 

36,418

 

 

 

61,712

 

Net income

 

$

49,915

 

 

$

76,915

 

 

$

61,853

 

 

$

106,477

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

 

$

0.66

 

 

$

0.54

 

 

$

0.91

 

Diluted

 

$

0.44

 

 

$

0.66

 

 

$

0.54

 

 

$

0.91

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

113,500,381

 

 

 

117,133,169

 

 

 

114,865,336

 

 

 

117,218,013

 

Diluted

 

 

113,760,647

 

 

 

117,383,132

 

 

 

115,126,977

 

 

 

117,484,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 31,

 

 

July 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

49,915

 

 

$

76,915

 

 

$

61,853

 

 

$

106,477

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

8,942

 

 

 

(13,066

)

 

 

10,730

 

 

 

(3,476

)

Change in unrealized (losses) gains on marketable

   securities, net of tax

 

 

(16

)

 

 

4

 

 

 

(4

)

 

 

 

Total other comprehensive income (loss)

 

 

8,926

 

 

 

(13,062

)

 

 

10,726

 

 

 

(3,476

)

Comprehensive income

 

$

58,841

 

 

$

63,853

 

 

$

72,579

 

 

$

103,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(amounts in thousands, except share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Common Shares

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Number of

 

 

Par

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Value

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

Total

 

Balances as of January 31, 2017

 

 

116,233,781

 

 

$

12

 

 

$

 

 

$

1,347,141

 

 

$

(34,069

)

 

$

1,313,084

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

61,853

 

 

 

10,726

 

 

 

72,579

 

Share-based compensation

 

 

 

 

 

 

 

 

13,956

 

 

 

 

 

 

 

 

 

13,956

 

Stock options and awards

 

 

100,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative effect of change in

   accounting pronouncement

 

 

 

 

 

 

 

 

1,607

 

 

 

(760

)

 

 

 

 

 

847

 

Share repurchases

 

 

(5,053,128

)

 

 

(1

)

 

 

(15,563

)

 

 

(76,089

)

 

 

 

 

 

(91,653

)

Balances as of July 31, 2017

 

 

111,280,653

 

 

$

11

 

 

$

-

 

 

$

1,332,145

 

 

$

(23,343

)

 

$

1,308,813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

URBAN OUTFITTERS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

 

 

Six Months Ended

 

 

 

July 31,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

61,853

 

 

$

106,477

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

64,719

 

 

 

68,393

 

(Benefit) provision for deferred income taxes

 

 

(4,414

)

 

 

1,021

 

Share-based compensation expense

 

 

13,956

 

 

 

12,752

 

Loss on disposition of property and equipment, net

 

 

2,060

 

 

 

1,275

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(20,783

)

 

 

(19,569

)

Inventory

 

 

(24,475

)

 

 

(37,432

)

Prepaid expenses and other assets

 

 

2,758

 

 

 

7,237

 

Payables, accrued expenses and other liabilities

 

 

27,628

 

 

 

20,816

 

Net cash provided by operating activities

 

 

123,302

 

 

 

160,970

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Cash paid for property and equipment

 

 

(43,004

)

 

 

(74,403

)

Cash paid for marketable securities

 

 

(116,675

)

 

 

(95,536

)

Sales and maturities of marketable securities

 

 

152,838

 

 

 

109,357

 

Acquisition of business

 

 

 

 

 

(15,325

)

Net cash used in investing activities

 

 

(6,841

)

 

 

(75,907

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayments of long-term debt

 

 

 

 

 

(100,000

)

Proceeds from the exercise of stock options

 

 

 

 

 

2,901

 

Share repurchases related to share repurchase program

 

 

(90,511

)

 

 

(10,704

)

Share repurchases related to taxes for share-based awards

 

 

(1,142

)

 

 

 

Net cash used in financing activities

 

 

(91,653

)

 

 

(107,803

)

Effect of exchange rate changes on cash and cash equivalents

 

 

3,811

 

 

 

580

 

Increase (decrease) in cash and cash equivalents

 

 

28,619

 

 

 

(22,160

)

Cash and cash equivalents at beginning of period

 

 

248,140

 

 

 

265,276

 

Cash and cash equivalents at end of period

 

$

276,759

 

 

$

243,116

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Income taxes

 

$

41,595

 

 

$

41,329

 

Non-cash investing activities—Accrued capital expenditures

 

$

9,246

 

 

$

20,525

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

URBAN OUTFITTERS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and per share data)

(unaudited)

1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed financial statements should be read in conjunction with Urban Outfitters, Inc.’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended January 31, 2017, filed with the United States Securities and Exchange Commission on April 3, 2017.

The Company’s business experiences seasonal fluctuations in net sales and net income, with a more significant portion typically realized in the second half of each year predominantly due to the year-end holiday period. Historically, and consistent with the retail industry, this seasonality also impacts our working capital requirements, particularly with regard to inventory. Accordingly, the results of operations for the three and six months ended July 31, 2017 are not necessarily indicative of the results to be expected for the full year.

The Company’s fiscal year ends on January 31. All references in these notes to the Company’s fiscal years refer to the fiscal years ended on January 31 in those years. For example, the Company’s fiscal year 2018 will end on January 31, 2018.

2. Recent Accounting Pronouncements

Recently Adopted

In March 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standards update that simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted the new guidance on February 1, 2017 and recorded a cumulative effect reduction to beginning retained earnings of $(984) related to the Company’s election to record forfeitures as they occur and $224 related to the recognition of previously unrecognized excess tax benefits. In addition, the Company elected to retrospectively adopt the provision regarding the presentation of excess tax benefits (deficits) in the statement of cash flows, which resulted in an increase in net cash provided by operating activities and a decrease in net cash used in financing activities of $50 for the six months ended July 31, 2016. The provision requiring the inclusion of excess tax benefits (deficits) as a component of the provision for income taxes in the consolidated results of operations has been applied prospectively. The Company recorded excess tax deficits of $1,604 during the six months ended July 31, 2017.

Recently Issued

In October 2016, the FASB issued an accounting standards update that amends the existing guidance on the income tax effects of intra-entity asset transfers with the exception of transfers of inventory. The update requires the recognition of tax expense when an intra-entity asset transfer occurs as opposed to being deferred under the existing guidance. The update will be effective for the Company on February 1, 2018 and early adoption is permitted in the first interim period of a fiscal year. The update requires a modified retrospective transition approach, with a cumulative-effect adjustment to retained earnings. The Company is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued an accounting standards update that introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. This includes loan commitments, accounts receivable, trade receivables, and certain off-balance sheet credit exposures. The guidance also modifies the impairment model for available-for-sale debt securities. The update will be effective for the

6


 

Company on February 1, 2020 and early adoption is permitted. The Company is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued an accounting standards update that amends the existing accounting standards for lease accounting. This update requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of 12 months or less. The update will be effective for the Company on February 1, 2019 and early adoption is permitted. The update requires a modified retrospective transition approach, which includes a number of practical expedients. While the Company expects adoption to result in a significant increase in the assets and liabilities recorded on its balance sheet, the Company is currently assessing the overall impact on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued an accounting standards update that clarifies the principles for recognizing revenue from contracts with customers. The update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The update states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in the amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. Entities are required to apply the following steps when recognizing revenue under the update: (1) identify the contract(s) with a customer; (2) identify the performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The update allows for a “full retrospective” adoption, meaning the update is applied to all periods presented, or a “modified retrospective” adoption, meaning the update is applied only to the most current periods presented in the financial statements. In August 2015, the FASB issued an accounting standards update which approved a one-year deferral of the effective date that allows the Company to defer the effective date to February 1, 2018, but still permits the Company to adopt the update as of the original February 1, 2017 effective date. The Company has determined it will adopt this update on February 1, 2018 and has concluded that the effects of this update will not have a material impact on its consolidated financial statements and related disclosures.

3. Acquisition

On February 1, 2016, the Company acquired certain assets of the Vetri Family group of restaurants, headquartered in Philadelphia, PA, for a total aggregate purchase price of approximately $18,937, of which $15,325 was paid in cash, $2,687 was satisfied through the settlement of a note receivable and up to an additional $925 that will be paid in cash in fiscal 2018. No liabilities were assumed. Pro forma information related to this acquisition is not included because the impact on the Company’s Condensed Consolidated Statements of Income is not considered to be material.

 

7


 

4. Marketable Securities

During all periods shown, marketable securities are classified as available-for-sale. The amortized cost, gross unrealized gains (losses) and fair value of available-for-sale securities by major security type and class of security as of July 31, 2017, January 31, 2017 and July 31, 2016 were as follows:

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

(Losses)

 

 

Value

 

As of July 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

72,805

 

 

$

4

 

 

$

(61

)

 

$

72,748

 

Municipal and pre-refunded municipal bonds

 

 

36,630

 

 

 

15

 

 

 

(13

)

 

 

36,632

 

Certificates of deposit

 

 

815

 

 

 

 

 

 

 

 

 

815

 

 

 

 

110,250

 

 

 

19

 

 

 

(74

)

 

 

110,195

 

Long-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

14,906

 

 

 

 

 

 

(22

)

 

 

14,884

 

Municipal and pre-refunded municipal bonds

 

 

3,057

 

 

 

9

 

 

 

(2

)

 

 

3,064

 

Mutual funds, held in rabbi trust

 

 

5,183

 

 

 

103

 

 

 

 

 

 

5,286

 

Certificates of deposit

 

 

2,726

 

 

 

 

 

 

 

 

 

2,726

 

 

 

 

25,872

 

 

 

112

 

 

 

(24

)

 

 

25,960

 

 

 

$

136,122

 

 

$

131

 

 

$

(98

)

 

$

136,155

 

As of January 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

59,403

 

 

$

7

 

 

$

(90

)

 

$

59,320

 

Municipal and pre-refunded municipal bonds

 

 

51,731

 

 

 

28

 

 

 

(12

)

 

 

51,747

 

 

 

 

111,134

 

 

 

35

 

 

 

(102

)

 

 

111,067

 

Long-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

19,102

 

 

 

9

 

 

 

(33

)

 

 

19,078

 

Municipal and pre-refunded municipal bonds

 

 

19,488

 

 

 

35

 

 

 

(9

)

 

 

19,514

 

Mutual funds, held in rabbi trust

 

 

4,583

 

 

 

91

 

 

 

(1

)

 

 

4,673

 

Certificates of deposit

 

 

1,023

 

 

 

 

 

 

 

 

 

1,023

 

 

 

 

44,196

 

 

 

135

 

 

 

(43

)

 

 

44,288

 

 

 

$

155,330

 

 

$

170

 

 

$

(145

)

 

$

155,355

 

As of July 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

23,658

 

 

$

8

 

 

$

(24

)

 

$

23,642

 

Municipal and pre-refunded municipal bonds

 

 

34,720

 

 

 

43

 

 

 

(4

)

 

 

34,759

 

Certificates of deposit

 

 

830

 

 

 

 

 

 

 

 

 

830

 

 

 

 

59,208

 

 

 

51

 

 

 

(28

)

 

 

59,231

 

Long-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

8,958

 

 

 

8

 

 

 

(9

)

 

 

8,957

 

Municipal and pre-refunded municipal bonds

 

 

12,191

 

 

 

29

 

 

 

(1

)

 

 

12,219

 

Mutual funds, held in rabbi trust

 

 

4,156

 

 

 

153

 

 

 

 

 

 

4,309

 

Certificates of deposit

 

 

515

 

 

 

 

 

 

 

 

 

515

 

 

 

 

25,820

 

 

 

190

 

 

 

(10

)

 

 

26,000

 

 

 

$

85,028

 

 

$

241

 

 

$

(38

)

 

$

85,231

 

 

Proceeds from the sales and maturities of available-for-sale securities were $152,838 and $109,357 for the six months ended July 31, 2017 and 2016, respectively. The Company included in “Other income (expense), net,” in the Condensed Consolidated Statements of Income, net realized losses of $23 and $9 for the three and six months ended July 31, 2017, respectively, and net realized gains of $9 and $22 for the three and six months ended July 31, 2016, respectively. Amortization of discounts and premiums, net, resulted in a reduction of “Other income (expense), net” of $725 and $1,528 for the three and six months ended July 31, 2017, and $567 and $1,161 for the three and six

8


 

months ended July 31, 2016, respectively. Mutual funds represent assets held in an irrevocable rabbi trust for the Company’s Non-qualified Deferred Compensation Plan (“NQDC”). These assets are a source of funds to match the funding obligations to participants in the NQDC but are subject to the Company’s general creditors. The Company elected the fair value option for financial assets for the mutual funds held in the rabbi trust resulting in all unrealized gains and losses being recorded in “Other income (expense), net” in the Condensed Consolidated Statements of Income.

5. 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 Company’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, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

87,632

 

 

$

 

 

$

 

 

$

87,632

 

Municipal and pre-refunded

   municipal bonds

 

 

 

 

 

39,696

 

 

 

 

 

 

39,696

 

Mutual funds, held in rabbi trust

 

 

5,286

 

 

 

 

 

 

 

 

 

5,286

 

Certificates of deposit

 

 

 

 

 

3,541

 

 

 

 

 

 

3,541

 

 

 

$

92,918

 

 

$

43,237

 

 

$

 

 

$

136,155

 

 

 

 

Marketable Securities Fair Value as of

 

 

 

January 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

78,398

 

 

$

 

 

$

 

 

$

78,398

 

Municipal and pre-refunded

   municipal bonds

 

 

 

 

 

71,261

 

 

 

 

 

 

71,261

 

Mutual funds, held in rabbi trust

 

 

4,673

 

 

 

 

 

 

 

 

 

4,673

 

Certificates of deposit

 

 

 

 

 

1,023

 

 

 

 

 

 

1,023

 

 

 

$

83,071

 

 

$

72,284

 

 

$

 

 

$

155,355

 

9


 

 

 

 

Marketable Securities Fair Value as of

 

 

 

July 31, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

32,599

 

 

$

 

 

$

 

 

$

32,599

 

Municipal and pre-refunded

   municipal bonds

 

 

 

 

 

46,978

 

 

 

 

 

 

46,978