urbn-10q_20180731.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, 2018

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

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—109,134,684 shares outstanding on September 4, 2018.

 

 

 


TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

Condensed Consolidated Balance Sheets as of July 31, 2018, January 31, 2018 and July 31, 2017

1

 

 

 

 

Condensed Consolidated Statements of Income for the three and six months ended July 31, 2018 and 2017

2

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 31, 2018 and 2017

3

 

 

 

 

Condensed Consolidated Statement of Shareholders’ Equity for the six months ended July 31, 2018

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended July 31, 2018 and 2017

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

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

19

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26

 

 

 

Item 4.

Controls and Procedures

26

 

 

 

PART II

OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

27

 

 

 

Item 1A.

Risk Factors

27

 

 

 

Item 6.

Exhibits

28

 

 

 

 

Signatures

29

 

 


 

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,

 

 

 

2018

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

405,727

 

 

$

282,220

 

 

$

276,759

 

Marketable securities

 

 

198,166

 

 

 

165,125

 

 

 

110,195

 

Accounts receivable, net of allowance for doubtful accounts of

   $1,613, $1,326 and $592, respectively

 

 

90,646

 

 

 

76,962

 

 

 

75,530

 

Inventory

 

 

375,657

 

 

 

351,395

 

 

 

365,176

 

Prepaid expenses and other current assets

 

 

131,572

 

 

 

103,055

 

 

 

110,017

 

Total current assets

 

 

1,201,768

 

 

 

978,757

 

 

 

937,677

 

Property and equipment, net

 

 

807,084

 

 

 

813,768

 

 

 

843,058

 

Marketable securities

 

 

45,514

 

 

 

58,688

 

 

 

25,960

 

Deferred income taxes and other assets

 

 

104,169

 

 

 

101,567

 

 

 

115,906

 

Total Assets

 

$

2,158,535

 

 

$

1,952,780

 

 

$

1,922,601

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

149,947

 

 

$

128,246

 

 

$

159,756

 

Accrued expenses, accrued compensation and other current liabilities

 

 

279,991

 

 

 

231,968

 

 

 

210,399

 

Total current liabilities

 

 

429,938

 

 

 

360,214

 

 

 

370,155

 

Long-term debt

 

 

 

 

 

 

 

 

 

Deferred rent and other liabilities

 

 

284,925

 

 

 

291,663

 

 

 

243,633

 

Total Liabilities

 

 

714,863

 

 

 

651,877

 

 

 

613,788

 

Commitments and contingencies (see Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

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

   none issued

 

 

 

 

 

 

 

 

 

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

   108,951,308, 108,248,568 and 111,280,653 shares issued and

   outstanding, respectively

 

 

11

 

 

 

11

 

 

 

11

 

Additional paid-in-capital

 

 

18,770

 

 

 

684

 

 

 

 

Retained earnings

 

 

1,451,492

 

 

 

1,310,859

 

 

 

1,332,145

 

Accumulated other comprehensive loss

 

 

(26,601

)

 

 

(10,651

)

 

 

(23,343

)

Total Shareholders’ Equity

 

 

1,443,672

 

 

 

1,300,903

 

 

 

1,308,813

 

Total Liabilities and Shareholders’ Equity

 

$

2,158,535

 

 

$

1,952,780

 

 

$

1,922,601

 

 

 

 

 

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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net sales

 

$

992,454

 

 

$

872,931

 

 

$

1,848,142

 

 

$

1,634,121

 

Cost of sales

 

 

636,610

 

 

 

575,588

 

 

 

1,211,638

 

 

 

1,096,998

 

Gross profit

 

 

355,844

 

 

 

297,343

 

 

 

636,504

 

 

 

537,123

 

Selling, general and administrative expenses

 

 

238,992

 

 

 

222,163

 

 

 

465,756

 

 

 

440,907

 

Income from operations

 

 

116,852

 

 

 

75,180

 

 

 

170,748

 

 

 

96,216

 

Other income, net

 

 

1,746

 

 

 

1,736

 

 

 

1,826

 

 

 

2,055

 

Income before income taxes

 

 

118,598

 

 

 

76,916

 

 

 

172,574

 

 

 

98,271

 

Income tax expense

 

 

25,789

 

 

 

27,001

 

 

 

38,505

 

 

 

36,418

 

Net income

 

$

92,809

 

 

$

49,915

 

 

$

134,069

 

 

$

61,853

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.85

 

 

$

0.44

 

 

$

1.23

 

 

$

0.54

 

Diluted

 

$

0.84

 

 

$

0.44

 

 

$

1.22

 

 

$

0.54

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

108,831,399

 

 

 

113,500,381

 

 

 

108,663,990

 

 

 

114,865,336

 

Diluted

 

 

110,433,840

 

 

 

113,760,647

 

 

 

110,091,586

 

 

 

115,126,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income

 

$

92,809

 

 

$

49,915

 

 

$

134,069

 

 

$

61,853

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

(7,881

)

 

 

8,942

 

 

 

(15,850

)

 

 

10,730

 

Change in unrealized losses (gains) on marketable securities, net of tax

 

 

(7

)

 

 

(16

)

 

 

(100

)

 

 

(4

)

Total other comprehensive (loss) income

 

 

(7,888

)

 

 

8,926

 

 

 

(15,950

)

 

 

10,726

 

Comprehensive income

 

$

84,921

 

 

$

58,841

 

 

$

118,119

 

 

$

72,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2018

 

 

108,248,568

 

 

$

11

 

 

$

684

 

 

$

1,310,859

 

 

$

(10,651

)

 

$

1,300,903

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

134,069

 

 

 

(15,950

)

 

 

118,119

 

Share-based compensation

 

 

 

 

 

 

 

 

10,990

 

 

 

 

 

 

 

 

 

10,990

 

Share-based awards

 

 

860,758

 

 

 

 

 

 

13,020

 

 

 

 

 

 

 

 

 

13,020

 

Cumulative effect of change in

     accounting pronouncements

     (see Note 2)

 

 

 

 

 

 

 

 

 

 

 

6,564

 

 

 

 

 

 

6,564

 

Share repurchases

 

 

(158,018

)

 

 

 

 

 

(5,924

)

 

 

 

 

 

 

 

 

(5,924

)

Balances as of July 31, 2018

 

 

108,951,308

 

 

$

11

 

 

$

18,770

 

 

$

1,451,492

 

 

$

(26,601

)

 

$

1,443,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

134,069

 

 

$

61,853

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

60,158

 

 

 

64,719

 

Benefit for deferred income taxes

 

 

(9,506

)

 

 

(4,414

)

Share-based compensation expense

 

 

10,990

 

 

 

13,956

 

Loss on disposition of property and equipment, net

 

 

2,452

 

 

 

2,060

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(14,196

)

 

 

(20,783

)

Inventory

 

 

(26,807

)

 

 

(24,475

)

Prepaid expenses and other assets

 

 

(10,086

)

 

 

2,758

 

Payables, accrued expenses and other liabilities

 

 

71,728

 

 

 

27,628

 

Net cash provided by operating activities

 

 

218,802

 

 

 

123,302

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Cash paid for property and equipment

 

 

(55,642

)

 

 

(43,004

)

Cash paid for marketable securities

 

 

(168,823

)

 

 

(116,675

)

Sales and maturities of marketable securities

 

 

130,029

 

 

 

152,838

 

Net cash used in investing activities

 

 

(94,436

)

 

 

(6,841

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from the exercise of stock options

 

 

13,020

 

 

 

 

Share repurchases related to share repurchase program

 

 

 

 

 

(90,511

)

Share repurchases related to taxes for share-based awards

 

 

(5,924

)

 

 

(1,142

)

Net cash provided by (used in) financing activities

 

 

7,096

 

 

 

(91,653

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(7,955

)

 

 

3,811

 

Increase in cash and cash equivalents

 

 

123,507

 

 

 

28,619

 

Cash and cash equivalents at beginning of period

 

 

282,220

 

 

 

248,140

 

Cash and cash equivalents at end of period

 

$

405,727

 

 

$

276,759

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Income taxes

 

$

39,698

 

 

$

41,595

 

Non-cash investing activities—Accrued capital expenditures

 

$

15,002

 

 

$

9,246

 

 

 

 

 

 

 

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, 2018, filed with the United States Securities and Exchange Commission on April 2, 2018.

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, 2018 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 2019 will end on January 31, 2019.

2. Recent Accounting Pronouncements

Recently Adopted

In October 2016, the Financial Accounting Standards Board (“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 Company adopted the new guidance on February 1, 2018 using the modified retrospective approach. The net cumulative effect of this change was $4,496 and was recognized as a decrease to retained earnings as of February 1, 2018.

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 the 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(s); (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract(s); and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company adopted this update on February 1, 2018 using the modified retrospective approach and applied the new guidance to all contracts that were not completed as of the adoption date. Adoption resulted in a change in the timing of recognizing breakage income related to its gift cards and in recognizing estimated sales returns on a gross basis on its balance sheet. The net cumulative effect of this change was $11,060, after tax, and was recognized as an increase to retained earnings as of February 1, 2018. The difference in financial statement line item amounts in the current period under the new accounting guidance as compared to what the balances would be as reported under the previous accounting guidance is immaterial.

Recently Issued

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

6


 

also modifies the impairment model for available-for-sale debt securities. The update will be effective for the 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.

3. Revenue from Contracts with Customers

Revenue Recognition

Merchandise: Merchandise is sold through retail stores, catalogs and the digital sales channel, as well as to wholesale customers and franchise partners. Revenue is recognized when control of the promised goods is transferred to the customer. The Company has elected to treat shipping and handling as fulfillment activities, and not a separate performance obligation. Accordingly, the Company will recognize revenue for its single performance obligation at the point of sale or at the time of shipment, which is when transfer of control to the customer occurs. Revenue does not include taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities. Revenue is recognized net of estimated customer returns. Retail segment return policies vary by brand, but generally provide for no time limit on returns and the refund to be issued in either the form of original payment or as a gift card. Payment for merchandise is tendered primarily by cash, check, credit card, debit card or gift card. Uncollectible accounts receivable primarily results from unauthorized credit card transactions. The Company maintains an allowance for doubtful accounts for its Wholesale segment accounts receivable, which management reviews on a regular basis and believes is sufficient to cover potential credit losses and billing adjustments. Payment terms in the Wholesale segment vary by customer with the most common being a net 30-day policy.

Food and Beverage: Revenue from restaurant sales and events is recognized upon completion of the service, when the Company satisfies its single performance obligation. Customer deposits may be received in advance for events which represents a contract liability until the Company satisfies its performance obligation.

Franchise Fees: Revenue from franchise operations primarily relates to merchandise sales to franchisees and royalty fees. Merchandise sales to franchisees are discussed above under Merchandise. Royalty fees are based upon a percentage of franchisee net sales to third party customers and are recognized when such sales occur.

Gift Cards: The Company accounts for a gift card transaction by recording a liability at the time the gift card is issued to the customer in exchange for consideration from the customer. At the time of issuance, the Company has an open performance obligation for the future delivery of promised goods or services. The liability remains outstanding until the card is redeemed by the customer, at which time the Company recognizes revenue. Over time, a portion of the outstanding gift cards will not be redeemed by the customer (“breakage”). Revenue is recognized from breakage over time in proportion to gift card redemptions. Judgment is used in determining the amount of breakage revenue to be recognized and is based on historical gift card redemption patterns. Gift card breakage revenue is included in net sales and is not material. The Company’s gift cards do not expire.

See Note 13, “Segment Reporting,” of the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information including net sales recorded by reportable segment and net sales from contracts with customers by merchandise category.

Contract Balances

Contract receivables occur when the Company satisfies all of its performance obligations under a contract and recognizes revenue prior to billing or receiving consideration from a customer for which it has an unconditional right to payment. Contract receivables arise from credit card transactions and sales to Wholesale segment customers and franchisees. For the six month period ended July 31, 2018, the opening and closing balance of contract

7


 

receivables, net of allowance for doubtful accounts, was $76,962 and $90,646, respectively. For the six month period ended July 31, 2017, the opening and closing balance of contract receivables, net of allowance for doubtful accounts, was $54,505 and $75,530, respectively. Contract receivables are included in “Accounts receivable, net of allowance for doubtful accounts” in the Condensed Consolidated Balance Sheets.

Contract liabilities represent unearned revenue and result from the Company receiving consideration in a contract with a customer for which it has not satisfied all of its performance obligations. The Company’s contract liabilities result from customer deposits and the issuance of gift cards. Gift cards are expected to be redeemed within two years of issuance, with the majority of redemptions occurring in the first year. For the six month period ended July 31, 2018, the opening and closing balance of contract liabilities was $56,637 and $32,013, respectively. For the six month period ended July 31, 2017, the opening and closing balance of contract liabilities was $59,013 and $46,664, respectively. Contract liabilities are included in “Accrued expenses, accrued compensation and other current liabilities” in the Condensed Consolidated Balance Sheets. During the six month period ended July 31, 2018, the Company recognized $22,429 of revenue that was included in the contract liability balance at the beginning of the period.

 

 

8


 

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, 2018, January 31, 2018 and July 31, 2017 were as follows:

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

(Losses)

 

 

Value

 

As of July 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

150,648

 

 

$

 

 

$

(261

)

 

$

150,387

 

Municipal and pre-refunded municipal bonds

 

 

46,904

 

 

 

10

 

 

 

(43

)

 

 

46,871

 

Certificates of deposit

 

 

908

 

 

 

 

 

 

 

 

 

908

 

 

 

 

198,460

 

 

 

10

 

 

 

(304

)

 

 

198,166

 

Long-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

34,333

 

 

 

 

 

 

(213

)

 

 

34,120

 

Municipal and pre-refunded municipal bonds

 

 

2,130

 

 

 

1

 

 

 

(7

)

 

 

2,124

 

Mutual funds, held in rabbi trust

 

 

6,401

 

 

 

171

 

 

 

(1

)

 

 

6,571

 

Certificates of deposit

 

 

2,699

 

 

 

 

 

 

 

 

 

2,699

 

 

 

 

45,563

 

 

 

172

 

 

 

(221

)

 

 

45,514

 

 

 

$

244,023

 

 

$

182

 

 

$

(525

)

 

$

243,680

 

As of January 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

111,612

 

 

$

 

 

$

(184

)

 

$

111,428

 

Municipal and pre-refunded municipal bonds

 

 

52,474

 

 

 

11

 

 

 

(39

)

 

 

52,446

 

Certificates of deposit

 

 

1,251

 

 

 

 

 

 

 

 

 

1,251

 

 

 

 

165,337

 

 

 

11

 

 

 

(223

)

 

 

165,125

 

Long-term Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

 

39,853

 

 

 

 

 

 

(228

)

 

 

39,625

 

Municipal and pre-refunded municipal bonds

 

 

9,873

 

 

 

8

 

 

 

(24

)

 

 

9,857

 

Mutual funds, held in rabbi trust

 

 

5,973

 

 

 

274

 

 

 

(10

)

 

 

6,237

 

Certificates of deposit

 

 

2,969

 

 

 

 

 

 

 

 

 

2,969

 

 

 

 

58,668

 

 

 

282

 

 

 

(262

)

 

 

58,688

 

 

 

$

224,005

 

 

$

293

 

 

$

(485

)

 

$

223,813

 

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

 

 

Proceeds from the sales and maturities of available-for-sale securities were $130,029 and $152,838 for the six months ended July 31, 2018 and 2017, respectively. The Company included in “Other income, net,” in the Condensed Consolidated Statements of Income, net realized losses of $0 and $13 for the three and six months ended July 31, 2018, respectively, and net realized losses of $23 and $9 for the three and six months ended July 31, 2017,

9


 

respectively. Amortization of discounts and premiums, net, resulted in a reduction of “Other income, net” of $517 and $1,151 for the three and six months ended July 31, 2018, respectively, and $725 and $1,528 for the three and six months ended July 31, 2017, 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, 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, 2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

184,507

 

 

$

 

 

$

 

 

$

184,507

 

Municipal and pre-refunded

   municipal bonds

 

 

 

 

 

48,995

 

 

 

 

 

 

48,995

 

Mutual funds, held in rabbi trust

 

 

6,571

 

 

 

 

 

 

 

 

 

6,571

 

Certificates of deposit

 

 

 

 

 

3,607

 

 

 

 

 

 

3,607

 

 

 

$

191,078

 

 

$

52,602

 

 

$

 

 

$

243,680

 

 

 

 

Marketable Securities Fair Value as of

 

 

 

January 31, 2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

151,053

 

 

$

 

 

$

 

 

$

151,053

 

Municipal and pre-refunded

   municipal bonds

 

 

 

 

 

62,303

 

 

 

 

 

 

62,303

 

Mutual funds, held in rabbi trust

 

 

6,237

 

 

 

 

 

 

 

 

 

6,237

 

Certificates of deposit

 

 

 

 

 

4,220

 

 

 

 

 

 

4,220

 

 

 

$

157,290

 

 

$

66,523

 

 

$

 

 

$

223,813

 

10


 

 

 

 

Marketable Securities Fair Value as of

 

 

 

July 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

87,632

 

 

$

 

 

$

 

 

$

87,632