Note 3—Fair Value

Fair Values of Assets and Liabilities

We measure fair value at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

Level 1: Observable inputs such as quoted prices for identical assets or liabilities in active markets.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants would price the asset or liability.

Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

At March 31, 2018 and June 30, 2017, our assets and liabilities measured at fair value on a recurring basis were as follows:


	March 31, 2018								June 30, 2017
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Money market funds (cash and cash equivalents)	$	100	$	—	$	—	$	100	$	593	$	—	$	—	$	593
Available for sale securities - Debt
U.S. Corporate	$	—	$	3,489	$	—	$	3,489	$	—	$	1,906	$	—	$	1,906
Government - U.S.		—		6,469		—		6,469		—		—		—		—

Total available for sale securities	$	—	$	9,958	$	—	$	9,958	$	—	$	1,906	$	—	$	1,906
Short-term derivative interest rate swap	$	—	$	169	$	—	$	169	$	—	$	—	$	—	$	—
Long-term derivative interest rate swap	$	—	$	1,830	$	—	$	1,830	$	—	$	—	$	—	$	—

Fair Value of Financial Instruments

We have certain financial instruments which consist of cash and cash equivalents, cash and cash equivalents held for customers, marketable securities, accounts receivable, accounts payable, customer account liabilities, a derivative interest rate swap as more fully described in Note 11 Derivative Instruments and debt drawn on our Credit Facility as more fully described in Note 10 Indebtedness. Fair value information for each of these instruments is as follows:

•

Cash and cash equivalents, cash and cash equivalents held for customers, accounts receivable, accounts payable and customer account liabilities fair value approximates their carrying values, due to the short-term nature of these instruments.

•

Marketable securities classified as held to maturity, all of which mature within one year, are recorded at amortized cost, which at March 31, 2018 and June 30, 2017, approximated fair value.

•

Marketable securities classified as available for sale are recorded at fair value. Unrealized gains and losses are included as a component of accumulated other comprehensive loss in stockholders’ equity, net of tax. We use the specific identification method to determine any realized gains or losses from the sale of our marketable securities classified as available for sale.

•

The fair value of our derivative interest rate swap is based on the present value of projected cash flows that will occur over the life of the instrument, after considering certain contractual terms of the arrangement.

•

The carrying value of assets related to deposits we have made to fund future requirements associated with Israeli severance arrangements was $1.5 million at both March 31, 2018 and June 30, 2017, which approximated their fair value.

•

We have certain other investments accounted for at cost. The carrying value of these investments was $7.7 million at both March 31, 2018 and June 30, 2017 and are reported as a component of our other assets. These investments are recorded at cost, less any write-downs for other-than-temporary impairment charges. To determine the fair value of these investments, we use readily available financial information including information based on recent or pending third-party equity investments in these entities. In certain instances, a cost method investment’s fair value may not be estimated if there are no identified events or changes in circumstances that would indicate a significant adverse effect on the fair value of the investment and to do so would be impractical, and as a result, we have not estimated the fair value of these investments.

•

We have borrowings of $150 million against our Credit Facility (refer to Note 10 Indebtedness for a discussion of this credit agreement). The fair value of these borrowings, which are classified as Level 2, approximates their carrying value at March 31, 2018, as the instrument carries a variable rate of interest which reflects current market rates.

Marketable Securities

The table below presents information regarding our marketable securities by major security type as of March 31, 2018 and June 30, 2017.


	March 31, 2018						June 30, 2017
	Held to Maturity		Available for Sale		Total		Held to Maturity		Available for Sale		Total
	(in thousands)
Marketable securities:
Corporate and other debt securities	$	67	$	9,958	$	10,025	$	67	$	1,906	$	1,973

Total marketable securities	$	67	$	9,958	$	10,025	$	67	$	1,906	$	1,973

The following table summarizes the estimated fair value of our investments in available for sale marketable securities classified by the contractual maturity date of the securities:


	March 31, 2018
	(in thousands)
Due within 1 year	$	9,958
Due in 1 year through 5 years		—

Total	$	9,958

All of our available for sale marketable securities are included in current assets as we do not have the positive intent to hold these investments until maturity and view these investments as available to fund current operations. At March 31, 2018, the difference between the fair value of our available for sale securities and their amortized cost was not significant.

The following table presents the aggregate fair values and gross unrealized losses for those available for sale investments that were in an unrealized loss position as of March 31, 2018 and June 30, 2017, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:


	At March 31, 2018					At June 30, 2017
	Less than 12 Months
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in thousands)
U.S. Corporate	$	3,489	$	(2	)	$	1,628	$	(1	)
Government—U.S.		6,469		(9	)		—		—

Total	$	9,958	$	(11	)	$	1,628	$	(1	)