FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value on a recurring basis consisted of the following as of January 31, 2018 and 2017:



	January 31, 2018
	Fair Value Hierarchy Category
(in thousands)	Level 1		Level 2		Level 3
Assets:
Money market funds	$	186	$	—	$	—
Short-term investments, classified as available-for-sale	—		2,002		—
Foreign currency forward contracts	—		3,682		—
Interest rate swap agreement	—		2,580		—
Total assets	$	186	$	8,264	$	—
Liabilities:
Foreign currency forward contracts	$	—	$	1,308	$	—
Contingent consideration - business combinations	—		—		62,829
Option to acquire noncontrolling interests of consolidated subsidiaries	—		—		2,950
Total liabilities	$	—	$	1,308	$	65,779



	January 31, 2017
	Fair Value Hierarchy Category
(in thousands)	Level 1		Level 2		Level 3
Assets:
Money market funds	$	175	$	—	$	—
Foreign currency forward contracts	—		1,646		—
Interest rate swap agreement	—		1,429		—
Total assets	$	175	$	3,075	$	—
Liabilities:
Foreign currency forward contracts	$	—	$	1,246	$	—
Interest rate swap agreement	—		408		—
Contingent consideration - business combinations	—		—		52,733
Option to acquire noncontrolling interests of consolidated subsidiaries	—		—		3,550
Total liabilities	$	—	$	1,654	$	56,283

The following table presents the changes in the estimated fair values of our liabilities for contingent consideration measured using significant unobservable inputs (Level 3) for the years ended January 31, 2018 and 2017:



	Year Ended January 31,
(in thousands)	2018			2017
Fair value measurement, beginning of year	$	52,733		$	22,391
Contingent consideration liabilities recorded for business combinations	27,604			26,400
Changes in fair values, recorded in operating expenses	(8,324		)	7,255
Payments of contingent consideration	(9,412		)	(3,313		)
Foreign currency translation and other	228			—
Fair value measurement, end of year	$	62,829		$	52,733

Our estimated liability for contingent consideration represents potential payments of additional consideration for business combinations, payable if certain defined performance goals are achieved. Changes in fair value of contingent consideration are recorded in the consolidated statements of operations within selling, general and administrative expenses.

During the year ended January 31, 2017, we acquired two majority owned subsidiaries for which we hold an option to acquire the noncontrolling interests. We account for the option as an in-substance investment in the noncontrolling common stock of each such subsidiary. We include the fair value of the option within other liabilities and do not recognize noncontrolling interests in these subsidiaries. The following table presents the change in the estimated fair value of this liability, which is measured using Level 3 inputs, for the years ended January 31, 2018 and 2017:



	Year Ended January 31,
(in thousands)	2018			2017
Fair value measurement, beginning of year	$	3,550		$	—
Acquisition of option to acquire noncontrolling interests of consolidated subsidiaries	—			3,134
Change in fair value, recorded in operating expenses	(600		)	416
Fair value measurement, end of year	$	2,950		$	3,550

There were no transfers between levels of the fair value measurement hierarchy during the years ended January 31, 2018 and 2017.

Fair Value Measurements

Money Market Funds - We value our money market funds using quoted active market prices for such funds.

Short-term Investments, Corporate Debt Securities, and Commercial Paper - The fair values of short-term investments, as well as corporate debt securities and commercial paper classified as cash equivalents, are estimated using observable market prices for identical securities that are traded in less-active markets, if available. When observable market prices for identical securities are not available, we value these short-term investments using non-binding market price quotes from brokers which we review for reasonableness using observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model.

Foreign Currency Forward Contracts - The estimated fair value of foreign currency forward contracts is based on quotes received from the counterparties thereto. These quotes are reviewed for reasonableness by discounting the future estimated cash flows under the contracts, considering the terms and maturities of the contracts and market foreign currency exchange rates using readily observable market prices for similar contracts.

Interest Rate Swap Agreement - The fair value of our interest rate swap agreement is based in part on data received from the counterparty, and represents the estimated amount we would receive or pay to settle the agreement, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources.

Contingent Consideration - Business Combinations - The fair value of the contingent consideration related to business combinations is estimated using a probability-adjusted discounted cash flow model. These fair value measurements are based on significant inputs not observable in the market. The key internally developed assumptions used in these models are discount rates and the probabilities assigned to the milestones to be achieved. We remeasure the fair value of the contingent consideration at each reporting period, and any changes in fair value resulting from either the passage of time or events occurring after the acquisition date, such as changes in discount rates, or in the expectations of achieving the performance targets, are recorded within selling, general, and administrative expenses. Increases or decreases in discount rates would have inverse impacts on the related fair value measurements, while favorable or unfavorable changes in expectations of achieving performance targets would result in corresponding increases or decreases in the related fair value measurements. We utilized discount rates ranging from 3.0% to 5.0% in our calculations of the estimated fair values of our contingent consideration liabilities as of January 31, 2018. We utilized discount rates ranging from 3.0% to 20.0% in our calculations of the estimated fair values of our contingent consideration liabilities as of January 31, 2017.

Option to Acquire Noncontrolling Interests of Consolidated Subsidiaries - The fair value of the option is determined primarily by using the income approach, which discounts expected future cash flows to present value using estimates and assumptions determined by management. This fair value measurement is based upon significant inputs not observable in the market. We remeasure the fair value of the option at each reporting period, and any changes in fair value are recorded within selling, general, and administrative expenses. We utilized discount rates of 13.5% and 14.0% in our calculation of the estimated fair value of the option as of January 31, 2018 and 2017, respectively.

Other Financial Instruments

The carrying amounts of accounts receivable, accounts payable, and accrued liabilities and other current liabilities approximate fair value due to their short maturities.

The estimated fair values of our term loan borrowings were $425 million and $410 million at January 31, 2018 and 2017, respectively. The estimated fair values of the term loans are based upon indicative bid and ask prices as determined by the agent responsible for the syndication of our term loans. We consider these inputs to be within Level 3 of the fair value hierarchy because we cannot reasonably observe activity in the limited market in which participations in our term loans are traded. The indicative prices provided to us as at each of January 31, 2018 and 2017 did not significantly differ from par value. The estimated fair value of our revolving credit borrowings, if any, is based upon indicative market values provided by one of our lenders. We had no revolving credit borrowings at January 31, 2018 and 2017.

The estimated fair values of our Notes were approximately $389 million and $381 million at January 31, 2018 and 2017, respectively. The estimated fair value of the Notes is determined based on quoted bid and ask prices in the over-the-counter market in which the Notes trade. We consider these inputs to be within Level 2 of the fair value hierarchy.

Assets and Liabilities Not Measured at Fair Value on a Recurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, we also measure certain assets and liabilities at fair value on a nonrecurring basis. Our non-financial assets, including goodwill, intangible assets and property, plant and equipment, are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are recorded at fair value only when an impairment charge is recognized. Further details regarding our regular impairment reviews appear in Note 1, “Summary of Significant Accounting Policies”.