Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Notes)

v3.5.0.2
Fair Value Measurements (Notes)
 3 Months Ended
Jun. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair value is defined by ASC 820, Fair Value Measurements and Disclosures (ASC 820), as the price that would be received upon selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•
Level 1 – Quoted prices in active markets for identical assets and liabilities.
•
Level 2 – Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
•
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company’s money market funds are measured using Level 1 inputs. The contingent consideration described in Note 9 is measured using Level 3 inputs.
The following table presents available-for sale securities and non-financial liabilities measured at fair value on a recurring basis as of June 30, 2016:
(in thousands)
Total Fair Value
of Asset or
Liability
 
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance Sheet
Classification
Assets:
 
 
 
 
 
 
 
 
 
Money market funds
$
6,678

 
$
6,678

 
—

 
—

 
Cash and cash
equivalents
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent consideration, current
$
47

 
—

 
—

 
$
47

 
Contingent
consideration payable
The following table presents available-for sale securities and non-financial liabilities measured at fair value on a recurring basis as of March 31, 2016:
(in thousands)
Total Fair Value
of Asset or
Liability
 
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Balance Sheet
Classification
Assets:
 
 
 
 
 
 
 
 
 
Money market funds
$
10,043

 
$
10,043

 
—

 
—

 
Cash and cash
equivalents
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent consideration, current
$
311

 
—

 
—

 
$
311

 
Contingent consideration payable

The fair value of the money market funds approximates their carrying amounts due to the short-term nature of these financial assets.
In connection with an acquisition in the quarter ended June 30, 2012, payment of a portion of the purchase price was contingent upon the profitability of the acquired products for post-closing periods through June 30, 2016, and was offset by working capital adjustments and other indemnification claims. The Company estimated the fair value of contingent consideration as the present value of the expected payments over the term of the arrangement based on financial forecasts of future profitability of the acquired products, and reaching the forecast. The final calculation performed during the quarter ended June 30, 2016 determined the actual cash payment for the contingent consideration to be $2.1 million, of which $47,000 was unpaid as of June 30, 2016.
The fair value measurement of contingent consideration as of June 30, 2016 and March 31, 2016, encompasses the following significant unobservable inputs:
($ in thousands)
Unobservable Inputs
 
June 30, 2016

 
March 31, 2016

Estimated earn-out contingent consideration
$
2,832

 
$
2,968

Working capital and other adjustment
(444
)
 
(444
)
Indemnification related to warranty claims
(303
)
 
(303
)
Discount rate
—
%
 
—
%
Approximate timing of cash flows
0.1 years

 
0.4 years


The following table summarizes contingent consideration activity:
(in thousands)
 
Balance as of March 31, 2016
$
311

Contingent consideration – payments
(127
)
Contingent consideration – change in fair value in General and Administrative expense
(137
)
Balance as of June 30, 2016
$
47