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Fair Value of Financial Instruments | 9 Months Ended
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Mar. 31, 2017
Business Combinations [Abstract] |
Fair Value of Financial Instruments |
Note 11. | Fair Value of Financial Instruments
The FASB defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous markets for the asset and liability in an orderly transaction between market participants at the measurement date. The Company estimates fair value of its financial instruments utilizing an established three-level hierarchy in accordance with U.S. GAAP. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:
• | Level 1 – | Valuation is based upon unadjusted quoted prices for identical assets or liabilities in active markets.
• | Level 2 – | Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instruments.
• | Level 3 – | Valuation is based upon other unobservable inputs that are significant to the fair value measurements.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. At March 31, 2017, the Company had foreign currency forward contracts recorded at fair value. The fair values of these instruments were measured using valuations based upon quoted prices for similar assets and liabilities in active markets (Level 2) and are valued by reference to similar financial instruments, adjusted for credit risk, restrictions and other terms specific to the contracts. Foreign currency loss related to these contracts was $1.1 million for the three months ended March 31, 2017, and foreign currency gain of $0.2 million for the nine months ended March 31, 2017. The Company had a contingent earnout arrangement related to the acquisition of EpiWorks recorded at fair value. The EpiWorks earnout arrangement provides up to a maximum of $6.0 million of additional cash payments based upon EpiWorks achieving certain agreed upon financial and operational targets for capacity, wafer output and gross margin, which if earned would be payable for the achievement of each specific target over the next three years. The fair value of the contingent earnout arrangement was measured using valuations based upon other unobservable inputs that are significant to the fair value measurement (Level 3). The following table provides a summary by level of the fair value of financial instruments that are measured on a recurring basis for the periods presented ($000):
|  | Fair Value Measurements at March 31, 2017 Using: |
|  |  |  |  |  | Quoted Prices in |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Active Markets |  |  | Other |  |  | Significant |
|  |  |  |  |  | for Identical |  |  | Observable |  |  | Unobservable |
|  |  |  |  |  | Assets |  |  | Inputs |  |  | Inputs |
|  | March 31, 2017 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | 135 |  |  | $ | - |  |  | $ | 135 |  |  | $ | - |
Contingent earnout arrangement |  | $ | 5,545 |  |  | $ | - |  |  | $ | - |  |  | $ | 5,545 |
|  | Fair Value Measurements at June 30, 2016 Using: |
|  |  |  |  |  | Quoted Prices in |  |  | Significant |  |  |  |  |
|  |  |  |  |  | Active Markets |  |  | Other |  |  | Significant |
|  |  |  |  |  | for Identical |  |  | Observable |  |  | Unobservable |
|  |  |  |  |  | Assets |  |  | Inputs |  |  | Inputs |
|  | June 30, 2016 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | 511 |  |  | $ | - |  |  | $ | 511 |  |  | $ | - |
Contingent earnout arrangement |  | $ | 4,352 |  |  | $ | - |  |  | $ | - |  |  | $ | 4,352 |
The Company’s policy is to report transfers into and out of Levels 1 and 2 of the fair value hierarchy at fair values as of the beginning of the period in which the transfers occur. There were no transfers in and out of Levels 1 and 2 of the fair value hierarchy during the three and nine months ended March 31, 2017. The following table presents a reconciliation of the beginning and ending fair value measurements of the Company’s level 3 contingent earnout arrangement related to the acquisition of EpiWorks ($000):
|  | Significant |
|  | Unobservable Inputs |
|  | (Level 3) |
Balance at July 1, 2016 |  | $ | 4,352 |
Payments |  |  | - |
Changes in fair value |  |  | 1,193 |
Balance at March 31, 2017 |  | $ | 5,545 |
The change in fair value of $1.2 million was recorded in other expense (income), net in the Condensed Consolidated Statement of Earnings. The fair values of cash and cash equivalents are considered Level 1 among the fair value hierarchy and approximate fair value because of the short-term maturity of those instruments. The Company’s borrowings including its capital lease obligation are considered Level 2 among the fair value hierarchy and are variable interest rates and accordingly their carrying amounts approximate fair value.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=73719730&loc=d3e13433-108611 + Details
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