XML 27 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value Measurements
 6 Months Ended
Jun. 30, 2014
Fair Value Measurements  
Fair Value Measurements

Note 4—Fair Value Measurements

 

ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value in GAAP, establishes a framework for measuring fair value and requires certain disclosures about fair value measurements.  ASC Topic 820 requires that certain financial assets and financial liabilities be re-measured and reported at fair value each reporting period while other non-financial assets and liabilities may be re-measured and reported at fair value on a non-recurring basis.

 

In general, fair values determined by Level 1 inputs use quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

 

The following table presents, for each of the fair value hierarchy levels identified under ASC Topic 820, the Company’s financial assets and liabilities that are required to be measured at fair value at June 30, 2014 and December 31, 2013:

 

 

 

 

 

Fair Value Measurements at Reporting Date

 

 

 

Amount
Recorded
on Balance
Sheet

 

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets as of June 30, 2014:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,177

 

$

160,177

 

—

 

—

 

Short-term investments

 

$

2,280

 

$

2,280

 

—

 

—

 

Liabilities as of June 30, 2014:

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

5,403

 

—

 

—

 

$

5,403

 

 

 

 

 

 

 

 

 

 

 

Assets as of December 31, 2013:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

196,077

 

$

196,077

 

—

 

—

 

Short-term investments

 

$

18,686

 

$

18,686

 

—

 

—

 

Liabilities as of December 31, 2013:

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

9,233

 

—

 

—

 

$

9,233

 

 

Short-term investments consist primarily of Certificates of Deposit (“CDs”) and U.S. Treasury bills with various financial institutions that are backed by the federal government.

 

Other financial instruments of the Company not listed in the table consist of accounts receivable, accounts payable and certain accrued liabilities.  These financial instruments generally approximate fair value based on their short-term nature.  The carrying value of the Company’s long-term debt approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities.

 

The following table provides changes to the Company’s contingent consideration liability Level 3 fair value measurements during the six months ended June 30, 2014:

 

Contingent Consideration

 

 

 

Balance at December 31, 2013

 

$

9,233

 

Additions:

 

 

 

Change in fair value of contingent consideration

 

441

 

Vadnais acquisition

 

729

 

Reductions:

 

 

 

Payment to Q3C sellers

 

(5,000

)

Balance at June 30, 2014

 

$

5,403

 

 

On a quarterly basis, the Company assesses the estimated fair value of the contractual obligation to pay the contingent consideration and any changes in estimated fair value are recorded as other non-operating expense or income in the Company’s consolidated statement of operations.  Fluctuations in the fair value of contingent consideration are impacted by two unobservable inputs, management’s estimate of the probability (which has ranged from 33% to 100%) of the acquired company meeting the contractual operating performance target and the estimated discount rate (a rate that approximates the Company’s cost of capital). Significant changes in either of those inputs in isolation would result in a significantly different fair value measurement.  Generally, a change in the assumption of the probability of meeting the performance target is accompanied by a directionally similar change in the fair value of contingent consideration liability, whereas a change in assumption of the estimated discount rate is accompanied by a directionally opposite change in the fair value of contingent consideration liability.