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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2015
Fair Value Measurements |
Fair Value Measurements | Note 4—Fair Value Measurements ASC Topic 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value in GAAP and requires certain disclosures about fair value measurements. ASC Topic 820 addresses fair value GAAP for financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period and for non-financial assets and liabilities that are 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, 2015 and December 31, 2014:
|  |  |  | 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, 2015: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 85,970 |  | $ | 85,970 |  | — |  | — |
Short-term investments |  | $ | — |  | $ | — |  | — |  | — |
Liabilities as of June 30, 2015: |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | 1,812 |  | — |  | — |  | $ | 1,812 |
Assets as of December 31, 2014: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 139,465 |  | $ | 139,465 |  | — |  | — |
Short-term investments |  | $ | 30,992 |  | $ | 30,992 |  | — |  | — |
Liabilities as of December 31, 2014: |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | 6,922 |  | — |  | — |  | $ | 6,922 |
Short-term investments at December 31, 2014 consisted primarily of 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, 2015 and 2014:
|  | Significant Unobservable Inputs (Level 3) |
|  | 2015 |  | 2014 |
Contingent Consideration Liability |  |  |  |  |
Beginning balance, January 1, 2015 and 2014 |  | $ | 6,922 |  | $ | 9,233 |
Additions to contingent consideration liability: |  |  |  |  |
Change in fair value of contingent consideration liability |  | 90 |  | 441 |
Vadnais acquisition |  | — |  | 729 |
Reductions in the contingent consideration liability: |  |  |  |  |
Payment to Q3C sellers for meeting performance targets |  | (5,000 | ) | (5.000 | )
Reduction due to non-attainment of performance target — Ram-Fab |  | (200 | ) | — |
Ending balance, June 30, 2015 and 2014 |  | $ | 1,812 |  | $ | 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 statement of income. 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 an 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 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 used of the estimated discount rate is accompanied by a directionally opposite change in the fair value of contingent consideration liability.

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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=36462937&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=35750535&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=35750535&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=35750535&loc=d3e13433-108611 + Details
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