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Fair Value Measurements | 9 Months Ended
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Sep. 28, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 6. Fair Value Measurements ASC 820, “Fair Value Measurements,” establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable:
| • | Level 1: Quoted prices for identical assets or liabilities in active markets which the Company can access
| • | Level 2: Observable inputs other than those described in Level 1
| • | Level 3: Unobservable inputs
Cash Equivalents The Company’s cash equivalents are highly liquid investments with original maturities of three months or less, which represent an asset the Company measures at fair value on a recurring basis. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets. The fair values of cash, accounts receivable, income taxes receivable, accounts payable, income taxes payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature. Foreign Currency Contracts The Company addresses market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain balance sheet foreign currency transaction exposures. The Company uses foreign currency forward contracts as a part of its strategy to manage exposures related to foreign currency denominated monetary assets and liabilities. Contingent Consideration On December 14, 2016, the Company acquired certain video signal processing and management technologies used in medical visualization solutions. Under the purchase and sale agreement, the owners are eligible to receive contingent consideration based on the achievement of certain revenue targets from 2018 to 2021. The undiscounted range of possible contingent consideration is zero to €5.5 million ($6.6 million). If such targets are achieved, the contingent consideration would be payable in cash in four installments from 2019 to 2022. As the acquired assets did not meet the definition of a business, the fair value of the contingent consideration is recognized when probable and estimable and is capitalized as part of the cost of the acquired assets. In December 2017, the Company recorded an estimated fair value of $1.3 million in contingent consideration, which is reported as a long-term liability in other liabilities on the consolidated balance sheet as of December 31, 2017. Based on the most recent projected revenues for fiscal years 2018 to 2021, the fair value of the contingent consideration was adjusted to $2.4 million, which is reported as a long-term liability in other liabilities on the consolidated balance sheet as of September 28, 2018. On February 19, 2015, the Company acquired Applimotion Inc. (“Applimotion”). Under the purchase and sale agreement for the Applimotion acquisition, the shareholders of Applimotion were eligible to receive contingent consideration based on the achievement of certain revenue targets for fiscal years 2015 to 2017. If such targets were achieved, the contingent consideration would be payable in cash in two installments in 2017 and 2018, respectively. The estimated fair value of the contingent consideration of $1.0 million was determined based on the Monte Carlo valuation method and was recorded as part of the purchase price as of the acquisition date. As a result of Applimotion’s fiscal year 2015 and 2016 revenue results, contingent consideration of $1.2 million was paid in the first quarter of 2017. Based on Applimotion’s fiscal year 2016 and 2017 revenue results, the fair value for the remaining contingent consideration was adjusted to $2.8 million as of December 31, 2017. The Company paid $2.8 million as the final Applimotion contingent consideration payment in January 2018. The following table summarizes the fair values of the Company’s financial assets and liabilities as of September 28, 2018 (in thousands):
|  |  |  |  | Quoted Prices in |  |  |  |  |  |  | Significant Other |
|  |  |  |  | Active Markets for |  |  | Significant Other |  |  | Unobservable |
|  |  |  |  | Identical Assets |  |  | Observable Inputs |  |  | Inputs |
| Fair Value |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents | $ | 2,109 |  |  | $ | 2,109 |  |  | $ | — |  |  | $ | — |
Prepaid expenses and other current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | 132 |  |  |  | — |  |  |  | 132 |  |  |  | — |
| $ | 2,241 |  |  | $ | 2,109 |  |  | $ | 132 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accrued expenses and other current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | $ | 33 |  |  | $ | — |  |  | $ | 33 |  |  | $ | — |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration - Long-term |  | 2,438 |  |  |  | — |  |  |  | — |  |  |  | 2,438 |
| $ | 2,471 |  |  | $ | — |  |  | $ | 33 |  |  | $ | 2,438 |
The following table summarizes the fair values of the Company’s financial assets and liabilities as of December 31, 2017 (in thousands):
|  |  |  |  | Quoted Prices in |  |  |  |  |  |  | Significant Other |
|  |  |  |  | Active Markets for |  |  | Significant Other |  |  | Unobservable |
|  |  |  |  | Identical Assets |  |  | Observable Inputs |  |  | Inputs |
| Fair Value |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents | $ | 2,665 |  |  | $ | 2,665 |  |  | $ | — |  |  | $ | — |
Prepaid expenses and other current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | 150 |  |  |  | — |  |  |  | 150 |  |  |  | — |
| $ | 2,815 |  |  | $ | 2,665 |  |  | $ | 150 |  |  | $ | — |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accrued expenses and other current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration - Current | $ | 2,800 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,800 |
Foreign currency forward contracts (1) |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration - Long-term |  | 1,304 |  |  |  | — |  |  |  | — |  |  |  | 1,304 |
| $ | 4,104 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,104 |
| (1) | The unrealized loss from foreign currency forward contracts was nominal as of December 31, 2017.
Changes in the fair value of Level 3 contingent consideration during the nine months ended September 28, 2018 were as follows (in thousands):
| Contingent Consideration |
Balance at December 31, 2017 | $ | 4,104 |
Payments |  | (2,800 | )
Fair value adjustments |  | 1,134 |
Balance at September 28, 2018 | $ | 2,438 |
As of September 28, 2018, the significant unobservable inputs used in the fair value measurement of the Company’s contingent consideration were projected revenues and a discount rate. Increases or decreases in the unobservable inputs would result in a higher or lower fair value measurement. See Note 10 to Consolidated Financial Statements for a discussion of the estimated fair value of the Company’s outstanding debt.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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