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Fair Value Measurement: | 9 Months Ended
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Sep. 30, 2017
Fair Value Disclosures [Abstract] |
Fair Value Disclosures [Text Block] | Fair Value Measurement Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair value:
• | Level 1: quoted prices in active markets for identical assets or liabilities;
• | Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
• | Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities.
During the first quarter of 2017, we recognized an earn-out liability upon the acquisition of HIS from Pfizer. Pfizer may be entitled up to $225 million in cash if certain performance targets for the combined company for the three years ending December 31, 2019 are achieved. The initial fair value of the earn-out was determined by employing a Monte Carlo simulation in a risk neutral framework. The underlying simulated variable was adjusted EBITDA. The adjusted EBITDA volatility estimate was based on a study of historical asset volatility for a set of comparable public companies. The model includes other assumptions including the market price of risk, which was calculated as the weighted average cost of capital ("WACC") less the long term risk free rate. The initial value assigned to the contingent consideration was a result of forecasted product demand of our HIS business, as discussed further in Note 3: Acquisition, Strategic Transaction and Integration Expenses. At each reporting date subsequent to the acquisition we will remeasure the earn-out using the same methodology above and recognize any changes in value. If the probability of achieving the performance target significantly changes from what we initially anticipated, the change could have a significant impact on our financial statements in the period recognized. Our contingent earn-out liability is separately stated in our condensed consolidated balance sheets. The following table provides a reconciliation of the Level 3 earn-out liability measured at estimated fair value based on an initial valuation and updated quarterly for the nine months ended September 30, 2017 (in thousands):
|  | Earn-out Liability
Accrued balance, December 31, 2016 |  | $ | — |
Acquisition date fair value estimate of earn-out |  | 19,000 |
Change in fair value of earn-out (included in (loss) income from operations as a separate line item) |  | 13,000 |
Accrued balance, September 30, 2017 |  | $ | 32,000 |
The fair value of the earn-out at September 30, 2017 changed from the fair value calculated at acquisition due to a change in the forecast of the underlying target, adjusted EBITDA, and due to changes in other assumptions used in the Monte Carlo simulation, as detailed in the below table. The following table provides quantitative information about Level 3 inputs for fair value measurement of our earn-out liability as of the acquisition date and September 30, 2017. Significant increases or decreases in these inputs in isolation could result in a significant impact on our fair value measurement:
Simulation Input |  | As of September 30, 2017 |  | At Acquisition February 3, 2017
Adjusted EBITDA Volatility |  | 28.00 | % |  | 29.00 | %
WACC |  | 9.00 | % |  | 10.00 | %
20-year risk free rate |  | 2.63 | % |  | 2.82 | %
Market price of risk |  | 6.18 | % |  | 6.93 | %
Cost of debt |  | 3.94 | % |  | 4.16 | %
The fair value of our investments is estimated using observable market based inputs such as quoted prices, interest rates and yield curves or Level 2 inputs, which consisted of corporate bonds. The fair value of our Level 2 forward currency contract is estimated using observable market inputs such as known notional value amounts, spot and forward exchange rates. These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative. The assets related to our Dominican Republic manufacturing facilities are classified as assets held-for-sale. These assets are separately stated in our condensed consolidated balance sheet. The fair value of these Level 3 assets was determined as part of the HIS business valuation and was based on a market approach using comparable building and land sales data and the analysis of market conditions. There were no transfers between Levels during the three and nine months ended September 30, 2017. Our assets and liabilities measured at fair value on a recurring basis consisted of the following (Level 1, 2 and 3 inputs as defined above) (in thousands):
| Fair value measurements at September 30, 2017
| Total carrying value |  | Quoted prices in active markets for identical assets (level 1) |  | Significant other observable inputs (level 2) |  | Significant unobservable inputs (level 3)
Assets: |  |  |  |  |  |  |
Available for sale securities: |  |  |  |  |  |  |
Short-term | $ | 9,591 |  |  | $ | — |  |  | $ | 9,591 |  |  | $ | — |
Long-term | 15,140 |  |  | — |  |  | 15,140 |  |  | — |
Foreign exchange forwards: |  |  |  |  |  |  |
Prepaid expenses and other current assets | 1,279 |  |  | — |  |  | 1,279 |  |  | — |
Other assets | 309 |  |  | — |  |  | 309 |  |  | — |
Total Assets | $ | 26,319 |  |  | $ | — |  |  | $ | 26,319 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Earn-out liability | $ | 32,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 32,000 |
Total Liabilities | $ | 32,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 32,000 |
Our assets measured at fair value on a nonrecurring basis consisted of the following (Level 1, 2 and 3 inputs as defined above) (in thousands):
| Fair value measurements at September 30, 2017 using
| Total carrying value |  | Quoted prices in active markets for identical assets (level 1) |  | Significant other observable inputs (level 2) |  | Significant unobservable inputs (level 3)
Assets: |  |  |  |  |  |  |
Assets held-for-sale | $ | 12,489 |  |  | $ | — |  |  | $ | — |  |  | $ | 12,489 |
Total Assets | $ | 12,489 |  |  | $ | — |  |  | $ | — |  |  | $ | 12,489 |

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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 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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