(5) FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following table represents the Company's financial assets and liabilities which are measured at fair value on a recurring basis (in thousands):



			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2017
Cash equivalents	$	75,149	$	75,149	$	—	$	—
FFF call right	9,936		—		—		9,936
Deferred compensation plan assets	45,368		45,368		—		—
Total assets	$	130,453	$	120,517	$	—	$	9,936
Earn-out liabilities	$	18,787	$	—	$	—	$	18,787
FFF put right	25,482		—		—		25,482
Total liabilities	$	44,269	$	—	$	—	$	44,269

June 30, 2016
Cash equivalents	$	83,846	$	83,846	$	—	$	—
Corporate debt securities	33,132		—		33,132		—
Asset-backed securities	14,757		—		14,757		—
Deferred compensation plan assets	41,917		41,917		—		—
Total assets	$	173,652	$	125,763	$	47,889	$	—
Earn-out liabilities	$	4,128	$	—	$	—	$	4,128
Total liabilities	$	4,128	$	—	$	—	$	4,128

Cash equivalents were included in cash and cash equivalents, and corporate debt securities and asset-backed securities were included in current and long-term marketable securities in the accompanying condensed consolidated balance sheets (see Note 4 - Investments). The fair value of the Company's corporate debt securities and asset-backed securities, classified as Level 2, were valued using quoted prices for similar securities in active markets or quoted prices for identical or similar securities in markets that are not active.

Deferred compensation plan assets consisted of highly liquid mutual fund investments, which were classified as Level 1. The current portion of deferred compensation plan assets was included in prepaid expenses and other current assets ($5.5 million and $2.0 million at March 31, 2017 and June 30, 2016, respectively) in the accompanying condensed consolidated balance sheets.

Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

Earn-out liabilities

Earn-out liabilities were incurred in connection with acquisitions of Inflow Health, LLC on October 1, 2015, Healthcare Insights, LLC ("HCI") on July 31, 2015 and Innovatix and Essensa on December 2, 2016 (see Note 3 - Business Acquisitions). At March 31, 2017 and June 30, 2016, the earn-out liabilities were classified as Level 3. The fair values of the earn-out liabilities were determined based on estimated future earnings and the probability of achieving them. The current portion of the earn-out liabilities was $18.5 million and $0.5 million at March 31, 2017 and June 30, 2016, respectively, and was included in other liabilities, current in the accompanying condensed consolidated balance sheets. The long-term portion of the earn-out liabilities was $0.3 million and $3.7 million at March 31, 2017 and June 30, 2016, respectively, and was included in other liabilities, noncurrent in the accompanying condensed consolidated balance sheets. Changes in the fair values of the earn-out liabilities were recorded within selling, general and administrative expenses in the accompanying condensed consolidated statements of income.

FFF put and call rights

Pursuant to a shareholders' agreement entered into in connection with the Company's equity investment in FFF on July 26, 2016 (see Note 4 - Investments), the majority shareholder of FFF obtained a put right ("FFF put right") that provides such shareholder the right to sell all or any portion of its interest in FFF to the Company, which is exercisable beginning on the fourth anniversary of the investment closing date at a per share price equal to FFF's earnings before interest, taxes, depreciation and amortization ("EBITDA") over the twelve calendar months prior to the purchase date multiplied by a market adjusted multiple, adjusted for any outstanding debt and cash and cash equivalents ("Equity Value per Share"). In addition, the shareholders' agreement provided the Company with a call right ("FFF call right") to purchase the remaining interest in FFF from the majority shareholder, which is exercisable at any time within 180 calendar days after the date of a Key Man Event (generally defined in the shareholders' agreement as the resignation, termination for cause, death or disability of the majority shareholder). In the event that the FFF put or call rights are exercised, the purchase price for the additional interest in FFF will be at a per share price equal to the Equity Value per Share.

The fair value of the FFF put and call rights were determined based on the Equity Value per Share calculation using unobservable inputs, which included the estimated FFF put and call rights' expiration dates, the forecast of FFF's EBITDA over the option period, forecasted movements in the overall market and the likelihood of a Key Man Event. Significant changes to the Equity Value per Share resulting from changes in the unobservable inputs could have a significant impact on the fair values of the FFF put and call rights.

The Company recorded the FFF put and call rights within long term other liabilities and long term other assets, respectively, within the accompanying condensed consolidated balance sheets. Net changes in the fair value of the FFF put and call rights were recorded within other expense, net, in the accompanying condensed consolidated statements of income.

A reconciliation of the Company's earn-out liabilities and FFF put and call rights is as follows (in thousands):



	Beginning Balance		Purchases		Gain (Loss)			Ending Balance
Three months ended March 31, 2017
FFF call right asset	$	10,750	$	—	$	(814	)	$	9,936
Total Level 3 assets	$	10,750	$	—	$	(814	)	$	9,936
Earn-out liabilities	$	16,713	$	—	$	(2,074	)	$	18,787
FFF put right liability	26,384		—		902			25,482
Total Level 3 liabilities	$	43,097	$	—	$	(1,172	)	$	44,269

Three months ended March 31, 2016
Earn-out liabilities	$	4,109	$	—	$	(27	)	$	4,136
Total Level 3 liabilities	$	4,109	$	—	$	(27	)	$	4,136

Nine months ended March 31, 2017
FFF call right asset	$	—	$	10,361	$	(425	)	$	9,936
Total Level 3 assets	$	—	$	10,361	$	(425	)	$	9,936
Earn-out liabilities	$	4,128	$	16,662	$	2,003		$	18,787
FFF put right liability	—		25,821		339			25,482
Total Level 3 liabilities	$	4,128	$	42,483	$	2,342		$	44,269

Nine months ended March 31, 2016
Earn-out liabilities	$	—	$	4,109	$	(27	)	$	4,136
Total Level 3 liabilities	$	—	$	4,109	$	(27	)	$	4,136

Non-Recurring Fair Value Measurements

During the nine months ended March 31, 2017, no non-recurring fair value measurements were required related to the testing of goodwill and intangible assets for impairment. However, purchase price allocations required significant non-recurring Level 3 inputs. The preliminary fair values of the acquired intangible assets resulting from the acquisitions of Acro Pharmaceuticals and Innovatix and Essensa were determined using the income approach (see Note 3 - Business Acquisitions).

The Company recognized a one-time gain of $204.8 million related to the remeasurement of the Company's 50% equity method investment in Innovatix to fair value upon acquisition of the remaining interest in Innovatix (see Note 3 - Business Acquisitions). The fair value of the investment was calculated using a discounted cash flow model.

Financial Instruments For Which Fair Value Only is Disclosed

The fair values of non-interest bearing notes payable, classified as Level 2, were less than their carrying values by approximately $0.6 million and $0.7 million at March 31, 2017 and June 30, 2016, respectively, based on assumed market interest rates of 2.6% and 2.1%, respectively.

Other Financial Instruments

The fair value of cash, accounts receivable, accounts payable and accrued liabilities approximated carrying value due to the short-term nature of these financial instruments.