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Performance-Based Common Stock Warrants | 9 Months Ended
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Sep. 30, 2017
Equity [Abstract] |
Performance-Based Common Stock Warrants | Performance-Based Common Stock Warrants On March 9, 2016, we issued common stock purchase warrants to Comcast to purchase up to 725,000 shares of our common stock at a price of $54.55 per share. The right to exercise the warrants is subject to vesting over three successive two-year periods (with the first two-year period commencing on January 1, 2016) based on the level of purchases of goods and services from us by Comcast and its affiliates, as defined in the warrants. The table below presents the purchase levels and number of warrants that will vest in each period based upon achieving these purchase levels.
| Incremental Warrants That Will Vest
Aggregate Level of Purchases by Comcast and Affiliates | January 1, 2016 - December 31, 2017 |  | January 1, 2018 - December 31, 2019 |  | January 1, 2020 - December 31, 2021
$260 million | 100,000 |  |  | 100,000 |  |  | 75,000 |
$300 million | 75,000 |  |  | 75,000 |  |  | 75,000 |
$340 million | 75,000 |  |  | 75,000 |  |  | 75,000 |
Maximum Potential Warrants Earned by Comcast | 250,000 |  |  | 250,000 |  |  | 225,000 |
If total aggregate purchases by Comcast and its affiliates are below $260 million in any of the two-year periods above, no warrants will vest related to that two-year period. If total aggregate purchases of goods and services by Comcast and its affiliates exceed $340 million during either the first or second two-year period, the amount of any such excess will count toward aggregate purchases in the following two-year period. To fully vest in the rights to purchase all of the underlying shares, Comcast and its affiliates must purchase an aggregate of $1.02 billion in goods and services from us during the six-year vesting period. Any and all warrants that vest will expire on January 1, 2023. The warrants provide for certain adjustments that may be made to the exercise price and the number of shares issuable upon exercise due to customary anti-dilution provisions. Additionally, in connection with the warrants, we have also entered into a registration rights agreement with Comcast under which Comcast may from time to time request that we register the shares of common stock underlying vested warrants with the SEC. Because the warrants contain performance criteria under which Comcast must achieve specified aggregate purchase levels for the warrants to vest, as detailed above, the measurement date for the warrants is the date on which the warrants vest. Through September 30, 2017, 100,000 of the warrants had vested. The fair value of the warrants is determined using the Black-Scholes option pricing model. The assumptions we utilized and the resulting fair value of the warrants were the following:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Fair value | $ | 24.17 |  |  | $ | 38.32 |  |  | $ | 24.17 |  |  | $ | 38.32 |
Price of Universal Electronics Inc. common stock | $ | 62.10 |  |  | $ | 74.99 |  |  | $ | 62.10 |  |  | $ | 74.99 |
Risk-free interest rate | 1.93 | % |  | 1.32 | % |  | 1.93 | % |  | 1.32 | %
Expected volatility | 34.41 | % |  | 40.54 | % |  | 34.41 | % |  | 40.54 | %
Expected life in years | 5.26 |  |  | 6.25 |  |  | 5.26 |  |  | 6.25 |
The impact to net sales recorded in connection with the warrants and the related income tax benefit were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2017 |  | 2016 |  | 2017 |  | 2016
Reduction/(increase) to net sales | $ | (141 | ) |  | $ | 1,160 |  |  | $ | 1,122 |  |  | $ | 3,219 |
Income tax (benefit)/expense | 53 |  |  | (426 | ) |  | (418 | ) |  | (1,182 | )
At September 30, 2017, we estimated the number of warrants that will vest based on the combination of purchases already made and projected future purchases that will be made by Comcast and its affiliates. These estimates may increase or decrease based on actual future purchases. The aggregate unrecognized estimated fair value of unvested warrants at September 30, 2017 was $14.2 million.

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