Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.6.0.2
Fair Value Measurements
12 Months Ended
Dec. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value:
Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities; quoted prices 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.
Level 3—Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
The Company does not have any financial assets or liabilities measured at fair value on a recurring basis.
The following financial instruments are not measured at fair value on the consolidated balance sheet as of December 31, 2016 and 2015, but require disclosure of fair values: cash and cash equivalents, accounts receivable, and accounts payable. The carrying value of these financial instruments approximates fair values because of the relatively short maturity.
During the third quarter of 2014, the Company listed the facility in Mundelein, Illinois for sale. This asset was measured at fair value less cost to sell as of September 30, 2014 based on market price and Level 2 inputs. The book value of this asset on June 30, 2014 was $3.6 million. The Company expensed $2.2 million during the third quarter of 2014 for this impairment. As of December 31, 2016 the Company is carrying the asset as held for sale its fair value of $1.4 million.
For the year ended December 31, 2014 the Company recorded a charge of $0.6 million, related to impairment of trademarks and trade names. The Company measures these non-financial assets at fair value on a nonrecurring basis subsequent to the initial recognition. The fair value of these non-financial assets was measured using Level 3 inputs. See Note 6—Intangible Assets
The Company also has contingent consideration associated with earnouts from acquisitions. Contingent consideration liabilities are classified as Level 3 liabilities, as the Company use unobservable inputs to value them, which is a probability-based income approach. Contingent considerations are classified as accrued liabilities on the consolidated balance sheets. Subsequent changes in the fair value of contingent consideration liabilities are recorded within the income statement as an operating expense.
Contingent consideration associated with earnouts from acquisitions is as follows (in thousands):
 
December 31, 2015
 
Additions
 
Payments
 
Adjustments
 
December 31, 2016
Liabilities:
 
 
 
 
 
 
 
 
 
Contingent consideration
$
6,209

 
$
2,500

 
$
(2,284
)
 
$
(3,382
)
 
$
3,043

Total
$
6,209

 
$
2,500

 
$
(2,284
)
 
$
(3,382
)
 
$
3,043


The significant unobservable inputs used in the fair value measurement of contingent consideration related to the acquisitions are annualized revenue forecasts developed by the Company considering the probability of achievement of those revenue forecasts. Significant increases (decreases) in these unobservable inputs in isolation would result in a significantly lower (higher) fair value measurement.
The Company's Level 2 securities are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spread, benchmark securities, prepayment/default projections based on historical data and other observable inputs. The Company validates the prices provided by its third-party pricing services by understanding the models used, obtaining market values from other pricing sources, analyzing pricing data in certain instances and confirming those securities traded in active markets. See Note 4 to these Consolidated Financial Statements for further information regarding the Company's financial instruments.
Short term investments are as follows (in thousands):
 
December 31, 2016
 
Level I
 
Level II
 
Level III
 
Total
Short term investments
 
 
 
 
 
 
 
    U.S. Treasury Bills

 
7,688

 

 
7,688

    U.S. investment grade bonds

 
16,789

 

 
16,789

    Developed investment grade bonds

 
9,542

 

 
9,542

Total short term investments

 
34,019

 

 
34,019