Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit price in an orderly transaction between market participants on the measurement date. A three-level hierarchy is used for fair value measurements based upon the observability of the inputs to the valuation of an asset or liability as of the measurement date. Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs. A financial instrument's level within the hierarchy is based on the highest level of any input that is significant to the fair value measurement. Following is a description of our valuation methodologies used to estimate the fair value for our assets and liabilities.

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

The Company's non-financial assets such as goodwill, intangible assets and property, plant and equipment are recorded at fair value when an impairment is recognized or at the time acquired in a business combination. As discussed in Note 6 - Intangible Assets and Goodwill and Note 7 - Restructuring and Other Expense, during 2015, we recorded impairment charges associated with goodwill, intangible assets or property, plant and equipment and reduced the carrying amount of such assets subject to the impairment to their estimated fair value. Additionally, as discussed in Note 4 - Acquisitions, the Company acquired Connected Data, Inc. during 2015 and recorded the acquired assets and liabilities, including goodwill, intangible assets and property, plant and equipment at their estimated fair value. The determination of the estimated fair value of such assets required the use of significant unobservable inputs which would be considered Level 3 fair value measurements.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The Company measures certain assets and liabilities at their estimated fair value on a recurring basis, including cash and cash equivalents, derivative instruments and our contingent consideration obligations associated with the acquisition of CDI.

The following table provides information by level for assets and liabilities that are measured at fair value on a recurring basis for year ended December 31, 2016:



Description	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
	(In millions)
Assets:
Trading securities	$	22.0	$	2.5	$	19.5	$	—
Liabilities:
Contingent consideration associated with CDI acquisition	0.3		—		0.3		—

Trading Securities

On August 13, 2015 the Company entered into an agreement to sell its RDX™ Storage product line, including $1.5 million of associated inventory, to Sphere 3D for approximately 1.5 million shares of Sphere 3D common stock and a warrant exercisable into up to an additional 250,000 shares (at a $0.01 exercise price per share) of Sphere 3D common stock. The Company recognized a gain of $4.5 million within "Restructuring and other" upon the closing of this transaction. For the year ended December 31, 2015 the Company recorded a $0.5 million loss on the value Sphere 3D shares held. The loss was recorded in other (income) expense in the Consolidated Statement of Operations as the investments are classified as trading securities under applicable accounting criteria. The Company sold 1.2 million shares of Sphere 3D common stock during the fourth quarter of 2015 for $2.7 million in proceeds. The Company sold the remaining shares in 2016.

On February 8, 2016, the Company entered into a subscription agreement with Clinton Lighthouse Equity Strategies Fund (Offshore) Ltd. (“Clinton Lighthouse”). Clinton Lighthouse is a market neutral fund which provides daily liquidity to its investors. The short term investment was classified as a trading security as we expect to be actively managing this investment at all times with the intention of maximizing our investment returns. Income or loss associated with this trading security as a component of "Other income (expense)" in our Condensed Consolidated Statements of Operations and purchases or sales of this security are reflected as Operating activities in our Condensed Consolidated Statements of Cash Flows. As of December 31, 2016, the short term investment balance in Clinton Lighthouse was $19.5 million. We recorded losses of approximately $4.5 million in the year ended December 31, 2016 related to Clinton Lighthouse, which includes $0.5 million of performance fees reflected within "Other income (expense)" in the Condensed Consolidated Statements of Comprehensive Loss. See Note 16 - Related Party Transactions for more information.

Derivative Financial Instruments

We attempted to substantially mitigate the risk that forecasted cash flows denominated in foreign currencies may be adversely affected by changes in the currency exchange rates through the use of option, forward and combination option contracts. The degree of our hedging could fluctuate based on management judgment and forecasted projections. We formally documented all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking the hedged items. This process included linking all derivatives to forecasted transactions. We formally assessed, both at the hedge's inception and on an ongoing basis, whether the derivatives used in hedging transactions were highly effective in offsetting changes in the cash flows of hedged items. The company discontinued the use of derivatives in 2015 and we did not have any contracts outstanding as of December 31, 2016.

Gains and losses related to cash flow hedges were deferred in accumulated other comprehensive loss with a corresponding asset or liability. When the hedged transaction occurred, the gains and losses in accumulated other comprehensive loss were reclassified into our Consolidated Statements of Operations in the same line as the item being hedged. If at any time it was determined that a derivative was ineffective, we discontinued hedge accounting prospectively, with the ineffective portion of a derivative's change in fair value recognized in the current period operations. During the year ended December 31, 2015, we deemed certain cash flow hedges as ineffective due to the wind down of our legacy business. As such, we discontinued hedge accounting and recorded a gain of $1.7 million to other expense in our Consolidated Statement of Operations for the year ended December 31, 2015.

Other Assets and Liabilities

The carrying value of accounts receivable and accounts payable approximate their fair values due to the short-term duration of these items. Additionally, our borrowings of $0.2 million of outstanding debt at December 31, 2015, as further described in Note 17 - Debt, approximated fair value due to the short nature of the debt.