Fair Value Measurements

3 Months Ended

Mar. 29, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

ASC 820, “Fair Value Measurements,” establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable:

• Level 1: Quoted prices for identical assets or liabilities in active markets which the Company can access

• Level 2: Observable inputs other than those described in Level 1

• Level 3: Unobservable inputs

Cash Equivalents

The Company’s cash equivalents are highly liquid investments with original maturities of three months or less, which represent an asset the Company measures at fair value on a recurring basis. The Company determines the fair value of cash equivalents using a market approach based on quoted prices in active markets. The fair values of cash, accounts receivable, income taxes receivable, accounts payable, income taxes payable and accrued expenses and other current liabilities approximate their carrying values because of their short-term nature.

Foreign Currency Contracts

The Company addresses market risks from changes in foreign currency exchange rates through a risk management program that includes the use of derivative financial instruments to mitigate certain balance sheet foreign currency transaction exposures. The Company uses foreign currency forward contracts as a part of its strategy to manage exposures related to foreign currency denominated monetary assets and liabilities.

Contingent Consideration

On December 14, 2016, the Company acquired certain video signal processing and management technologies used in medical visualization solutions. Under the purchase and sale agreement, the former owners are eligible to receive contingent consideration based on the achievement of certain revenue targets from 2018 to 2021 by the Company from products using such technologies. The undiscounted range of possible contingent consideration is zero to €5.5 million ($6.6 million). If such targets are achieved, the contingent consideration would be payable in cash in four installments from 2019 to 2022. As the acquired assets did not meet the definition of a business, the fair value of the contingent consideration is recognized when probable and estimable and is capitalized as part of the cost of the acquired assets. Subsequent changes in the estimated fair value of this contingent liability are recorded as adjustments to the carrying value of the asset acquired and amortized over the remaining useful life of the underlying asset. There were no changes to the fair value of the contingent consideration during the three months ended March 29, 2019.

Summary by Fair Value Hierarchy

The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of March 29, 2019 (in thousands):

			Quoted Prices in				Significant Other
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	3,252	$	3,252	$	—	$	—
Prepaid expenses and other current assets:
Foreign currency forward contracts		296		—		296		—
	$	3,548	$	3,252	$	296	$	—
Liabilities
Accrued expenses and other current liabilities:
Contingent consideration - Current	$	1,248	$	—	$	—	$	1,248
Foreign currency forward contracts		6		—		6		—
Other liabilities:
Contingent consideration - Long-term		2,128		—		—		2,128
	$	3,382	$	—	$	6	$	3,376

The following table summarizes the fair values of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 (in thousands):

			Quoted Prices in				Significant Other
			Active Markets for		Significant Other		Unobservable
			Identical Assets		Observable Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
Assets
Cash equivalents	$	4,288	$	4,288	$	—	$	—
Prepaid expenses and other current assets:
Foreign currency forward contracts		15		—		15		—
	$	4,303	$	4,288	$	15	$	—
Liabilities
Accrued expenses and other current liabilities:
Foreign currency forward contracts	$	182	$	—	$	182	$	—
Other liabilities:
Contingent consideration - Long-term		3,376		—		—		3,376
	$	3,558	$	—	$	182	$	3,376

As of March 29, 2019, the significant unobservable inputs used in the fair value measurement of the Company’s contingent consideration were projected revenues and a discount rate. Increases or decreases in the unobservable inputs would result in a higher or lower fair value measurement.

See Note 9 to Consolidated Financial Statements for a discussion of the estimated fair value of the Company’s outstanding debt.