Fair Value Measurements

6 Months Ended

Jun. 30, 2018

FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories:


•	Level 1 - observable inputs such as quoted prices (unadjusted) in active liquid markets for identical securities as of the reporting date;


•	Level 2 - other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; or observable market prices in markets with insufficient volume and/or infrequent transactions; and


•	Level 3 - significant inputs that are generally unobservable inputs for which there is little or no market data available, including our own assumptions in determining fair value.

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 were as follows (in thousands):



	June 30, 2018
	Level 1		Level 2			Level 3		Total
Assets:
Cash Equivalents
Money market funds	$	1,821	$	—		$	—	$	1,821
Commercial paper	—		4,990			—		4,990
Total cash equivalents	1,821		4,990			—		6,811
Available-for-Sale Securities
Certificates of deposit⁽¹⁾	—		20,380			—		20,380
Corporate bonds	—		24,631			—		24,631
U.S. government bonds	—		14,976			—		14,976
Total available-for-sale securities	—		59,987			—		59,987
Derivatives
Interest rate swap contract	—		561			—		561
Total derivatives	—		561			—		561
Total assets measured at fair value	$	1,821	$	65,538		$	—	$	67,359

Liabilities:
Derivatives
Foreign currency forward contracts	$	—	$	(667	)	$	—	$	(667	)
Total liabilities measured at fair value	$	—	$	(667	)	$	—	$	(667	)



	December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents
Money market funds	$	10,946	$	—	$	—	$	10,946
Commercial paper	—		1,996		—		1,996
Total cash equivalents	10,946		1,996		—		12,942
Available-for-Sale Securities
Certificates of deposit⁽¹⁾	—		19,875		—		19,875
Corporate bonds	—		29,239		—		29,239
U.S. government bonds	—		8,189		—		8,189
Total available-for-sale securities	—		57,303		—		57,303
Derivatives
Interest rate swap contract	—		372		—		372
Foreign currency forward contracts	—		390		—		390
Total derivatives	—		762		—		762
Total assets measured at fair value	$	10,946	$	60,061	$	—	$	71,007

⁽¹⁾ All certificates of deposit are within current FDIC insurance limits.

We did not have any liabilities measured at fair value on a recurring basis as of December 31, 2017.

For our assets measured at fair value on a recurring basis, we recognize transfers between levels at the actual date of the event or change in circumstance that caused the transfer. There were no transfers between levels during the six months ended June 30, 2018, nor for the year ended December 31, 2017.

We did not have any changes to our valuation techniques during the six months ended June 30, 2018, nor for the year ended December 31, 2017.

We classify our marketable securities as available-for-sale and, accordingly, record them at fair value. Level 1 investment valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 investment valuations are obtained from inputs, other than quoted market prices in active markets for identical assets, that are directly or indirectly observable in the marketplace and quoted prices in markets with limited volume or infrequent transactions. The factors or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Unrealized holding gains and losses are excluded from earnings and are reported net of tax in comprehensive income until realized.

The fair values of our interest rate swap contract and our foreign currency forward contracts are calculated as the present value of estimated future cash flows using discount factors derived from relevant Level 2 market inputs, including forward curves and volatility levels.

We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property, plant and equipment, goodwill, other intangible assets and certain other long-lived assets in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. We did not perform any valuations on assets or liabilities that are valued at fair value on a nonrecurring basis during the first six months of 2018. During the fourth quarter of 2017, we performed our annual goodwill and indefinite-lived trade names impairment analyses effective as of October 1, 2017. During the six months ended June 30, 2018, we did not record any other-than-temporary impairments on our financial assets required to be measured at fair value on a nonrecurring basis. For the year ended December 31, 2017, we recorded an impairment to our indefinite-lived Octane Fitness trade name in the amount of $8.8 million.

The carrying values of cash and cash equivalents, trade receivables, prepaids and other current assets, trade payables and accrued liabilities approximate fair value due to their short maturities. The carrying value of our term loan approximates its fair value and falls under Level 2 of the fair value hierarchy, as the interest rate is variable and based on current market rates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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