Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Fair Value Measurements [Abstract]

Fair Value Measurements

NOTE 2. Fair Value Measurements

The Company applies a three-level valuation hierarchy for fair value measurements. This hierarchy prioritizes the inputs into three broad levels.  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability. Level 3 inputs are unobservable inputs based on management’s assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s fair value measurement classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis at September 30, 2017 and December 31, 2016:

			Fair Value Measurements Using
	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2017
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	91,339	$	—	$	91,339	$	—
Foreign currency forward contracts		61		—		61		—
Total Assets	$	91,400	$	—	$	91,400	$	—
Liabilities:
Contingent consideration - acquisitions	$	3,025	$	—	$	—	$	3,025
Total Liabilities	$	3,025	$	—	$	—	$	3,025
December 31, 2016
Assets:
Available-for-sale debt securities:
Municipal notes and bonds	$	87,029	$	—	$	87,029	$	—
Corporate bonds		843		—		843		—
Foreign currency forward contracts		312		—		312		—
Total Assets	$	88,184	$	—	$	88,184	$	—
Liabilities:
Contingent consideration - acquisitions	$	3,251	$	—	$	—	$	3,251
Total Liabilities	$	3,251	$	—	$	—	$	3,251

The Company’s investments classified as Level 1 are based on quoted market prices that are available in active markets.

The Company’s investments classified as Level 2 are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency.  The foreign currency forward contracts are primarily measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers.  Investment prices are obtained from third party pricing providers, which models prices utilizing the above observable inputs, for each asset class.

Level 3 liabilities consisted of contingent consideration related to an acquisition for which the Company uses a discounted cash flow model to value these liabilities.  The Level 3 assumptions used in the discounted cash flow model for the contingent consideration included projected revenues, timing of cash flows and estimates of discount rates of 8.6% and 9.1% for the nine months ended September 30, 2017 and 2016, respectively.  A significant decrease in the projected revenues or increase in discount rates could result in a significantly lower fair value measurement for the contingent consideration.  

This table presents a reconciliation for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2017:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at December 31, 2016	$	3,251
Additions		—
Total loss included in selling, general and administrative expense		132
Payments		(358	)
Transfers into (out of) Level 3		—
Balance at September 30, 2017	$	3,025

See Note 3 for additional discussion regarding the fair value of the Company’s marketable securities.

Fair Value of Other Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value because of the short-term maturity of these instruments.  The estimated fair value of these obligations is based, primarily, on a market approach, comparing the Company’s interest rates to those rates the Company believes it would reasonably receive upon re-entry into the market.  Judgment is required to estimate the fair value, using available market information and appropriate valuation methods.