Fair Value Measurements

The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following levels of inputs may be used to measure fair value:

Level 1 Inputs: Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 Inputs: Observable inputs other than prices included in Level 1, including quoted prices for similar assets or 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 Inputs: Unobservable inputs that are significant to the fair value of the assets or liabilities and reflect an entity's own assumptions in pricing assets or liabilities since they are supported by little or no market activity.

The following tables summarize assets and liabilities measured and recorded at fair value on a recurring basis in the accompanying Consolidated Balance Sheets as of September 30, 2016 and 2015 (in thousands):



			Fair Value Measurements at Reporting Date Using
Description	September 30, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	143	$	98	$	45	$	—
Available-for-sale securities	6,135		—		6,135		—
Foreign exchange contracts	5		—		5		—
Convertible debt securities	5,774		—		—		5,774
Stock warrant	45		—		—		45
Total Assets	$	12,102	$	98	$	6,185	$	5,819
Liabilities:
Contingent consideration	$	500	$	—	$	—	$	500
Foreign exchange contracts	97		—		97		—
Total Liabilities	$	597	$	—	$	97	$	500



			Fair Value Measurements at Reporting Date Using
Description	September 30, 2015		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	11,628	$	10,133	$	1,495	$	—
Available-for-sale securities	133,308		—		133,308		—
Foreign exchange contracts	89		—		89		—
Convertible debt securities	5,337		—		—		5,337
Stock warrant	59		—		—		59
Total Assets	$	150,421	$	10,133	$	134,892	$	5,396
Liabilities:
Contingent consideration	$	811	$	—	$	—	$	811
Foreign exchange contracts	36		—		36		—
	$	847	$	—	$	36	$	811

The convertible debt securities and the stock warrant are included in "Other assets" in the accompanying Consolidated Balance Sheets as of September 30, 2016 and 2015. Please refer to Note 8, "Equity Method and Other Investments" for further information on the convertible debt securities and the stock warrant.

Cash Equivalents

Cash equivalents of $0.1 million and $10.1 million, respectively, at September 30, 2016 and 2015 consist of Money Market Funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Cash equivalents of less than $0.1 million and $1.5 million, respectively, at September 30, 2016 and 2015, consist primarily of Bank Certificate of Deposits and are classified within Level 2 of the fair value hierarchy because they are not actively traded.

Available-For-Sale Securities

Available-for-sale securities of $6.1 million and $133.3 million, respectively, at September 30, 2016 and 2015 consist of Municipal Securities, Bank Certificate of Deposits, Commercial Paper, Mortgage-Backed Securities, as well as U.S. Treasury Securities and Obligations of U.S. Government Agencies. The securities are valued using matrix pricing and benchmarking and classified within Level 2 of the fair value hierarchy because they are not actively traded. Matrix pricing is a mathematical technique used to value securities by relying on the securities’ relationship to other benchmark quoted prices.

Foreign Exchange Contracts

Foreign exchange contract assets and liabilities amounted to less than $0.1 million and $0.1 million, respectively, at September 30, 2016. Foreign exchange contract assets and liabilities amounted to $0.1 million and less than $0.1 million, respectively, at September 30, 2015. Foreign exchange contract assets and liabilities are measured and reported at fair value based on observable market inputs and classified within Level 2 of the fair value hierarchy due to a lack of an active market for these contracts.

Convertible Debt Securities

Convertible debt securities of $5.8 million and $5.3 million, respectively, at September 30, 2016 and 2015 are classified within Level 3 of the fair value hierarchy and measured at fair value based on the probability-weighted expected return method (the "PWERM") utilizing various scenarios for the expected payout of the instrument covering the full range of the potential outcomes. The PWERM determines the value of an asset based upon an analysis of future values for the subject asset and full range of its potential values. The asset value is based upon the present value of the probability of each future outcome becoming available to the asset and the economic rights and preferences of each asset. The Company remeasures the fair value of the convertible debt securities at each reporting date and recognizes the corresponding fair value change related to the underlying inputs in the "Other (expense) income, net" in the Company's Consolidated Statements of Operations.

Stock Warrants

Stock warrant of less than $0.1 million and $0.1 million, respectively, at September 30, 2016 and 2015 is classified within Level 3 of the fair value hierarchy and measured at fair value based on the Black-Scholes model. The Black-Scholes model applied to the warrant incorporates the constant price variation of the underlying asset, the time value of money, the warrant’s strike price and the time until the warrant’s expiration date. The fair value of the warrant was determined utilizing a five year equity volatility percentage based on an average equity volatility derived from comparable public companies. The Company remeasures the fair value of the stock warrant at each reporting date and recognizes the corresponding fair value change related to the underlying inputs in the "Other (expense) income, net" in the Company's Consolidated Statements of Operations.

Contingent Consideration

Contingent consideration liability of $0.5 million and $0.8 million, respectively, at September 30, 2016 and 2015 is classified within Level 3 of the fair value hierarchy and measured at fair value based on the probability-weighted average discounted cash flow model utilizing potential outcomes related to achievement of certain specified targets and events. The fair value measurement of the contingent consideration is based on probabilities assigned to each potential outcome and the discount rate. The Company remeasures the fair value of the contingent consideration at each reporting date and recognizes the corresponding fair value change related to the underlying inputs in the "Selling, general and administrative" expenses in the Company's Consolidated Statements of Operations. Please refer to Note 4 “Acquisitions” for further information on the contingent consideration liability.

The carrying amounts of accounts receivable and accounts payable approximate their fair value due to their short-term nature.

The following table presents the reconciliation of the assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):



	Convertible Debt Securities		Stock Warrants			Contingent Consideration			Total
Balance at September 30, 2015	$	5,337	$	59		$	811		$	6,207
Change in fair value	437		(14		)	(311		)	112
Balance at September 30, 2016	$	5,774	$	45		$	500		$	6,319

Nonrecurring Fair Value Measurements

The Company holds certain assets that are measured at fair value on a nonrecurring basis in periods subsequent to initial recognition.

As of September 30, 2015, the building and the underlying land located in Oberdiessbach, Switzerland were presented at fair value of $2.9 million as "Assets Held for Sale" in the accompanying Consolidated Balance Sheets. The Company determined fair value of the assets held for sale based on indication of value resulting from marketing the building and the land to prospective buyers. Fair value measurement was classified within Level 3 of the fair value hierarchy since it was based on unobservable inputs. During fiscal year 2016, the Company sold the building and the underlying land to an unrelated third party for a total price of $2.8 million and remeasured the fair value of the assets. The corresponding impact of this remeasurement on the Company's results of operations for fiscal year 2016 was insignificant.

Loan receivable of $0.2 million and $1.0 million, respectively, at September 30, 2016 and 2015 is recorded at carrying value and included in "Other assets" in the accompanying Consolidated Balance Sheets. The fair value of the loan is determined by considering the fair value of the collateral using valuation techniques, principally the discounted cash flow method and a relief from royalty approach, reduced by the amounts subordinated to the debt provided by the new lender. Fair value measurement is classified within Level 3 of the fair value hierarchy since it is based primarily on unobservable inputs and requires significant management judgment. The observable inputs used in the Company's analysis are limited primarily to the discount rate, which is based on a rate commensurate with the risks and uncertainties of the Borrower. As a result, the fair value of the loan could vary under different conditions or assumptions, including the varying assumptions regarding future cash flows of the Borrower or discount rates.

During fiscal year 2016, the Company concluded that recent operating trends and declining future cash flow forecasts of the Borrower represented indicators of potential loan impairment. As a result, the Company updated the discounted cash flow valuation model based on revised lower forecasted future cash flow assumptions and determined, based on a relief from royalty and discounted cash flow approaches, that carrying value of the loan exceeded its estimated fair value by $0.8 million. Accordingly, the Company recorded an impairment charge of $0.8 million in "Selling, general and administrative" expenses in the Company's Consolidated Statements of Operations during fiscal year ended September 30, 2016 which resulted in the loan's carrying value of $0.2 million at September 30, 2016. Please refer to Note 9, "Loan Receivable" for further information on the loan.

Loan receivable of $1.5 million at September 30, 2016 and 2015 is recorded at carrying value and included in "Other assets" in the accompanying unaudited Consolidated Balance Sheets. Please refer to Note 8, "Equity Method and Other Investments" for further information on the loan.

Certain non-financial assets, including goodwill, finite-lived intangible assets and other long-lived assets, are measured at fair value on a non-recurring basis in accordance with the income approach when there is an indication of impairment. Please refer to Note 2, "Summary of Significant Accounting Policies" for further information on the valuation techniques used in developing these measurements.