Fair Value

3 Months Ended

Mar. 31, 2021

Fair Value [Abstract]

Fair Value

7. Fair Value

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair values due to the short-term nature of these instruments.  Fair value estimates are made at a specific point in time, based on relevant market information.

The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

◾ Level 1 – quoted prices in active markets for identical assets or liabilities;

◾ Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;

◾ Level 3 – unobservable inputs based on the Company’s own assumptions.

Accounting standards permit companies, at their option, to measure certain financial instruments and other eligible items at fair value. The Company has elected not to apply the fair value option to existing eligible items beyond what is required by US GAAP.

The following tables present the fair value hierarchy for those assets measured at fair value on a recurring basis (U.S. dollars in thousands):

	Fair Value at March 31, 2021
	Level 1		Level 2			Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	57,236	$	—		$	—		$	57,236
Derivative financial instruments asset		—		5,030			—			5,030
Life insurance contracts		—		—			46,606			46,606
Derivative financial instruments liability		—		(83	)		—			(83	)
Contingent consideration		—		—			(3,264	)		(3,264	)
Total	$	57,236	$	4,947		$	43,342		$	105,525

	Fair Value at December 31, 2020
	Level 1		Level 2			Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	56,628	$	—		$	—		$	56,628
Derivative financial instruments asset		—		1,145			—			1,145
Life insurance contracts		—		—			45,453			45,453
Derivative financial instruments liability		—		(105	)		—			(105	)
Contingent consideration		—		—			(3,125	)		(3,125	)
Total	$	56,628	$	1,040		$	42,328		$	99,996

The following table provides a summary of changes in fair value of the Company’s Level 3 marketable securities (U.S. dollars in thousands):

Beginning balance at January 1, 2021	$	45,453
Actual return on plan assets		1,153
Purchase and issuances		7,016
Sales and settlements		(7,016	)
Transfers into Level 3		—
Ending balance at March 31, 2021	$	46,606

The following table provides a summary of changes in fair value of the Company’s Level 3 contingent consideration (U.S. dollars in thousands):

Beginning balance at January 1, 2021	$	(3,125	)
Changes in fair value of contingent consideration		(139	)
Ending balance at March 31, 2021	$	(3,264	)

Contingent consideration: Contingent consideration represents the obligations incurred in connection with acquisitions. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding the future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on significant inputs unobservable in the market and thus represents a level 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or decrease in the fair value of the contingent consideration obligation.