FAIR VALUE

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2, or 3 within the fair value hierarchy:


•	Level 1 - Fair values are determined utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;


•	Level 2 - Fair values are determined by utilizing quoted prices for identical or similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves, and foreign currency spot rates;


•	Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The fair value hierarchy level is determined by asset and liability class based on the lowest level of significant input. The observability of inputs may change for certain assets or liabilities. This condition could cause an asset or liability to be reclassified between levels. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During the nine months ended September 26, 2015 and September 27, 2014, there were no transfers between levels.

Valuation methodologies used for assets, liabilities, and the redeemable noncontrolling interest measured or disclosed at fair value are as follows:


•	Cash equivalents - Valued at quoted market prices determined through third-party pricing services.


•	Mutual funds - Valued at the unadjusted quoted net asset value of shares held by the Company.


•	Foreign currency forward contracts - Valued using readily observable market inputs, such as forward foreign exchange points and foreign exchanges rates.


•	Investments in life insurance policies - Valued at cash surrender value based on fair value of underlying investments.


•	Contingent consideration - Valued based on a probability weighting of the future cash flows associated with the potential outcomes.


•	Redeemable noncontrolling interest - Valued primarily using the income approach based on estimated future cash flows of the underlying business based on the Company’s projected financial data discounted by a weighted average cost of capital.

Assets, liabilities, and noncontrolling interest measured at fair value on a recurring basis are summarized below:



	September 26, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents	$	—	$	159	$	—	$	159
Other current assets:
Marketable securities	4,570		—		—		4,570
Foreign currency forward contracts	—		16		—		16
Other assets:
Life insurance policies	—		19,346		—		19,346
Total assets measured at fair value	$	4,570	$	19,521	$	—	$	24,091

Other current liabilities:
Contingent consideration	$	—	$	—	$	1,111	$	1,111
Foreign currency forward contracts	—		306		—		306
Other long-term liabilities:
Contingent consideration	—		—		169		169
Redeemable noncontrolling interest	—		—		27,447		27,447
Total liabilities and redeemable noncontrolling interest measured at fair value	$	—	$	306	$	28,727	$	29,033



	December 27, 2014
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents	$	—	$	1,934	$	—	$	1,934
Other assets:
Life insurance policies	—		20,520		—		20,520
Total assets measured at fair value	$	—	$	22,454	$	—	$	22,454

Other current liabilities:
Contingent consideration	$	—	$	—	$	1,583	$	1,583
Other long-term liabilities:
Contingent consideration	—		—		1,245		1,245
Redeemable noncontrolling interest	—		—		28,419		28,419
Total liabilities and redeemable noncontrolling interest measured at fair value	$	—	$	—	$	31,247	$	31,247

Redeemable Noncontrolling Interest

The Company’s redeemable noncontrolling interest resulted from the acquisition of a 75% ownership interest in Vital River. Concurrent with the acquisition, the Company entered into a joint venture agreement with the noncontrolling interest holders that provides the Company with the right to purchase the remaining 25% of the entity for cash at its then appraised value beginning in January 2016. Additionally, the noncontrolling interest holders were granted the right to require the Company to purchase the remaining 25% of the entity at its then appraised value beginning in January 2016 for cash. These rights are accelerated in certain events. As the noncontrolling interest holders can require the Company purchase the remaining 25% interest, the noncontrolling interest is classified in the mezzanine section of the consolidated balance sheet, which is above the equity section and below liabilities.

The following table provides a rollforward of the fair value of the Company’s redeemable noncontrolling interest:



	Nine Months Ended
	September 26, 2015			September 27, 2014
	(in thousands)
Beginning balance	$	28,419		$	20,581
Additions	—			—
Total gains or losses (realized/unrealized):
Net income attributable to noncontrolling interest	614			523
Foreign currency translation	(693		)	(113		)
Change in fair value, included in additional paid-in capital	(893		)	3,559
Ending balance	$	27,447		$	24,550

The significant unobservable inputs used in the fair value measurement of the Company’s redeemable noncontrolling interest are the estimated future cash flows based on projected financial data and a discount rate of 18.0%. Significant changes in the timing or amounts of the estimated future cash flows would result in a significantly higher or lower fair value measurement. Significant increases or decreases in the discount rate would result in a significantly lower or higher fair value measurement, respectively.

Contingent Consideration

The following table provides a rollforward of the contingent consideration related to the acquisitions of Argenta, BioFocus, VivoPath and ChanTest. See Note 2, “Business Acquisitions.”



	Nine Months Ended
	September 26, 2015			September 27, 2014
	(in thousands)
Beginning balance	$	2,828		$	—
Additions	675			2,428
Payments	(600		)	—
Total gains or losses (realized/unrealized):
Reversal of previously recorded contingent liability and change in fair value	(1,623		)	120
Ending balance	$	1,280		$	2,548

The significant unobservable inputs used in the fair value measurement of the Company’s contingent consideration are the probabilities of successful achievement of certain financial targets and a discount rate. Significant increases or decreases in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant increases or decreases in the discount rate would result in a significantly lower or higher fair value measurement, respectively.

Debt Instruments

The book value of the Company’s term and revolving loans, which are variable rate loans carried at amortized cost, approximates their fair value based on current market pricing of similar debt. As the fair value is based on significant other observable inputs, including current interest and foreign currency exchange rates, it is deemed to be Level 2.