Note 13 - Fair Value Measurements

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

1

3

. Fair Value Measurements

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in

one

of the following

three

categories:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Level

1

assets being measured at fair value on a recurring basis as of

December 

31,

2018

included our short-term investment mutual fund account.

We had

no

Level

2

assets being measured at fair value on a recurring basis as of

December 

31,

2018.

As discussed in Notes

1

and

2,

several of our acquisition-related assets and liabilities were measured using Level

3

techniques. During

2016,

we recorded contingent liabilities associated with our acquisitions of the RestoreFlow allograft and ProCol biologic graft businesses. In the case of the Restore Flow allograft acquisition, the agreement included the potential for us to pay up to

$5.1

million of additional consideration, with

$1.1

million contingent on the continued employment by LeMaitre Vascular of certain retained employees, and another

$4.0

million contingent on the achievement of specified levels of revenues in the

first

12

and

24

months following the acquisition date. This additional consideration was initially valued in total at

$1.0

million and was being re-measured each reporting period until the payment requirement ended, with any adjustments reported in income from operations. The

first

portion related to continued employment by LeMaitre Vascular of retained individuals was paid during

2018.

The amount attributable to achieving specified levels of revenue following the acquisition date was

not

paid as the associated revenue metrics were

not

achieved. In the case of ProCol, additional consideration is payable to the former shareholders for a

three

-year period following the closing, calculated at

10%

of ProCol revenues. This additional consideration was initially valued at

$0.3

million and is being re-measured each reporting period until the payment requirement ends, with any adjustments reported in income from operations. These arrangements are described more fully in Note

2.

The following table provides a rollforward of the fair value of these liabilities, as determined by Level

3

unobservable inputs including management’s forecast of future revenues for these acquired businesses, as well as, in the case of the Restore Flow allograft acquisition, management’s estimate of the likelihood of continued employment of certain retained employees.

	Year ended December 31,
	2018			2017			2016
	(in thousands)
Beginning balance	$	1,300		$	1,320		$	-
Additions		-			-			1,301
Payments		(1,199	)		(126	)		(68	)
Change in fair value included in earnings		(29	)		106			87
Ending balance	$	72		$	1,300		$	1,320