Note 4 - Fair Value Measurement

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

4. FAIR VALUE MEASUREMENT

The following tables detail the fair value measurement of the financial assets and liabilities (in thousands):

	Fair Value Measurement at December 31, 2015
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	31,640	$	31,640	$	-	$	-
Certificates of deposit		21,574		-		21,574		-
U.S. treasuries and government agency bonds		123,532		-		123,532		-
Auction-rate securities backed by student-loan notes		5,361		-		-		5,361
Mutual funds under deferred compensation plan		8,279		8,279		-		-
Total	$	190,386	$	39,919	$	145,106	$	5,361

	Fair Value Measurement at December 31, 2014
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		Level 1		Level 2		Level 3
Assets:
Money market funds	$	60,078	$	60,078	$	-	$	-
Certificates of deposit		22,778		-		22,778		-
U.S. treasuries and government agency bonds		89,674		-		89,674		-
Auction-rate securities backed by student-loan notes		5,389		-		-		5,389
Mutual funds under deferred compensation plan		2,236		2,236		-		-
Total	$	180,155	$	62,314	$	112,452	$	5,389
Liabilities:
Contingent consideration	$	2,507	$	-	$	-	$	2,507
Total	$	2,507	$	-	$	-	$	2,507

The Company’s level 3 assets consist of government-backed student loan auction-rate securities, with interest rates that reset through a Dutch auction every 7 to 35 days and which became illiquid in 2008. The following table provides a rollforward of the fair value of the auction-rate securities (in thousands):

Balance at January 1, 2014	$	9,860
Sales and settlement at par		(4,650	)
Change in unrealized loss included in other comprehensive income		179
Ending balance at December 31, 2014		5,389
Change in unrealized loss included in other comprehensive income		(28	)
Ending balance at December 31, 2015	$	5,361

The Company determined the fair value of the auction-rate securities using a discounted cash flow model with the following assumptions:

	December 31,
	2015			2014
Time-to-liquidity (months)		24			24
Expected return		2.9%			2.9%
Discount rate	4.3%	-	7.3%	4.0%	-	7.0%

The Company’s level 3 liabilities consisted of contingent consideration related to the acquisition of Sensima in July 2014. The arrangement requires the Company to pay up to $8.9 million to certain former Sensima shareholders if Sensima achieves a new product introduction as well as certain product revenue and direct margin targets in 2016. The fair value of the contingent consideration at the Acquisition Date was $2.5 million, which was estimated based on a probability-weighted analysis of possible future revenue outcomes. The fair value was calculated using the following assumptions:

	December 31, 2014
Projected revenue (in millions)	$2.1	-	$3.8
Discount rate		9.0%
Probability of occurrence	20%	-	50%

As part of the quarterly assessment in the fourth quarter of 2015, management reviewed the sales forecast for the products and concluded that the projected product revenue in 2016 will not likely meet the minimum target required to earn the contingent consideration, primarily because the product adoption process by customers will take longer than the Company had originally anticipated. Accordingly, the fair value of the contingent consideration was deemed to be $0 as of December 31, 2015, and the Company recorded the release of the liability of $2.5 million as a credit to selling, general and administrative expenses in the Consolidated Statement of Operations. The Company will continue to assess the probability of former Sensima shareholders earning the contingent consideration in 2016 and may record additional adjustment to the fair value.