Note 10 - Fair Value Measurement

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

Note 10. Fair Value Measurement

The Company performs fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value as the exchange price that would be received for 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.

ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three levels as follows:

• Level 1 – Quoted prices for identical instruments in active markets.

• Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

• Level 3 – Instruments whose significant value drivers are unobservable.

The fair value standards require an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. When a valuation includes inputs from multiple sources at various levels in the fair value hierarchy, the assets or liabilities are classified at the lowest level for which the input has a significant effect on the overall valuation.

Assets and liabilities measured at fair value on a recurring basis on the Company’s consolidated balance sheets at June 30, 2014 and December 31, 2013 consisted primarily of contingent consideration in connection with the Company’s acquisition of ECA in July 2013. In accordance with the purchase agreement for the ECA transaction, the Company is required to pay consideration in the event that ECA achieves certain specified earnings results during the three fiscal-year end periods post-acquisition, ending December 31, 2015. At the end of each reporting period, the Company determines the fair value of contingent consideration using a discounted cash flow model which includes a probability assessment of expected future cash flows related to ECA. The fair value measurement uses significant inputs that are not observable in the market and thus, represents a Level 3 fair value measurement. At June 30, 2014 and December 31, 2013, the fair value measurement of contingent consideration was zero and $2.8 million, respectively. The change in the fair value measurement of $2.8 million was recorded as a reduction to indirect and selling expenses during the first quarter of fiscal year 2014.

In addition, the Company accounts for forward contract agreements in the consolidated balance sheets as either an asset or liability measured at fair value. The fair value of the hedges at June 30, 2014 and December 31, 2013 and the changes in fair value for the three and six months ended June 30, 2014 and June 30, 2013 were immaterial.