Fair Value Measurements

6 Months Ended

Oct. 26, 2019

Fair Value Measurements

Fair Value Measurements

4. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:

●Level 1—Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.

●Level 2—Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.

●Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability.

The Company’s financial liabilities measured at fair value on a recurring basis at October 26, 2019, were as follows (in thousands):

	Fair Value Measurement Using
			Significant
	Quoted prices in		other		Significant
	active markets for		observable		unobservable
	identical assets		inputs		inputs
Description	(Level 1)		(Level 2)		(Level 3)		Total
Contingent consideration	$	—	$	—	$	4,344	$	4,344
Total	$	—	$	—	$	4,344	$	4,344

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

	Fair Value
	Measurements Using
	Significant
	Unobservable Inputs
Description	(Level 3)
Balance at May 1, 2019	$	—
Business acquisition		4,263
Transfers to Level 3		—
Total losses (realized or unrealized)
Included in selling, general and administrative		81
Included in other comprehensive income		—
Settlements		—
Balance at October 26, 2019	$	4,344
The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at October 26, 2019	$	—

Pursuant to the Pulse Purchase Agreement, the sellers may receive up to a maximum of $5,000,000 in additional cash consideration (“contingent consideration”), if specific research and development milestones are achieved by December 10, 2021. The contingent consideration was valued using a probability weighted discounted cash flow model. The analysis considered, among other items, contractual terms of the Pulse Purchase Agreement, the Company’s

discount rate, the timing of expected future cash flows and the probability that the milestones required for payment of the contingent consideration will be achieved. See Note 18—Business Acquisitions.