Fair Value Measurements

6 Months Ended

Jun. 30, 2018

The Company categorizes its financial instruments into a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. Financial instruments recorded at fair value on the Company’s Consolidated Balance Sheets are categorized as follows:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table provides the carrying value and fair value of certain financial assets and liabilities of the Company measured at fair value on a recurring basis as of June 30, 2018 and December 31, 2017:



	Carrying Value		Fair Value Measurement at June 30, 2018
	Carrying Value		Level 1		Level 2		Level 3
	(Unaudited - In thousands)
Cash and cash equivalents	$	26,006	$	26,006	$	—	$	—
Marketable securities—held-to-maturity:
Certificates of deposit	688		688		—		—

Credit facility repayment feature liability	$	2,979	$	—	$	—	$	2,979



	Carrying Value		Fair Value Measurement at December 31, 2017
	Carrying Value		Level 1		Level 2		Level 3
	(Unaudited - In thousands)
Cash and cash equivalents	$	20,751	$	20,751	$	—	$	—
Long-term restricted cash equivalents	6,336		6,336		—		—
Trading securities	3,761		3,761		—		—
Marketable securities—held-to-maturity:
Certificates of deposit	$	4,452	$	4,452	$	—	$	—

As of June 30, 2018, $0.7 million of marketable securities had contractual maturities which were less than one year. Certificates of deposit are classified as held-to-maturity securities carried at amortized cost, which, due to the short-term maturity of these instruments, approximates fair value using quoted prices in active markets for identical assets or liabilities defined as Level 1 inputs under the fair value hierarchy. As of June 30, 2018, $3.0 million is recorded as a credit facility repayment feature liability due to the provision in the Amended Credit Facility that requires prepayments of outstanding principal amounts when the Company’s cash and cash equivalents at any quarter end date exceeds $50.0 million. The prepayment feature is an embedded derivative that is accounted for as a liability separate from the Amended Credit Facility. The liability is adjusted to the fair value of potential future debt prepayments based upon management's probability weighted cash forecast at each balance sheet date. Management's cash forecasts are defined as Level 3 inputs under the fair value hierarchy.

Trading securities at December 31, 2017 consisted of 414,237 shares of Invitae Corporation common shares obtained in connection with the sale of Good Start Genetics. The trading securities were carried at fair value based on the closing stock price on the last trading day of the reporting period. The Company sold all of the Invitae shares during the first quarter of 2018 for $2.6 million of cash proceeds.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details