FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2018

Financial assets reported at fair value on a recurring basis included the following (unaudited)(in thousands):



	September 30, 2018			December 31, 2017
Lumber derivative contracts (Level 1)	$	(71	)	$	9

Contingent earn-out receivable (based on Level 3 inputs):
Current portion	$	117		$	373
Noncurrent portion	—			61
Total	$	117		$	434

Our Level 1 assets (lumber derivative contracts) fair value is based upon quoted market prices and is included in other current assets in the Condensed Consolidated Balance Sheet.

The following table summarizes the activity for our Level 3 assets and liabilities measured on a recurring basis (unaudited)(in thousands):



	Earn-out Receivable ⁽¹⁾
Balance at December 31, 2017	$	434
Add – adjustment based on re-assessments	7
Subtract – settlements	(324		)
Balance at September 30, 2018	$	117


⁽¹⁾	Earn-out receivable related to the transfer of our test handler product line in 2014.

Quantitative information about Level 3 fair value measurements on a recurring basis at September 30, 2018, is summarized in the table below:

Quantitative information about Level 3 fair value measurements on a recurring basis at December 31, 2017 is summarized in the table below:

- 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

Fair Value Asset

Valuation Technique

Unobservable Input Amount

Contingent earn-out receivable related to transfer of test handler product line

Discounted cash flow

Total revenue for the remaining royalty period

$6.9 million

Discount rate

2.41% to 2.64%