Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Measurements

3. Fair Value Measurements

U.S. GAAP defines a hierarchy which prioritizes the inputs in measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices for identical assets or liabilities in active markets at the measurement date; Level 2 inputs are observable market-based inputs or unobservable inputs that are corroborated by market data at the measurement date; and Level 3 inputs are unobservable inputs reflecting management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. When applying the fair value principles in valuation of assets and liabilities, we are required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short-term maturity of these instruments.

At December 31, 2012 we held $2.8 million of certificates of deposit, which were considered a Level 2 asset, and no liabilities measured at fair value on a recurring basis, and we did not hold any such assets or liabilities at March 31, 2013. The valuation technique used to measure fair value of certificates of deposit was based on quoted market prices or corroborated by observable market data. The certificates of deposit were redeemed at par in the three months ended March 31, 2013.

The fair values of our auction rate instruments, held at March 31, 2012, were classified in Level 3. They were valued using a trinomial discount model because there was insufficient observable auction rate market information available to determine the fair value of these investments. No such Level 3 instruments were held at March 31, 2013.

There were no transfers between Level 1 and Level 2 measurements in the three months ended March 31, 2013 and 2012. The following table sets forth the reconciliation of beginning and ending balances for each major category of assets measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2012 (dollars in thousands):

	Three Months Ended March 31, 2012
Balance at beginning of period	$	902
Losses included in earnings		(11	)
Losses included in other comprehensive income		(9	)
Balance as of March 31	$	882