Fair Value Measurements

9 Months Ended

Sep. 30, 2019

FAIR VALUE MEASUREMENTS

The Company's financial instruments consist of cash equivalents, short-term and long-term investments, accounts receivable, auction rate securities, accounts payable, drawings on revolving lines of credit, long-term debt, interest rate swaps and contingent purchase consideration.

The valuation techniques used to measure fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying amounts of money market fund deposits, term deposits, accounts receivable, accounts payable and drawings on revolving lines of credit are considered reasonable estimates of their fair market value due to the short maturity of most of these instruments or as a result of the competitive market interest rates which have been negotiated. The Company's bond securities are reported at fair value based upon quoted prices for instruments with identical terms in active markets. The Company's commercial paper securities reported at fair value are based upon model-driven valuations in which all significant inputs are observable or can be derived from or corroborated by observable market data for substantially the full term of the asset or liability, and are therefore classified as Level 2. At September 30, 2019 and December 31, 2018, the Company's long-term notes consisted of a variable rate note and a fixed rate note, and the book value is considered a reasonable estimate of fair market value.

The following table presents fair value information related to the Company's assets and liabilities measured at amortized cost on the condensed consolidated balance sheets with the exception of the interest rate swap, which is measured at fair value:


	Fair Value Measurements at September 30, 2019
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market fund deposits and term deposits	$	123,243	$	123,243	$	—	$	—

Commercial paper	56,831		—		56,831		—
Short-term investments:
U.S. Treasury and agency obligations	20,971		20,971		—		—
Corporate bonds	270,911		270,911		—		—
Non-U.S. government bonds	3,000		—		3,000		—
Commercial paper	197,453		—		197,453		—
Certificate of deposit	6,498		6,498		—		—
Long-term investments and other assets:

Auction rate securities	590		—		—		590
Interest rate swap	32		—		32		—
Total	$	679,529	$	421,623	$	257,316	$	590
Liabilities
Long-term debt	$	42,631	$	—	$	42,631	$	—
Contingent purchase consideration	297		—		—		297

Total	$	42,928	$	—	$	42,631	$	297
























	Fair Value Measurements at December 31, 2018
	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market fund deposits and term deposits	$	180,965	$	180,965	$	—	$	—
U.S. Treasury and agency obligations	6,495		6,495		—		—
Commercial paper	78,948		—		78,948		—
Short-term investments:
U.S. Treasury and agency obligations	116,800		116,800		—		—
Corporate bonds	227,009		227,009		—		—
Commercial paper	156,321		—		156,321		—
Long-term investments and other assets:
Corporate bonds	3,859		3,859		—		—
Auction rate securities	847		—		—		847
Interest rate swaps	31		—		31		—
Total	$	771,275	$	535,128	$	235,300	$	847
Liabilities
Long-term debt	$	45,378	$	—	$	45,378	$	—
Contingent purchase consideration	898		—		—		898
Total	$	46,276	$	—	$	45,378	$	898

The fair value of the short-term investments considered held-to-maturity as of September 30, 2019 and December 31, 2018 was $498,833 and $500,130, respectively, which include an unrealized gain of $325 and unrealized loss of $302, respectively, as compared to the book value recorded on the condensed consolidated balance sheets for the same periods. There

were no long-term investments considered held-to-maturity as of September 30, 2019. The fair value of the long-term investments considered held-to-maturity as of December 31, 2018 was $3,859, which represents the book value recorded within other assets on the condensed consolidated balance sheets for the same period. There were no impairments for the investments considered held-to-maturity at September 30, 2019 and December 31, 2018.

The Company entered into an interest rate swap that is designated as a cash flow hedge associated with a new long-term note issued during the second quarter of 2016 that will terminate with the long-term note in May 2023. The fair value at September 30, 2019 for the interest rate swap considered pricing models whose inputs are observable for the securities held by the Company.

Auction rate securities and contingent consideration are measured at fair value on a recurring basis using significant unobservable inputs (Level 3). The fair value of the auction rate securities was determined using prices observed in inactive markets with limited observable data for the securities held by the Company. The auction rate securities are considered available-for-sale securities. They had a cost basis of $590 and $847 at September 30, 2019 and December 31, 2018, respectively. There were no impairments for the investments considered available-for-sale during the quarters ended September 30, 2019 and 2018.

The fair value of contingent consideration was determined using an income approach at the respective business combination date and at the reporting date. That approach is based on significant inputs that are not observable in the market and include key assumptions such as assessing the probability of meeting certain milestones required to earn the contingent consideration.

The following table presents information about the Company's movement in Level 3 assets and liabilities measured at fair value:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		2019		2018
Auction rate securities
Balance, beginning of period	$	852	$	1,174	$	847	$	1,016
Redemptions	(264)		(207)		(264)		(207)
Change in fair value and accretion	2		—		7		158

Balance, end of period	$	590	$	967	$	590	$	967
Contingent purchase consideration
Balance, beginning of period	$	300	$	902	$	898	$	902
Cash payments	—		—		(632)		—


Foreign exchange adjustment	(3)		—		31		—
Balance, end of period	$	297	$	902	$	297	$	902

The following table presents the effective maturity dates of held-to-maturity and available-for-sale debt investments as of September 30, 2019 and December 31, 2018:


	September 30, 2019						December 31, 2018
	Book Value		Fair Value		Book Value		Fair Value
Investment maturity
Held-to-maturity:
Less than 1 year	$	498,508	$	498,833	$	585,875	$	585,573
1 through 5 years	—		—		3,859		3,859
Total	$	498,508	$	498,833	$	589,734	$	589,432
Available-for-sale:
Greater than 5 years	$	590	$	590	$	847	$	847

- 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.

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