Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

INVESTMENTS AND FAIR VALUE MEASUREMENTS

INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company's recurring financial assets and liabilities subject to fair value measurements are as follows:

	Fair Value Measurements as of June 30, 2013
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	219,533	$	219,533	$	—	$	—
Certificates of deposit	2,234		—		2,234		—
Bonds	7,577		7,577		—		—
Investment securities available for sale							—
Equity securities	86,691		79,947		6,744		—
Fixed income securities
U.S. Government securities	10,094		—		10,094		—
Corporate securities	30,031		—		30,031		—
U.S. mortgage backed securities	589		—		589		—
Commercial mortgage-backed securities	5,886		—		5,886		—
U.S. asset backed securities	850		—		850		—
Total fixed income securities	47,450		—		47,450		—
Warrants	806		—		—		806
Total	$	364,291	$	307,057	$	56,428	$	806
Liabilities:
Fair value of derivatives embedded within convertible debt	166,629		—		—		166,629
Total	$	166,629	$	—	$	—	$	166,629

	Fair Value Measurements as of December 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	372,718	$	372,718	$	—	$	—
Certificates of deposit	2,240		—		2,240		—
Bonds	6,306		6,306		—		—
Investment securities available for sale:
Equity securities	69,984		69,107		877		—
Warrants	769		—		—		769
Total	$	452,017	$	448,131	$	3,117	$	769
Liabilities:
Fair value of derivatives embedded within convertible debt	172,128		—		—		172,128
Total	$	172,128	$	—	$	—	$	172,128

The fair value of the Level 2 certificates of deposit are based on prices posted by the financial institutions. The fair value of investment securities available for sale included in Level 1 are based on quoted market prices from various stock exchanges. The Level 2 investment securities available for sale are equity securities based on quoted market prices of securities that are thinly traded and debt securities based on evaluated prices using observable, market-based inputs.

The fair value of derivatives embedded within convertible debt was derived using a valuation model and have been classified as Level 3. The valuation model assumes future dividend payments by the Company and utilizes interest rates and credit spreads based upon the implied debt rate of the 7.5% Convertible Notes to determine the fair value of the derivatives embedded within the convertible debt. The changes in fair value of derivatives embedded within convertible debt are presented on the Condensed Consolidated Statements of Operations.

The value of the embedded derivatives is contingent on changes in implied interest rates of the convertible debt, the Company's stock price, stock volatility as well as projections of future cash and stock dividends over the term of the debt.  The interest rate component of the value of the embedded derivative is computed by calculating an equivalent non-convertible, unsecured and subordinated borrowing cost. This rate is determined by calculating the implied rate on the Company's 2019 Convertible Notes when removing the embedded option value within the convertible security. This rate is based upon market observable inputs and influenced by the Company's stock price, convertible bond trading price, risk free interest rates and stock volatility. 

The Company recognized income of $5,499 and charges of $27,060 for the six months ended June 30, 2013 and 2012, respectively.

The fair value of the warrants was derived using the Black-Scholes model and has been classified as Level 3. The assumptions used under the Black-Scholes model in computing the fair value of the warrants are based on contractual term of the warrants, volatility of the underlying stock based on the historical quoted prices of the underlying stock, assumed future dividend payments and a risk-free rate of return.

The unobservable inputs related to the valuations of the Level 3 assets and liabilities are as follows at June 30, 2013:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
	June 30, 2013		Valuation Technique	Unobservable Input	Range (Actual)
Warrants	$	806	Option model	Stock price	$	1.54
				Exercise price	$	1.68
				Term (in years)	4.4
				Volatility	95.19		%
				Dividend rate	—
				Risk-free return	0.64		%
Fair value of derivatives embedded within convertible debt	$	166,629	Discounted cash flow	Assumed annual stock dividend	5		%
				Assumed annual cash dividend	$	1.60
				Stock price	$	16.22
				Convertible trading price	117.94		%
				Volatility	18		%
				Implied credit spread	8% - 9% (8.5%)

The unobservable inputs related to the valuations of the Level 3 assets and liabilities are as follows at December 31, 2012:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at
	December 31, 2012		Valuation Technique	Unobservable Input	Range (Actual)
Warrants	$	769	Option model	Stock price	$	1.40
				Exercise price	$	1.68
				Term (in years)	3.8
				Volatility	76.87		%
				Dividend rate	—
				Risk-free return	0.50		%
Fair value of derivatives embedded within convertible debt	$	172,128	Discounted cash flow	Assumed annual stock dividend	5		%
				Assumed annual cash dividend	$	1.60
				Stock price	$	14.87
				Convertible trading price	109.00		%
				Volatility	18		%
				Implied credit spread	10% - 11% (10.5%)

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record assets and liabilities at fair value on a nonrecurring basis. Generally, assets and liabilities are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company had no nonrecurring nonfinancial assets subject to fair value measurements as of June 30, 2013 and December 31, 2012, respectively.