Fair Value Measurements

12 Months Ended

Dec. 31, 2016

3. Fair Value Measurements

The fair value hierarchy established by ASC 820, Fair Value Measurement, prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1 — quoted prices in active markets for identical assets and liabilities

Level 2 — inputs other than Level 1 inputs that are observable, either directly or indirectly

Level 3 — unobservable inputs

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2016 and 2015:



	As of December 31, 2016								As of December 31, 2015
	Fair Value Hierarchy								Fair Value Hierarchy
(in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents (a)	$	146,103	$	146,103	$	—	$	—	$	75,452	$	75,452	$	—	$	—
Restricted cash (a)		50,504		50,504		—		—		45,853		45,853		—		—
Investments in lieu of customer retainage (b)		51,266		46,855		4,411		—		41,566		35,350		6,216		—
Total	$	247,873	$	243,462	$	4,411	$	—	$	162,871	$	156,655	$	6,216	$	—

Liabilities:
Interest rate swap contract (c)	$	—	$	—	$	—	$	—	$	45	$	—	$	45	$	—
Total	$	—	$	—	$	—	$	—	$	45	$	—	$	45	$	—

(a)

Cash, cash equivalents and restricted cash consists primarily of money market funds with original maturity dates of three months or less measured using quoted market prices.

(b)

Investments in lieu of customer retainage are classified as accounts receivable and are comprised of money market funds, U.S. Treasury Notes and other municipal bonds, the majority of which are rated Aa3 or better. The fair value of money market funds is measured using quoted market prices; therefore they are classified as Level 1 assets. The fair values of the U.S. Treasury Notes and municipal bonds are measured using readily available pricing sources for comparable instruments; therefore, they are classified as Level 2 assets.

(c)

The Company valued the interest rate swap liability utilizing a discounted cash flow model that took into consideration forward interest rates observable in the market and the counterparty’s credit risk.

The following is a summary of changes in Level 3 liabilities during 2015:



	Contingent
(in thousands)	Consideration
Balance as of December 31, 2014	$	24,814
Fair value adjustments included in other income (expense), net		(3,739)
Amount no longer subject to contingency		(21,075)
Balance as of December 31, 2015	$	—

The Company did not have material transfers between Levels 1 and 2 for either financial assets or liabilities during the years ended December 31, 2016 and 2015.

The carrying values of receivables, payables, other amounts arising out of normal contract activities, including retainage, which may be settled beyond one year, are estimated to approximate fair value. Of the Company’s long-term debt, the fair values of the 2010 Notes as of December 31, 2016 and 2015 were $302.6 million and $305.6 million, respectively, and the fair value of the Convertible Notes was $228.4 million as of December 31, 2016; the fair values were determined using Level 1 inputs, specifically current observable market prices. The reported value of the Company’s remaining long-term debt at December 31, 2016 and 2015 approximates fair value.

The fair value of the liability component of the Convertible Notes as of the issuance date of June 15, 2016 was $153.2 million, which was determined using a binomial lattice approach based on Level 2 inputs, specifically quoted prices in active markets for similar debt instruments that do not have a conversion feature. See Note 5 for additional information related to the Company’s Convertible Notes.

- 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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