Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value Disclosures

Fair Value of Financial Instruments

The Company measures at fair value certain financial assets and liabilities. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair-value hierarchy:

Level 1— Quoted prices for identical instruments in active markets;

Level 2— Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Foreign currency forward contracts are measured at fair value using models based on observable market inputs such as foreign currency exchange rates; therefore, they are classified within Level 2 of the valuation hierarchy. The cash surrender value of life insurance contracts is measured at fair value using quoted market prices for similar instruments; therefore, they are classified within Level 2 of the valuation hierarchy.

The contingent consideration liability represents future amounts we may be required to pay in conjunction with the acquisition of Continuous Computing and is based on the amount of royalty revenues generated by a specified set of contracts associated with certain of Continuous Computing's products over a period of 36 months after closing. The Company estimates the fair value of the contingent consideration liability using a probability-weighted scenario of estimated qualifying earn-out revenues calculated at net present value (level 3 of the fair value hierarchy).

The following table summarizes the fair value measurements for the Company's financial instruments (in thousands):

	Fair Value Measurements as of September 30, 2011
	Total			Level 1		Level 2			Level 3
Cash surrender value of life insurance contracts	$	3,282		$	—	$	3,282		$	—
Foreign currency forward contracts	(264		)	—		(264		)	—
Contingent consideration liability	(7,446		)	—		—			(7,446		)
Total	$	(4,428	)	$	—	$	3,018		$	(7,446	)

	Fair Value Measurements as of December 31, 2010
	Total		Level 1		Level 2		Level 3
Cash surrender value of life insurance contracts	$	3,618	$	—	$	3,618	$	—
Foreign currency forward contracts	432		—		432		—
Total	$	4,050	$	—	$	4,050	$	—

The following table summarizes our Level 3 activity for the Company's contingent consideration liability (in thousands):

	Level 3
Balance at December 31, 2010	$	—
Additions	7,400
Increase in liability due to re-measurement	26
Interest accretion	20
Balance at September 30, 2011	$	7,446

The Company records all gains and losses and interest accretion on the contingent consideration liability to restructuring and acquisition-related charges,net in the Consolidated Income Statements.