Fair Value Of Assets And Liabilities

9 Months Ended

Sep. 30, 2011

Fair Value Of Assets And Liabilities

Fair Value Of Assets And Liabilities

Note 2. Fair Value of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. "the exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. A hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect a company's judgment concerning the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances. The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:

• Level 1 — Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

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

• Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the Company's degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases an asset or liability is classified in its entirety based on the lowest level of input that is significant to the measurement of fair value.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition has caused, and in the future may cause, the Company's financial instruments to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3. During the three and nine-month periods ended September 30, 2011 and 2010, the Company did not have any reclassifications in levels.

The Company estimated the fair value of acquisition-related contingent consideration arrangements by applying the income approach using a probability-weighted discounted cash flow model. This fair value measurement is based on significant inputs not observed in the market and thus represents a Level 3 measurement. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company's own assumptions in measuring fair value.

Contingent consideration of $9.6 million, $10.9 million and $1.1 million was recognized in connection with business acquisitions in February 2011, June 2011 and September 2011, respectively. At September 30, 2011, the amounts recognized for these contingent consideration arrangements, the range of outcomes, and the assumptions used to develop the estimates had not materially changed.

The following table presents the valuation of the Company's financial assets and liabilities as of September 30, 2011 and December 31, 2010, measured at fair value on a recurring basis (in thousands):

	Level 1		Level 3		Fair Value
September 30, 2011
Liabilities
Acquisition-related contingent consideration-short-term (1)	$	0	$	10,483	$	10,483
Acquisition-related contingent consideration-long-term (2)		0		11,112		11,112
Total liabilities measured at fair value	$	0	$	21,595	$	21,595
December 31, 2010
Assets
Money Market Funds (3)	$	101,600	$	0	$	101,600

(1) Included in current installments of long-term obligations in the accompanying condensed consolidated balance sheets.

(2) Included in long-term obligations, excluding current installments in the accompanying condensed consolidated balance sheets.

(3) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets. The balance in money market funds at September 30, 2011 was $0.

The following table presents the changes in the estimated fair values of the Company's financial assets and liabilities that are measured using significant unobservable inputs (Level 3) for the nine months ended September 30, 2011:

	(In thousands)
	Assets		Liabilities
Balance on December 31, 2010	$	0	$	0
Acquisition-related contingent consideration recorded in 2011		0		21,595
Balance on September 30, 2011	$	0	$	21,595

Fair Value of Financial Instruments

The estimated fair values of the Company's financial instruments that are not measured at fair value on a recurring basis are as follows:

(In thousands)	September 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Short-term investments – held to maturity	$	20,000	$	20,000	$	40,000	$	40,000
Restricted cash		0		0		345		345
Liabilities:
2.75% Series A Debentures		263,322		284,109		255,727		302,672
2.75% Series B Debentures		241,197		284,281		234,047		305,422
Short-term debt		80,000		80,000		0		0
Deferred acquisition obligations		14,227		14,227		619		619

Fair values were determined as follows:

• The carrying amounts of short-term investments, short-term debt, restricted cash and deferred acquisition obligations approximate fair value because of the short-term maturity of these instruments. The short-term investments are classified as held-to-maturity and are carried at amortized cost.

• The fair value of the Series A and Series B Debentures are estimated based on several standard market variables, including the Company's stock price, yield to put/call through conversion and yield to maturity.

• The Company believes that the recorded values of all of its other financial instruments approximate their fair values because of their nature and respective relatively short maturity dates or durations.

• Deferred acquisition obligations exclude acquisition-related contingent consideration measured at fair value using Level 3 inputs.