Fair Value Measurement

12 Months Ended

Dec. 31, 2019

Note 3 - Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

All of our financial instruments are recognized in our consolidated balance sheets. Carrying values approximate fair value of most financial assets and liabilities. Investments and restricted cash and investments are recorded at market value. The interest rates on our investments approximate current market rates for these types of investments.

In determining the fair value of our financial assets, the Company predominately uses the market approach. In determining the fair value of all its corporate bonds, mortgage backed securities, U.S. treasuries, U.S. government agency securities, supranational, mutual funds, money market funds, asset backed securities, and municipal bonds, the Company utilizes non-binding quotes provided by our investment brokers.

Factors used in determining the fair value of our financial assets and liabilities are summarized into three levels as established in the fair value hierarchy framework. The three levels of the fair value hierarchy are described below.

Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 – Inputs to the valuation methodology include:

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Quoted prices for similar assets or liabilities in active markets;

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Quoted prices for identical or similar assets or liabilities in inactive markets;

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Inputs other than quoted prices that are observable for the asset or liability;

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Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

In determining the fair value measurement of our financial assets, the fair value measurement level within the hierarchy is based on the lowest level input and is applied to each financial asset. Valuation techniques are used to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table summarizes the Company’s investments at December 31, 2019 and 2018 measured at fair value on a recurring basis (in thousands):

	December 31, 2019							December 31, 2018
			Gross							Gross
			Unrealized							Unrealized
			Gains			Recorded				Gains			Recorded
	Cost		(Losses)			Basis		Cost		(Losses)			Basis
Current:
Cash equivalents:
Money market funds	$	35,526	$	—		$	35,526	$	30	$	—		$	30
Total cash equivalents		35,526		—			35,526		30		—			30
Investments:
Corporate bonds		53,493		156			53,649		20		—			20
Asset backed securities		14,017		(13	)		14,004		—		—			—
U.S. government agency securities		7,408		282			7,690		50		(1	)		49
U.S. treasuries		4,500		9			4,509		347		—			347
Mortgage backed securities		2,737		1			2,738		—		—			—
Total current investments		82,155		435			82,590		417		(1	)		416
Long term:
Investments:
U.S. treasuries		—		—			—		794		(3	)		791
Mortgage backed securities		—		—			—		484		(13	)		471
Corporate bonds		—		—			—		422		(7	)		415
Asset backed securities		—		—			—		10		—			10
Total long term investments		—		—			—		1,710		(23	)		1,687
Restricted cash and investments ⁽¹⁾:
Corporate bonds		98,481		1,931			100,412		185,116		(3,739	)		181,377
Mortgage backed securities		62,930		837			63,767		89,426		(2,026	)		87,400
Money market funds		29,046		—			29,046		419		—			419
U.S. government agency securities		27,885		642			28,527		45,548		(908	)		44,640
U.S. treasuries		16,906		21			16,927		44,304		(283	)		44,021
Supranational bonds		4,770		30			4,800		4,765		(24	)		4,741
Mutual funds		3,466		—			3,466		1,093		—			1,093
Asset backed securities		303		—			303		75		(1	)		74
Municipal bonds		—		—			—		50		—			50
Total restricted cash and investments		243,787		3,461			247,248		370,796		(6,981	)		363,815
Total investments	$	361,468	$	3,896		$	365,364	$	372,953	$	(7,005	)	$	365,948

(1) Included in restricted cash and investments within the consolidated balance sheets as of December 31, 2019 and 2018 is restricted cash of $197.0 million and $104.5 million, respectively, which is excluded from the table above. Restricted cash and investments are classified as current and noncurrent on the balance sheet based on the nature of the restriction.

The following table summarizes the Company's investments at December 31, 2019 and 2018 measured at fair value on a recurring basis by fair value hierarchy level (in thousands):

	December 31, 2019										December 31, 2018
	Total										Total
	Recorded										Recorded
	Basis		Level 1		Level 2		Level 3		Other ⁽¹⁾		Basis		Level 1		Level 2		Level 3		Other ⁽¹⁾
Cash equivalents:
Money market funds	$	35,526	$	—	$	—	$	—	$	35,526	$	30	$	—	$	—	$	—	$	30
Investments:
Corporate bonds		53,649		—		53,649		—		—		435		—		435		—		—
Asset backed securities		14,004		—		14,004		—		—		10		—		10		—		—
U.S. government agency securities		7,690		—		7,690		—		—		49		—		49		—		—
U.S. treasuries		4,509		—		4,509		—		—		1,138		—		1,138		—		—
Mortgage backed securities		2,738		—		2,738		—		—		471		—		471		—		—
Restricted cash and investments:
Corporate bonds		100,412		—		100,412		—		—		181,377		—		181,377		—		—
Mortgage backed securities		63,767		—		63,767		—		—		87,400		—		87,400		—		—
Money market funds		29,046		—		—		—		29,046		419		—		—		—		419
U.S. government agency securities		28,527		—		28,527		—		—		44,640		—		44,640		—		—
U.S. treasuries		16,927		—		16,927		—		—		44,021		—		44,021		—		—
Supranational bonds		4,800		—		4,800		—		—		4,741		—		4,741		—		—
Mutual funds		3,466		3,466		—		—		—		1,093		1,093		—		—		—
Asset backed securities		303		—		303		—		—		74		—		74		—		—
Municipal bonds		—		—		—		—		—		50		—		50		—		—
Total investments	$	365,364	$	3,466	$	297,326	$	—	$	64,572	$	365,948	$	1,093	$	364,406	$	—	$	449

(1) Investments in money market funds measured at fair value using the net asset value per share practical expedient are not subject to hierarchy level classification disclosure. The Company invests in money market funds that seek to maintain a stable net asset value. These investments include commingled funds that comprise high-quality short-term securities representing liquid debt and monetary instruments where the redemption value is likely to be the fair value. Redemption is permitted daily without written notice.

The following table summarizes the contractual maturities of the Company’s available for sale securities at December 31, 2019 and 2018. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

	December 31, 2019
(In thousands)	Less than 1 Year		Between 1 to 5 Years		Between 5 to 10 Years		After 10 Years		Total
Corporate bonds	$	7,238	$	120,887	$	25,936	$	—	$	154,061
Money market funds		64,572		—		—		—		64,572
U.S. government agency securities		2,128		6,425		27,664		—		36,217
U.S. treasuries		20,632		804		—		—		21,436
Asset backed securities		—		319		—		13,988		14,307
Supranational bonds		—		4,800		—		—		4,800
Total	$	94,570	$	133,235	$	53,600	$	13,988	$	295,393

	December 31, 2018
(In thousands)	Less than 1 Year		Between 1 to 5 Years		Between 5 to 10 Years		After 10 Years		Total
Corporate bonds	$	14,183	$	144,894	$	22,735	$	—	$	181,812
U.S. treasuries		4,919		40,240		—		—		45,159
U.S. government agency securities		4,788		7,031		32,870		—		44,689
Supranational bonds		—		4,741		—		—		4,741
Money market funds		449		—		—		—		449
Asset backed securities		—		84		—		—		84
Municipal bonds		50		—		—		—		50
Total	$	24,389	$	196,990	$	55,605	$	—	$	276,984

The average contractual maturity of mortgage backed securities was 17 years as of December 31, 2019 and 2018.

- 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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