FINANCIAL INSTRUMENTS

Investments in Debt and Equity Securities

The fair values of the Company’s available-for-sale securities are based on quoted market prices and are included in cash and cash equivalents and available-for-sale securities on the accompanying Consolidated Balance Sheets based on each respective security’s maturity.

During the first quarter of 2013, the Company liquidated its entire portfolio of available-for-sale securities. The available-for-sale securities were sold for total cash consideration of $9.4 million and the resulting net gain on sale of $0.1 million was recognized in Interest income and other, net in the accompanying Consolidated Statements of Operations.

The following is a summary of available-for-sale securities as of December 31, 2012 (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. government obligations and agency securities	$	6,775	$	54	$	—	$	6,829
U.S. corporate debt	651		13		—		664
Foreign corporate debt and equity securities	1,837		36		—		1,873
Total available-for-sale securities	$	9,263	$	103	$	—	$	9,366

Contractual maturities of available-for-sale securities as of December 31, 2012 are as follows (in thousands):



	December 31, 2012
Less than one year	$	7,083
One to two years	664
More than two years	1,619
Total available-for-sale securities	$	9,366

Realized gains for the years ended December 31, 2013 and 2012 were $0.1 million and $0.5 million, respectively. No realized losses were incurred for the year ended December 31, 2013. In 2012, realized losses were $0.1 million. Realized gains and losses are included in Interest income and other, net in the accompanying Consolidated Statements of Operations.

Non-Marketable Securities

As of December 31, 2013 and 2012, the carrying amounts of the Company's non-marketable securities, totaling $4.4 million and $4.4 million, respectively, equaled their estimated fair values. These non-marketable securities consist primarily of an investment in a limited partnership investment fund that invests in companies in the life science industry and are located in the United States. The investments were initially valued at purchase price and subsequently on the basis of inputs that market participants would use in pricing such investments. The portfolio of investments includes Level 1 publicly-traded equity securities and Level 3 equity securities and notes. During the year ended December 31, 2013, other-than-temporary impairment charges of $0.5 million were recorded on the Company's non-marketable securities. Net investment losses are included in Interest income and other, net in the accompanying Consolidated Statements of Operations. Depending on market conditions, the Company may incur additional charges on this investment in the future.

Derivative Financial Instruments

The Company derives a portion of its revenues in foreign currencies, predominantly in Europe and Japan, as part of its ongoing business operations. In addition, a portion of its assets are held in the nonfunctional currencies of its subsidiaries. The Company enters into foreign currency forward contracts to manage a portion of the volatility related to transactions that are denominated in foreign currencies. The Company's foreign currency forward contracts are entered into for periods consistent with the related underlying exposures and do not constitute positions that are independent of those exposures. The Company's accounting policies for these instruments are based on whether the instruments are classified as designated or non-designated hedging instruments. The Company records all derivatives on the accompanying Consolidated Balance Sheets at fair value. The effective portions of designated cash flow hedges are recorded in OCI until the hedged item is recognized in operations. As of December 31, 2013, the Company's existing foreign currency forward exchange contracts mature within 12 months. The deferred amount related to the Company's derivatives recorded in OCI at December 31, 2013, and expected to be recognized into earnings over the next 12 months is a net loss of $0.8 million. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedges are adjusted to fair value through earnings.

Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in other comprehensive income (loss) associated with such derivative instruments are reclassified immediately into operations through other income and expense. Any subsequent changes in fair value of such derivative instruments are reflected in Interest income and other, net unless they are re-designated as hedges of other transactions. During the year ended December 31, 2013, the Company recognized $0.2 million in net gains in Interest income and other, net, related to the loss of hedge designation on a portion of cash flow hedges related to the Japanese yen that were deemed ineffective due to lower-than-forecasted revenue from Japan. No additional hedges are deemed ineffective as of December 31, 2013. The Company did not recognize any net gains or losses related to the loss of hedge designation on discontinued cash flow hedges during the year ended December 31, 2012.

Under the Credit Agreement as defined in Note 12. "Long-Term Debt Obligations", the Company is required to maintain derivative contracts to protect against fluctuations in interest rates with respect to at least 35% of the aggregate principal amount of the Term Loan then outstanding, with such derivative contracts being required to have at least a three-year term. Accordingly, the Company maintains an interest rate swap (the "Interest Rate Swap") to comply with the requirement of the Credit Agreement. As of December 31, 2013, the notional amount of the Interest Rate Swap was $10.3 million compared to $27.5 million as of December 31, 2012 following the refinance of our Senior Credit Facility during the fourth quarter of 2013 described in more detail in Note 12. "Long-Term Debt Obligations". The Interest Rate Swap at December 31, 2013, calls for fixed rate quarterly payments of 0.6125% of the notional amount in exchange for a variable rate quarterly receipt equal to a 3-month LIBOR rate. The Interest Rate Swap terminates on June 25, 2015.

The Company did not designate the Interest Rate Swap as a hedging instrument and will recognize adjustments to fair value through Interest income and other, net on the accompanying Consolidated Statements of Operations at each reporting date. As of December 31, 2013, the fair value of the Interest Rate Swap was less than $0.1 million.

As of December 31, 2013 and 2012, the total notional values of the Company's derivative assets and liabilities were as follows (in thousands):



	December 31, 2013		December 31, 2012
Euro	$	21,990	$	16,933
Japanese yen	4,588		10,542
British pound	5,653		4,278
Interest rate swap	10,307		27,519
Total	$	42,538	$	59,272

Other than the Interest Rate Swap, the Company did not have any derivative assets or liabilities that were not designated or qualifying as hedges as of December 31, 2013 and December 31, 2012.

The Company is exposed to the risk that the counterparties to its hedges may be unable to meet the terms of these agreements. To mitigate the risk, only contracts with carefully selected highly-rated major financial institutions are entered into. In the event of non-performance by these counterparties, the asset position carrying values of the financial instruments represent the maximum amount of loss that can be incurred, however, no losses as a result of counterparty defaults are expected. The Company does not require and is not required to pledge collateral for these financial instruments. The Company does not enter into foreign currency forward contracts for trading or speculative purposes and is not party to any leveraged derivative instruments.

The following table shows the Company's foreign currency derivatives measured at fair value as reflected on the accompanying Consolidated Balance Sheets as of December 31, 2013 and 2012 (in thousands):



	December 31, 2013		December 31, 2012		Balance Sheet Classification
Derivative assets:
Foreign exchange contracts	$	185	$	842	Other current assets
Derivative liabilities:
Foreign exchange contracts	927		752		Accrued liabilities
Interest rate swap	11		77		Accrued liabilities

The following table shows the effect, net of tax, of the Company's derivative instruments on the accompanying Consolidated Statements of Operations and OCI for the years ended December 31, 2013, 2012 and 2011 (in thousands):



	Year ended December 31,
	2013			2012			2011
Derivatives in cash flow hedging relationships:
Net (loss) gain recognized in OCI, net of tax (1)	$	(796	)	$	(794	)	$	826
Net gain reclassified from accumulated OCI into Revenue, net of tax (2)	800			1,226			—
Net gain reclassified from accumulated OCI into Interest income and other, net, net of tax (3)	158			—			—
Net gain (loss) recognized in Interest income and other, net, net of tax (4)	74			109			(103		)
Derivatives not designated as hedging relationships:
Net (loss) recognized in Interest income and other, net, net of tax (5)	(122		)	(539		)	(1,720		)


(1)	Net change in the fair value of the effective portion classified in OCI


(2)	Effective portion classified as Revenue


(3)	Ineffective portion classified as Interest income and other, net


(4)	Amount excluded from effectiveness testing classified as Interest and other, net


(5)	Classified in Interest and other, net