Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

8. Fair Value Measurements

Valuation hierarchy under GAAP categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows:

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

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – inputs to the valuation methodology are unobservable and are significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The following table summarizes CBIZ’s assets and liabilities at September 30, 2011 and December 31, 2010 that are measured at fair value on a recurring basis subsequent to initial recognition and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

	Level	September 30, 2011			December 31, 2010
Deferred compensation plan assets	1	$	31,274		$	33,361
Corporate bonds	1	$	32,559		$	15,255
Interest rate swaps	2	$	(773	)	$	(16	)
Auction rate securities	3	$	—		$	10,216
Contingent purchase price liabilities	3	$	(27,662	)	$	(17,265	)

During the nine months ended September 30, 2011 and 2010, there were no transfers between the valuation hierarchy Levels 1, 2 and 3. The following table summarizes the change in fair values of the Company’s assets and liabilities identified as Level 3 for the nine months ended September 30, 2011 (pre-tax basis) (in thousands):

	Auction Rate Securities			Contingent Purchase Price Liabilities
Beginning balance – January 1, 2011	$	10,216		$	(17,265	)
Sales of auction rate securities		(10,980	)		—
Additions from business acquisitions		—			(11,745	)
Payment of contingent purchase price liability		—			330
Unrealized gains included in accumulated other comprehensive loss		664			—
Change in fair value of contingency		—			1,152
Change in net present value of contingency		—			(134	)
Increase in cash flows		100			—
Ending balance – September 30, 2011	$	—		$	(27,662	)

Auction Rate Securities – CBIZ’s investments in ARS were classified as Level 3 as a result of liquidity issues in the ARS market, an inactive trading market of the securities, and the lack of quoted prices from broker-dealers. During the nine months ended September 30, 2011, CBIZ sold all of its investments in ARS and as a result, realized a loss of approximately $0.1 million in “Other income (expense), net” for the nine months ended September 30, 2011, and reversed prior period unrealized losses of $0.4 million and $0.7 million for the three and nine months ended September 30, 2011. For the three and nine months ended September 30, 2010, changes in the fair value of ARS resulted in an unrealized loss of $0.9 million and $0.2 million, respectively. The difference in par value and fair value was determined to be temporary due to dislocation in the credit markets, the quality of the investments and their underlying collateral, and the probability of a passed auction or redemption in the future, considering the issuer’s ability to refinance if necessary. At December 31, 2010, CBIZ held three investments in ARS with par values totaling $13.4 million and included these ARS in “Funds held for clients – non-current”, as CBIZ intentions were to hold the ARS investments until the time par value was recovered, a time which could not be estimated.

Contingent Purchase Price Liabilities – Contingent purchase price liabilities resulted from business acquisitions made after January 1, 2009, and are classified as Level 3 due to the utilization of a probability weighted discounted cash flow approach to determine the fair value of the contingency. The contingent purchase price liabilities are included in “Other current liabilities” and “Accrued expenses – non-current”, depending on the expected settlement date. During the nine months ended September 30, 2011, the contingent liability increased $11.7 million as a result of two business acquisitions that closed in the third quarter of 2011 and net present value adjustments of $0.1 million, offset partially due to payments totaling $0.3 million and a $1.2 million adjustment to the estimate of future contingent liabilities. See Note 12 for further discussion of contingent purchase price liabilities.

The following table provides additional information with regards to the ARS with temporary impairments, aggregated by the length of time that the securities have been in a continuous unrealized loss position (in thousands):

	September 30, 2011				December 31, 2010
	12 Months or Greater				12 Months of Greater
Description of Security	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Auction rate securities	$	—	$	—	$	7,716	$	664

The following table presents financial instruments that are not carried at fair value but which require fair value disclosure as of September 30, 2011 and December 31, 2010 (in thousands):

	September 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
2006 Convertible Notes	$	750	$	750	$	39,250	$	40,050
2010 Convertible Notes	$	118,393	$	149,135	$	116,577	$	141,670

Although the trading of CBIZ’s 2006 Convertible Notes and 2010 Convertible Notes is limited, the fair value was determined based upon their most recent quoted trading activity. The 2006 Convertible Notes and 2010 Convertible Notes are carried at face value less any unamortized debt discount.

The carrying value of CBIZ’s cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments. The carrying value of bank debt approximates fair value, as the interest rate on the bank debt is variable and approximates current market rates.