Fair Value Measurement | 9 Months Ended |
Sep. 30, 2013 |
Fair Value Measurement | ' |
Fair Value Measurement |
The valuation hierarchy for disclosure of assets and liabilities reported at fair value prioritizes the inputs for such valuations into three broad levels: |
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• | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; | | | | | | | | | | | | | | |
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• | Level 2: quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; or | | | | | | | | | | | | | | |
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• | Level 3: unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. | | | | | | | | | | | | | | |
A financial asset's or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. |
The following tables provide the assets and liabilities carried at fair value and measured on a recurring basis: |
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| | | Fair Value Measurements at Reporting Date Using: |
(in thousands) | September 30, | | Quoted Prices in | | Significant Other | | Significant |
2013 | Active Markets | Observable | Unobservable |
| (Level 1) | Inputs | Inputs |
| | (Level 2) | (Level 3) |
Assets | | | | | | | |
Cash equivalents | $ | 306,866 | | | $ | 306,866 | | | $ | — | | | $ | — | |
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Short-term investments | $ | 440 | | | $ | — | | | $ | 440 | | | $ | — | |
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Liabilities | | | | | | | |
Contingent consideration | $ | (7,205 | ) | | $ | — | | | $ | — | | | $ | (7,205 | ) |
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Deferred compensation | $ | (700 | ) | | $ | — | | | $ | — | | | $ | (700 | ) |
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| | | Fair Value Measurements at Reporting Date Using: |
(in thousands) | 31-Dec-12 | | Quoted Prices in | | Significant Other | | Significant |
Active Markets | Observable | Unobservable |
(Level 1) | Inputs | Inputs |
| (Level 2) | (Level 3) |
Assets | | | | | | | |
Cash equivalents | $ | 206,979 | | | $ | 206,979 | | | $ | — | | | $ | — | |
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Short-term investments | $ | 452 | | | $ | — | | | $ | 452 | | | $ | — | |
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Liabilities | | | | | | | |
Contingent consideration | $ | (6,436 | ) | | $ | — | | | $ | — | | | $ | (6,436 | ) |
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Deferred compensation | $ | (1,394 | ) | | $ | — | | | $ | — | | | $ | (1,394 | ) |
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Foreign currency future | $ | (240 | ) | | $ | — | | | $ | (240 | ) | | $ | — | |
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The cash equivalents in the preceding tables represent money market mutual funds. |
The short-term investments in the preceding tables represent deposits held by certain foreign subsidiaries of the Company. The deposits have fixed interest rates with maturity dates ranging from three months to one year. |
The contingent consideration in the table above represents potential future payments related to the EVEN and Apache Design, Inc. ("Apache") acquisitions in accordance with the respective merger agreements. The deferred compensation in the table above is attributable to a retention agreement for a key member of Apache management, and was accounted for outside of that business combination. The net present value calculations for the contingent consideration and deferred compensation include significant unobservable inputs in the assumption that all remaining payments will be made, and therefore the liabilities were classified as Level 3 in the fair value hierarchy. |
The foreign currency future contract was settled in August 2013 and did not have a material impact on the Company's results of operations for the three or nine month periods ended September 30, 2013. |
The following tables present the changes in the Company’s Level 3 liabilities that are measured at fair value on a recurring basis during the three and nine months ended September 30, 2013 and 2012: |
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| Fair Value Measurement Using | | | | | | | | |
Significant Unobservable Inputs | | | | | | | | |
(in thousands) | Contingent | | Deferred | | | | | | | | |
Consideration | Compensation | | | | | | | | |
Balance as of January 1, 2013 | $ | 6,436 | | | $ | 1,394 | | | | | | | | | |
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Interest expense included in earnings | 31 | | | 6 | | | | | | | | | |
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Balance as of March 31, 2013 | $ | 6,467 | | | $ | 1,400 | | | | | | | | | |
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EVEN contingent consideration | 3,597 | | | — | | | | | | | | | |
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Interest expense and foreign exchange activity included in earnings | 134 | | | 7 | | | | | | | | | |
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Balance as of June 30, 2013 | $ | 10,198 | | | $ | 1,407 | | | | | | | | | |
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Contingent payments | (3,288 | ) | | (712 | ) | | | | | | | | |
Interest expense and foreign exchange activity included in earnings | 295 | | | 5 | | | | | | | | | |
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Balance as of September 30, 2013 | $ | 7,205 | | | $ | 700 | | | | | | | | | |
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| Fair Value Measurement Using | | | | | | | | |
Significant Unobservable Inputs | | | | | | | | |
(in thousands) | Contingent | | Deferred | | | | | | | | |
Consideration | Compensation | | | | | | | | |
Balance as of January 1, 2012 | $ | 9,571 | | | $ | 2,073 | | | | | | | | | |
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Interest expense included in earnings | 43 | | | 9 | | | | | | | | | |
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Balance as of March 31, 2012 | $ | 9,614 | | | $ | 2,082 | | | | | | | | | |
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Interest expense included in earnings | 43 | | | 9 | | | | | | | | | |
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Balance as of June 30, 2012 | $ | 9,657 | | | $ | 2,091 | | | | | | | | | |
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Contingent payments | (3,288 | ) | | (712 | ) | | | | | | | | |
Interest expense included in earnings | 35 | | | 8 | | | | | | | | | |
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Balance as of September 30, 2012 | $ | 6,404 | | | $ | 1,387 | | | | | | | | | |
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The carrying values of cash, accounts receivable, accounts payable, accrued expenses, other accrued liabilities and short-term obligations approximate their fair values because of their short-term nature. |