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Investments and Fair Value Measurements | 9 Months Ended
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Sep. 30, 2013
Investments and Fair Value Measurements [Abstract] |
Investments and Fair Value Measurements | 6. Investments and Fair Value Measurements Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market, and we consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. Our financial instruments are measured and recorded at fair value. Our non-financial assets, including property and equipment, intangible assets and goodwill, are measured at fair value upon acquisition, reviewed at least annually for impairment, and are fully assessed if there is an indicator of impairment. An adjustment would be made to the fair value of non-financial assets if an impairment charge is recognized. Fair value is determined for assets and liabilities using a three-tiered hierarchy, based upon significant levels of inputs as follows:
- | Level 1 – Quoted prices in active markets for identical assets or liabilities.
- | Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
- | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The following tables summarize the composition of our investments at September 30, 2013 and December 31, 2012 (in thousands):
|  |  |  |  |  | Classification on Balance Sheet
September 30, 2013 |  | Amortized Cost |  |  | Unrealized Gains (Losses) |  | Aggregate Fair Value |  | Cash and cash equivalents |  | Short-term available-for-sale securities |  | Long-term available-for- sale securities
Auction rate securities (“ARS”), greater than one year |  | $ | 1,000 |  | $ | (283 | ) |  | $ | 717 |  | $ | - |  | $ | - |  | $ | 717
Money market funds, ninety days or less |  |  | 269 |  |  | - |  |  |  | 269 |  |  | 269 |  |  | - |  |  | -
Municipal securities1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short term municipal securities funds2 |  |  | 27,343 |  |  | (117 | ) |  |  | 27,226 |  |  | - |  |  | 27,226 |  |  | -
One year or less |  |  | 775 |  |  | 3 |  |  |  | 778 |  |  | - |  |  | 778 |  |  | -
After one year through three years |  |  | 2,482 |  |  | 4 |  |  |  | 2,486 |  |  | - |  |  | 2,486 |  |  | -
Greater than three years |  |  | 5,879 |  |  | (129 | ) |  |  | 5,750 |  |  | - |  |  | 5,750 |  |  | -
Total |  | $ | 37,748 |  | $ | (522 | ) |  | $ | 37,226 |  | $ | 269 |  | $ | 36,240 |  | $ | 717
|  |  |  |  |  |  |  |  |  |  |  | Classification on Balance Sheet
December 31, 2012 |  | Amortized Cost |  |  | Unrealized Gains (Losses) |  | Aggregate Fair Value |  | Cash and cash equivalents |  | Short-term available-for-sale securities |  | Long-term available-for- sale securities
ARS, greater than one year |  | $ | 1,000 |  | $ | (277 | ) |  | $ | 723 |  | $ | - |  | $ | - |  | $ | 723
Money market funds, ninety days or less |  |  | 1,150 |  |  | - |  |  |  | 1,150 |  |  | 1,150 |  |  | - |  |  | -
Municipal securities1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short term municipal securities funds2 |  |  | 26,095 |  |  | (3 | ) |  |  | 26,092 |  |  | - |  |  | 26,092 |  |  | -
One year or less |  |  | 790 |  |  | 2 |  |  |  | 792 |  |  | - |  |  | 792 |  |  | -
After one year through three years |  |  | 1,345 |  |  | 7 |  |  |  | 1,352 |  |  | - |  |  | 1,352 |  |  | -
Greater than three years |  |  | 3,884 |  |  | 2 |  |  |  | 3,886 |  |  | - |  |  | 3,886 |  |  | -
Total |  | $ | 34,264 |  | $ | (269 | ) |  | $ | 33,995 |  | $ | 1,150 |  | $ | 32,122 |  | $ | 723
1Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. 2Amounts include short-term municipal security funds that do not have a set maturity date. The following table details the fair value measurements of assets and liabilities within the three levels of the fair value hierarchy at September 30, 2013 and December 31, 2012 (in thousands):
|  |  |  | Fair Value Measurements at Reporting Date Using
September 30, 2013 |  | Fair Market Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Other Unobservable Inputs (Level 3)
Non-financial assets: |  |  |  |  |  |  |  |
Property and equipment, net |  | $ | 10,954 |  | $ | - |  | $ | - |  |  | $ | 10,954
|  |  |  |  | Fair Value Measurements at Reporting Date Using
September 30, 2013 |  | Fair Market Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Other Unobservable Inputs (Level 3)
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |
ARS |  | $ | 717 |  | $ | - |  | $ | - |  |  | $ | 717
Money market funds |  |  | 269 |  |  | 269 |  |  | - |  |  |  | -
Municipal securities1 |  |  | 36,240 |  |  | 36,240 |  |  | - |  |  |  | -
Foreign currency exchange contracts |  |  | 116 |  |  | - |  |  | 116 |  |  |  | -
Total financial assets |  | $ | 37,342 |  | $ | 36,509 |  | $ | 116 |  |  | $ | 717
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts |  |  | 206 |  |  | - |  |  | 206 |  |  |  | -
Total financial liabilities |  | $ | 206 |  | $ | - |  | $ | 206 |  |  | $ | -
|  |  |  |  | Fair Value Measurements at Reporting Date Using
December 31, 2012 |  | Fair Market Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Other Unobservable Inputs (Level 3)
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |
ARS |  | $ | 723 |  | $ | - |  | $ | - |  |  | $ | 723
Money market funds |  |  | 1,150 |  |  | 1,150 |  |  | - |  |  |  | -
Municipal securities1 |  |  | 32,122 |  |  | 32,122 |  |  | - |  |  |  | -
Foreign currency exchange contracts |  |  | 952 |  |  | - |  |  | 952 |  |  |  | -
Total financial assets |  | $ | 34,947 |  | $ | 33,272 |  | $ | 952 |  |  | $ | 723
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency exchange contracts |  |  | 115 |  |  | - |  |  | 115 |  |  |  | -
Total financial liabilities |  | $ | 115 |  | $ | - |  | $ | 115 |  |  | $ | -
1 At September 30, 2013, municipal securities consisted of a 75/14/11 percent split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. At December 31, 2012, municipal securities consisted of an 82/12/6 split between holdings in short-term municipal security funds, municipal revenue bonds and municipal general obligation bonds, respectively. The underlying credit rating of the municipal securities at September 30, 2013 and December 31, 2012 were A+, A1 or better as defined by S&P 500 and Moody’s, respectively. Money market funds and municipal securities are classified as Level 1 assets because market prices are readily available for these investments. Level 2 financial assets and liabilities represent the fair value of our foreign currency exchange contracts that were valued using pricing models that take into account the contract terms, as well as multiple inputs where applicable, such as equity prices, interest rate yield curve, option volatility and currency rates. Level 3 financial assets represent the fair value of our auction-rate securities (“ARS”) and the building housing our corporate headquarters. ARS were valued using a pricing model that takes into account the average life of the underlying collateral, the rate of return, and the spread used for similar issuances. The fair value of our corporate headquarters was determined using an expected cash flow model. Fair value measurements on a recurring basis using Level 3 inputs consist of one available-for-sale ARS. The following table presents a reconciliation for the three and nine months ended September 30, 2013 and 2012, of available-for-sale ARS measured at fair value on a recurring basis using Level 3 inputs (in thousands):
|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2013 |  | 2012 |  | 2013 |  |  | 2012
Beginning balance |  | $ | 716 |  | $ | 714 |  | $ | 723 |  |  | $ | 700
Total realized / unrealized losses: |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings |  |  | - |  |  | - |  |  | - |  |  |  | -
Included in OCI |  |  | 1 |  |  | 5 |  |  | (6 | ) |  |  | 19
Sales and settlements |  |  | - |  |  | - |  |  | - |  |  |  | -
Transfers into Level 3, net |  |  | - |  |  | - |  |  | - |  |  |  | -
Ending balance |  | $ | 717 |  | $ | 719 |  | $ | 717 |  |  | $ | 719
During the nine months ended September 30, 2013, we experienced one failed ARS auction, representing principal of $1.0 million. This ARS continues to be classified as a long-term asset due to the high probability that the ARS may fail in future auctions. The next scheduled auction for this ARS is March 6, 2014. We have determined that there is no other-than-temporary impairment on this security, since we do not intend and are not required to sell this security before we have recovered the amortized cost basis, there has been no further deterioration of the credit rating of this investment, interest payments at coupon rate continue to be received and we expect to recover the amortized cost basis of this security. We will continue to reassess liquidity in future reporting periods based on several factors, including the success or failure of future auctions, possible failure of the investment to be redeemed, deterioration of the credit rating of the investment, market risk and other factors. In determining the fair value of bond and ARS investments, we consider the individual ratings of each holding. With regard to bonds, we consider the following: the underlying rating of the issuer irrespective of the insurance; the performance of the issuer; the term of the bond; and the quality of bond insurance provided by the rating of the bond insurer. With regard to valuation of our ARS, which is made up of student loans, we consider the underlying credit quality of comparable student loan portfolios and the average life of the underlying student loan assets and apply a discount related to the illiquidity of our ARS due to past failed auctions. Based on these inputs, we have applied a discount of 340-basis points to the London interbank offered rate resulting in a valuation of $0.7 million from a costs basis of $1.0 million as of September 30, 2013. At the reporting dates and in the future, we recognize that this investment is subject to general credit, liquidity, market and interest rate risks. The fair value of this investment accordingly will continue to change, and we will continue to evaluate its carrying value. Unrealized gains or losses related to available-for-sale securities are recorded in accumulated other comprehensive income (“AOCI”). The change in unrealized gains or losses related to available-for-sale securities are recorded in other comprehensive income net of income taxes in the period the change occurred. When securities are sold and a realized gain or loss is recognized, the amount is reclassified from AOCI to the income statement and recorded in interest and dividend income. For the three and nine months ended September 30, 2013 and 2012, a summary of AOCI balances and gains (losses) recognized in OCI is as follows (in thousands):
| Accumulated Other Comprehensive Income (Loss) |
| Available-for-sale securities |
| Three months ended |  |  | Nine months ended |
| September 30, |  |  | September 30, |
| 2013 |  |  | 2012 |  |  | 2013 |  |  | 2012 |
Balance, beginning of period | $ | (366 | ) |  | $ | 108 |  |  | $ | (180 | ) |  | $ | 135 |
Change before reclassification |  | (24 | ) |  |  | 66 |  |  |  | (216 | ) |  |  | 193 |
Reclassification into interest and dividend (income) loss |  | 70 |  |  |  | (364 | ) |  |  | 79 |  |  |  | (602 | )
Effect of incomes taxes |  | (25 | ) |  |  | 127 |  |  |  | (28 | ) |  |  | 211 |
Other comprehensive income (loss), net of income taxes |  | 21 |  |  |  | (171 | ) |  |  | (165 | ) |  |  | (198 | )
Balance, end of period | $ | (345 | ) |  | $ | (63 | ) |  | $ | (345 | ) |  | $ | (63 | )
During the nine months ended September 30, 2013, the change in AOCI for available-for-sale securities was primarily due to a decline in the fair market value of debt securities resulting from an increase in market interest rates during the period.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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