FINANCIAL INSTRUMENTS AND FAIR VALUE

The following table summarizes our investments ($ amounts in 000’s):



	December 31, 2013
	Amortized Cost	Unrealized Gains	Unrealized Losses		Fair Value
Corporate debt securities	603,185	1,506	(374	)	604,317
Commercial paper	69,356	7	—		69,363
Municipal bonds	38,815	48	(20	)	38,843
Certificates of deposit and term deposits	12,645	3	—		12,648
U.S. government and agency securities	2,000	1	—		2,001
Total available-for-sale securities	726,001	1,565	(394	)	727,172

	December 31, 2012
	Amortized Cost	Unrealized Gains	Unrealized Losses		Fair Value
Corporate debt securities	529,738	1,814	(161	)	531,391
Commercial paper	39,229	22	(6	)	39,245
Municipal bonds	36,787	83	—		36,870
Certificates of deposit and term deposits	9,099	6	—		9,105
Total available-for-sale securities	614,853	1,925	(167	)	616,611

The following table shows the gross unrealized losses and the related fair values of our investments that have been in a continuous unrealized loss position ($ amounts in 000’s):



	December 31, 2013
	Less Than 12 Months			12 Months or Greater		Total
	Fair Value	Unrealized Losses		Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
Corporate debt securities	182,795	(374	)	500	—	183,295	(374	)
Commercial paper	7,897	—		—	—	7,897	—
Municipal bonds	14,736	(20	)	—	—	14,736	(20	)
Total available-for-sale securities	205,428	(394	)	500	—	205,928	(394	)

The following table shows the gross unrealized losses and the related fair values of our investments that have been in a continuous unrealized loss position ($ amounts in 000’s):



	December 31, 2012
	Less Than 12 Months			12 Months or Greater			Total
	Fair Value	Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
Corporate debt securities	133,006	(156	)	5,010	(5	)	138,016	(161	)
Commercial paper	8,464	(6	)	—	—		8,464	(6	)
Total available-for-sale securities	141,470	(162	)	5,010	(5	)	146,480	(167	)

The contractual maturities of our investments are as follows ($ amounts in 000’s)



	December 31, 2013	December 31, 2012
Due within one year	375,497	290,719
Due within one to three years	351,675	325,892
Total	727,172	616,611

Available-for-sale securities are reported at fair value, with unrealized gains and losses, net of tax, included as a separate component of stockholders’ equity and in total comprehensive income. Realized gains and losses on available-for-sale securities are included in other expense, net in our consolidated statements of operations.

The unrealized losses on our available-for-sale securities were caused by fluctuations in market value and interest rates as a result of the economic environment. As the decline in market value are attributable to changes in market conditions and not credit quality, and because we have concluded currently that we neither intend to sell nor is it more likely than not that we will be required to sell these investments prior to a recovery of par value, we do not consider these investments to be other-than temporarily impaired as of December 31, 2013.

Realized gains and losses from the sale of available-for-sale securities were not significant in any period presented.

Fair Value Accounting—We apply the following fair value hierarchy for disclosure of the inputs used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

Level 3—Unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

We measure the fair value of money market funds using quoted prices in active markets for identical assets. The fair value of all other financial instruments was based on quoted prices for similar asserts in active markets, or model driven valuations using significant inputs derived from or corroborated by observable market data.

We classify investments within Level 1 if quoted prices are available in active markets for identical securities.

We classify items within Level 2 if the investments are valued using model driven valuations using observable inputs such as quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. Investments are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models.

The following table presents the fair value of our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and December 31, 2012 ($ amounts in 000’s):



	December 31, 2013				December 31, 2012
	Aggregate Fair Value	Quoted Prices in Active Markets For Identical Assets	Significant Other Observable Remaining Inputs	Significant Other Unobservable Remaining Inputs	Aggregate Fair Value	Quoted Prices in Active Markets For Identical Assets	Significant Other Observable Remaining Inputs	Significant Other Unobservable Remaining Inputs
		(Level 1)	(Level 2)	(Level 3)		(Level 1)	(Level 2)	(Level 3)
Assets:
Corporate debt securities	604,317	—	604,317	—	531,391	—	531,391	—
Commercial paper	71,363	—	71,363	—	41,994	—	41,994	—
Municipal bonds	38,843	—	38,843	—	36,870	—	36,870	—
Certificates of deposit and term deposits	12,648	—	12,648	—	9,105	—	9,105	—
Money market funds	5,724	5,724	—	—	39,871	39,871	—	—
U.S. government and agency securities	2,001	—	2,001	—	—	—	—	—
Total	734,896	5,724	729,172	—	659,231	39,871	619,360	—

Liabilities:
Contingent consideration	1,850	—	—	1,850	—	—	—	—
Total	1,850	—	—	—	—	—	—	—

Reported as:
Cash equivalents	7,724				42,620
Short-term investments	375,497				290,719
Long-term investments	351,675				325,892
Total	734,896				659,231

The fair value of contingent consideration arising from the acquisition of Coyote Point Systems (see Note 6), is classified within Level 3 of the fair value hierarchy since it is based on a probability-based approach that includes significant unobservable inputs. The significant unobservable inputs include projected revenues and the percentage probability of occurrence to value the payment. A significant increase (decrease) in the projected revenue in isolation could result in a significantly higher (lower) fair value measurement and significant increase (decrease) in the probability of occurrence between the outcomes in isolation could result in a significantly higher (lower) fair value measurement. The fair value of the contingent consideration is calculated on a quarterly basis by management based on a collaborative effort of our operations and finance and accounting groups. Potential valuation adjustments are made as additional information becomes available, including the progress toward achieving revenue targets as compared to initial projections, the impact of market competition, and changes in actual and projected product mix and average selling price, with the impact of such adjustments being recorded in the earnings of that period.

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the year ended December 31, 2013 or December 31, 2012.

The following table presents quantitative information about the inputs and valuation methodologies used for our fair value measurements classified in Level 3 of the fair value hierarchy as of December 31, 2013 ($ amounts in 000’s):



	December 31, 2013
	Fair Value	Valuation Technique	Significant Unobservable Input	Range
Contingent consideration	$1,850	Probability Weighted Income Approach	Revenue (in 000's)	$7,000 - $12,000

			Probability of occurrence (%)	40%-80%