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FAIR VALUE | 9 Months Ended
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Sep. 30, 2013
Fair Value Disclosures [Abstract] |
FAIR VALUE | FAIR VALUE Fair value is defined as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. There is a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
5. | FAIR VALUE — (CONTINUED)
The following table represents the Company's fair value hierarchy for its financial assets (cash, cash equivalents and investments) and liabilities measured at fair value on a recurring basis as of September 30, 2013 (in thousands):
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash | $ | 136,909 |  |  | $ | — |  |  | $ | — |  |  | $ | 136,909 |
Money market funds | 32,338 |  |  | — |  |  | — |  |  | 32,338 |
Commercial paper | 53,691 |  |  | — |  |  | — |  |  | 53,691 |
Auction rate securities | — |  |  | — |  |  | 21,675 |  |  | 21,675 |
Total assets measured at fair value | $ | 222,938 |  |  | $ | — |  |  | $ | 21,675 |  |  | $ | 244,613 |
Liabilities: |  |  |  |  |  |  |
Deferred consideration | $ | — |  |  | $ | — |  |  | $ | 1,208 |  |  | $ | 1,208 |
Total liabilities measured at fair value | $ | — |  |  | $ | — |  |  | $ | 1,208 |  |  | $ | 1,208 |
The following table represents the Company's fair value hierarchy for its financial assets (cash, cash equivalents and investments) and liabilities measured at fair value on a recurring basis as of December 31, 2012 (in thousands):
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash | $ | 135,232 |  |  | $ | — |  |  | $ | — |  |  | $ | 135,232 |
Money market funds | 20,775 |  |  | — |  |  | — |  |  | 20,775 |
Commercial paper | 20 |  |  | — |  |  | — |  |  | 20 |
Government-sponsored enterprise obligations | — |  |  | 37 |  |  | — |  |  | 37 |
Auction rate securities | — |  |  | — |  |  | 21,662 |  |  | 21,662 |
Total assets measured at fair value | $ | 156,027 |  |  | $ | 37 |  |  | $ | 21,662 |  |  | $ | 177,726 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Deferred consideration | $ | — |  |  | $ | — |  |  | $ | 2,304 |  |  | $ | 2,304 |
Total liabilities measured at fair value | $ | — |  |  | $ | — |  |  | $ | 2,304 |  |  | $ | 2,304 |
The Company’s Level 2 assets consisted of government-sponsored enterprise obligations, which did not have directly observable quoted prices in active markets. The Company’s Level 2 assets were valued using matrix pricing. The Company’s Level 3 assets consist of ARS, whose underlying assets are primarily student loan securities supported by guarantees from the Federal Family Education Loan Program (“FFELP”) of the U.S. Department of Education. The following tables summarize changes in fair value of the Company’s Level 3 assets for the three and nine months ended September 30, 2013 and 2012 (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2013 |  | 2012 |  | 2013 |  | 2012
Balance at beginning of period | $ | 21,675 |  |  | $ | 24,976 |  |  | $ | 21,662 |  |  | $ | 24,584 |
Auction rate securities upon acquisition | — |  |  | — |  |  | — |  |  | 442 |
Change in unrealized gain included in accumulated other comprehensive loss | — |  |  | 735 |  |  | 63 |  |  | 735 |
Settlements | — |  |  | (4,150 | ) |  | (50 | ) |  | (4,200 | )
Balance at end of period | $ | 21,675 |  |  | $ | 21,561 |  |  | $ | 21,675 |  |  | $ | 21,561 |
5. | FAIR VALUE — (CONTINUED)
The following table summarizes changes in fair value of the Company’s Level 3 assets from December 31, 2007 to September 30, 2013 (in thousands):
| Auction Rate Securities
Balance at December 31, 2007 | $ | 53,975 |
Change in unrealized loss included in accumulated other comprehensive loss | (3,710 | )
Settlements | (20,925 | )
Balance at December 31, 2008 | 29,340 |
Change in unrealized gain included in accumulated other comprehensive loss | 684 |
Settlements | (300 | )
Balance at December 31, 2009 | 29,724 |
Change in unrealized gain included in accumulated other comprehensive loss | 40 |
Settlements | (575 | )
Balance at December 31, 2010 | 29,189 |
Change in unrealized gain included in accumulated other comprehensive loss | 245 |
Settlements | (4,850 | )
Balance at December 31, 2011 | 24,584 |
Auction rate securities upon acquisition | 442 |
Change in unrealized gain included in accumulated other comprehensive loss | 836 |
Settlements | (4,200 | )
Balance at December 31, 2012 | 21,662 |
Change in unrealized gain included in accumulated other comprehensive loss | 63 |
Settlements | (50 | )
Balance at September 30, 2013 | $ | 21,675 |
ARS are variable rate debt instruments whose interest rates are reset approximately every 28 days. The majority of the underlying securities have contractual maturities greater than twenty years. The ARS are recorded at fair value. As of September 30, 2013, the Company held ARS with $24.3 million par value, all of which failed to settle at auction. The majority of these investments are of high credit quality with AAA credit ratings and are primarily student loan securities supported by guarantees from the FFELP of the U.S. Department of Education. The Company may not be able to liquidate and fully recover the carrying value of the ARS in the near term. As a result, these securities are classified as long-term investments in the Company’s condensed consolidated balance sheet as of September 30, 2013. While the Company continues to earn interest on its ARS investments at the contractual rate, these investments are not currently actively trading and therefore do not currently have a readily determinable market value. The estimated fair value of the ARS no longer approximates par value. The Company used a discounted cash flow model to determine the estimated fair value of its investment in ARS as of September 30, 2013. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, credit spreads, timing and amount of contractual cash flows, liquidity risk premiums, expected holding periods and default risk. The Company updates the discounted cash flow model on a quarterly basis to reflect any changes in the assumptions used in the model and settlements of ARS investments that occurred during the period. The only significant unobservable input in the discounted cash flow model is the discount rate. The discount rate used represents the Company's estimate of the yield expected by a market participant from the ARS investments. The weighted average discount rate used in the discounted cash flow model as of September 30, 2013 and December 31, 2012 was approximately 5.2% and 5.1%, respectively. Selecting another discount rate within the range used in the discounted cash flow model would not result in a significant change to the fair value of the ARS.
5. | FAIR VALUE — (CONTINUED)
Based on this assessment of fair value, as of September 30, 2013, the Company determined there was a decline in the fair value of its ARS investments of approximately $1.8 million. The decline was deemed to be a temporary impairment and recorded as an unrealized loss in accumulated other comprehensive loss in stockholders’ equity. In addition, while a majority of the ARS are currently rated AAA, if the issuers are unable to successfully close future auctions and/or their credit ratings deteriorate, the Company may be required to record additional unrealized losses in accumulated other comprehensive loss or an other-than-temporary impairment charge to earnings on these investments. As of September 30, 2013, the Company held Level 3 liabilities for deferred consideration that it acquired as a result of the April 30, 2012 acquisition of LoopNet. The deferred consideration totaled $1.2 million as of September 30, 2013 and included potential deferred cash payments in connection with acquisitions LoopNet completed in 2010 including: (i) potential deferred cash payments due to the sellers of LandsofAmerica.com, LLC ("LandsofAmerica") on March 31, 2014 based on LandsofAmerica's achievement of financial and operational milestones, resulting in undiscounted deferred consideration as of September 30, 2013 of approximately $1.0 million; and (ii) potential deferred cash payments due to the sellers of Reaction Corp. ("Reaction Web") on March 31, 2014 based on Reaction Web's achievement of revenue milestones, resulting in undiscounted deferred consideration as of September 30, 2013 of approximately $344,000. On March 28, 2013, the Company made a payment of $1.0 million to the sellers of LandsofAmerica for the achievement of financial and operational milestones in 2012 and a payment of approximately $344,000 to the sellers of Reaction Web for the achievement of revenue milestones in 2012. The following tables summarize changes in fair value of the Company’s Level 3 liabilities for the three and nine months ended September 30, 2013 and 2012 (in thousands):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2013 |  | 2012 |  | 2013 |  | 2012
Balance at beginning of period | $ | 1,146 |  |  | $ | 2,072 |  |  | $ | 2,304 |  |  | $ | — |
Deferred consideration upon acquisition | — |  |  | — |  |  | — |  |  | 2,011 |
Accretion for period | 62 |  |  | 113 |  |  | 248 |  |  | 174 |
Payments made during period | — |  |  | — |  |  | (1,344 | ) |  | — |
Balance at end of period | $ | 1,208 |  |  | $ | 2,185 |  |  | $ | 1,208 |  |  | $ | 2,185 |
The following table summarizes changes in fair value of the Company’s Level 3 liabilities from December 31, 2011 to September 30, 2013 (in thousands):
| Deferred Consideration
Balance at December 31, 2011 | $ | — |
Deferred consideration upon acquisition | 2,011 |
Accretion for 2012 | 293 |
Balance at December 31, 2012 | 2,304 |
Accretion from January 1, 2013 – September 30, 2013 | 248 |
Payments made from January 1, 2013 – September 30, 2013 | (1,344 | )
Balance at September 30, 2013 | $ | 1,208 |
The Company used a discounted cash flow model to determine the estimated fair value of its Level 3 liabilities. The assumptions used in preparing the discounted cash flow model include the discount rate and probabilities for completion of financial and operational milestones.
5. | FAIR VALUE — (CONTINUED)
The only significant unobservable input in the discounted cash flow model used to determine the estimated fair value of the Company's Level 3 liabilities is the discount rate. The discount rate used represents LoopNet's cost of equity at the time of each acquisition plus a margin for counterparty risk. The weighted average discount rate used as of September 30, 2013 and December 31, 2012 was approximately 23.5%. Selecting another discount rate within the range used in the discounted cash flow model would not result in a significant change to the fair value of the deferred consideration. Concentration of Credit Risk and Financial Instruments The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require that its customers’ obligations to the Company be secured. The Company maintains reserves for estimated inherent credit losses, and such losses have been within management’s expectations. The large size and widespread nature of the Company’s customer base and the Company’s lack of dependence on any individual customer mitigates the risk of nonpayment of the Company’s accounts receivable. The carrying amount of the accounts receivable approximates the net realizable value. The carrying value of accounts receivable, accounts payable, accrued expenses, and long-term debt approximates fair value.

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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 Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: 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=28364263&loc=d3e13433-108611 Reference 3: 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 4: 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=25499696&loc=d3e19207-110258 Reference 5: 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 6: 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=28364263&loc=d3e13504-108611 + Details
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