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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2019
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 4. Fair Value Measurements Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:
| Level 1: | Observable inputs such as quoted prices in active markets;
| Level 2: | Inputs include quoted prices for similar instruments in active markets and/or quoted prices for identical or similar instruments in markets that are not active near the measurement date; and
| Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
We classify our cash equivalents and available-for-sale investments as Level 1 or Level 2 within the fair value hierarchy. The fair value of our investment grade corporate debt securities is determined using proprietary valuation models and analytical tools, which utilize market pricing or prices for similar instruments that are both objective and publicly available, such as matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and offers. The fair value of our investments in restricted equity securities is determined using an option pricing valuation model and classified as Level 3 within the fair value hierarchy. The most significant assumptions within the option pricing valuation model are the term of the restrictions and the stock price volatility, which is based upon the historical volatility of similar companies. Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement. The $517.5 million of 2.25% convertible senior notes due May 15, 2024 (2024 Notes) were recorded at the estimated value of a similar non-convertible instrument on the date of issuance and accretes to the face value of the 2024 Notes over their 7-year term. The fair value of the 2024 Notes, estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $708.7 million at September 30, 2019 and $616.1 million at December 31, 2018. We did not reclassify any investments between levels in the fair value hierarchy during the nine months ended September 30, 2019 and 2018. Investments, which were measured at fair value on a recurring basis using the inputs described above, consisted of the following:
|  | blank |  |  | Fair Value Measurements Using |
(in thousands) |  | Carrying Value |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
September 30, 2019: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Classified as current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and money market funds |  | $ | 166,637 |  |  | $ | 166,637 |  |  | $ | — |  |  | $ | — |
Certificates of deposit |  |  | 463 |  |  |  | 463 |  |  |  | — |  |  |  | — |
Commercial paper |  |  | 135,197 |  |  |  | — |  |  |  | 135,197 |  |  |  | — |
Securities of government-sponsored entities |  |  | 112,961 |  |  |  | — |  |  |  | 112,961 |  |  |  | — |
Corporate debt securities |  |  | 255,367 |  |  |  | — |  |  |  | 255,367 |  |  |  | — |
Subtotal |  |  | 670,625 |  |  |  | 167,100 |  |  |  | 503,525 |  |  |  | — |
Classified as long-term assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and money market funds |  |  | 1,500 |  |  |  | 1,500 |  |  |  | — |  |  |  | — |
Certificates of deposit |  |  | 3,206 |  |  |  | 3,206 |  |  |  | — |  |  |  | — |
Securities of government-sponsored entities |  |  | 45,209 |  |  |  | — |  |  |  | 45,209 |  |  |  | — |
Corporate debt securities |  |  | 159,584 |  |  |  | — |  |  |  | 159,584 |  |  |  | — |
Restricted equity securities |  |  | 48,915 |  |  |  | — |  |  |  | — |  |  |  | 48,915 |
Total |  |  | 929,039 |  |  |  | 171,806 |  |  |  | 708,318 |  |  |  | 48,915 |
Less cash, cash equivalents and restricted cash |  |  | (171,806 | ) |  |  | (171,806 | ) |  |  | — |  |  |  | — |
Total investments |  | $ | 757,233 |  |  | $ | — |  |  | $ | 708,318 |  |  | $ | 48,915 |
blank |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2018: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Classified as current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and money market funds |  | $ | 141,714 |  |  | $ | 141,714 |  |  | $ | — |  |  | $ | — |
Commercial paper |  |  | 94,572 |  |  |  | — |  |  |  | 94,572 |  |  |  | — |
Securities of government-sponsored entities |  |  | 20,840 |  |  |  | — |  |  |  | 20,840 |  |  |  | — |
Corporate debt securities |  |  | 393,787 |  |  |  | — |  |  |  | 393,787 |  |  |  | — |
Subtotal |  |  | 650,913 |  |  |  | 141,714 |  |  |  | 509,199 |  |  |  | — |
Classified as long-term assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and money market funds |  |  | 1,500 |  |  |  | 1,500 |  |  |  | — |  |  |  | — |
Certificates of deposit |  |  | 3,977 |  |  |  | 3,977 |  |  |  | — |  |  |  | — |
Securities of government-sponsored entities |  |  | 64,837 |  |  |  | — |  |  |  | 64,837 |  |  |  | — |
Corporate debt securities |  |  | 151,191 |  |  |  | — |  |  |  | 151,191 |  |  |  | — |
Total |  |  | 872,418 |  |  |  | 147,191 |  |  |  | 725,227 |  |  |  | — |
Less cash, cash equivalents and restricted cash |  |  | (147,191 | ) |  |  | (147,191 | ) |  |  | — |  |  |  | — |
Total investments |  | $ | 725,227 |  |  | $ | — |  |  | $ | 725,227 |  |  | $ | — |
The following table presents a reconciliation of our investment in restricted equity securities, which is measured at fair value on a recurring basis using the significant unobservable inputs (Level 3) described above.
(in thousands) |  |  |
Balance at December 31, 2018 |  | $ | — |
Investment in restricted equity securities |  |  | 54,720 |
Net unrealized gain recognized on restricted equity securities during the period |  |  | 1,680 |
Balance at March 31, 2019 |  |  | 56,400 |
Net unrealized gain recognized on restricted equity securities during the period |  |  | 20,965 |
Balance at June 30, 2019 |  |  | 77,365 |
Net unrealized loss recognized on restricted equity securities during the period |  |  | (28,450 | )
Balance at September 30, 2019 |  | $ | 48,915 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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