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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2012
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements. Our financial assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2012 and December 31, 2011, consisted of the following (in thousands):
|  |  |  | Fair Value Measurements Using
|  | Total Fair |  | Quoted prices in |  | Significant other |  | Significant
|  | Value at |  | active markets |  | observable inputs |  | Unobservable inputs
Description |  | June 30, 2012 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets - Marketable securities |  | $ | 920 |  |  | $ | 920 |  |  | $ | — |  |  | $ | — |
Liabilities - Contingent consideration liability |  | 6,738 |  |  | — |  |  | — |  |  | 6,738 |
|  |  |  | Fair Value Measurements Using
|  | Total Fair |  | Quoted prices in |  | Significant other |  | Significant
|  | Value at |  | active markets |  | observable inputs |  | Unobservable inputs
Description |  | December 31, 2011 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Assets - Marketable securities |  | $ | 2,798 |  |  | $ | 2,798 |  |  | $ | — |  |  | $ | — |
Liabilities - Contingent consideration liability |  | 1,290 |  |  | — |  |  | — |  |  | 1,290 |
Our marketable securities, which consist entirely of available-for-sale equity securities, are valued using market prices in active markets. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Certain of our business combinations involve the payment of future contingent consideration based on either a percentage of future related product sales or upon attaining a specified future revenue milestone. See Note 5 for further information regarding these acquisitions. The fair value of the contingent consideration is re-measured at the estimated fair value at each reporting period with the change in fair value recognized within selling, general, and administrative expenses in the accompanying consolidated statements of income. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent liability during the three and six months ended June 30, 2012, were as follows (in thousands):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2012 |  | 2012
Beginning balance | 6,319 |  |  | $ | 1,290 |
Contingent consideration liability recorded as the result of acquisitions (see Note 5) | — |  |  | 5,000 |
Fair value adjustments recorded during the period | 431 |  |  | 460 |
Contingent payments made | (12 | ) |  | (12 | )
Ending balance | $ | 6,738 |  |  | $ | 6,738 |
The recurring Level 3 measurement of our contingent consideration liability includes the following significant unobservable inputs (amount in thousands):
Contingent consideration liability |  | Fair value at June 30, 2012 |  | Valuation technique |  | Unobservable inputs |  | Range
Revenue-based payments |  | $ | 6,738 |  |  | Discounted Cash Flow |  | Discount rate |  | 10% - 14.5%
|  |  |  |  |  | Probability of milestone payment |  | 90%
|  |  |  |  |  | Projected year of payments |  | 2012-2028
The contingent consideration liability is re-measured to fair value each reporting period using projected revenues, discount rates, probability of payment for milestone payments, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and long-range strategic plans. Increases (decreases) in discount rates and the time to payment may result in lower (higher) fair value measurements. A decrease in the probability of any milestone payment may result in lower fair value measurements. An increase (decrease) in either the discount rate or the time to payment, in isolation, may result in a significantly lower (higher) fair value measurement. Our determination of the fair value of the contingent consideration liability could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to selling, general, and administrative expenses in our consolidated statements of income. As of June 30, 2012, approximately $6.1 million was reflected in other long-term obligations and $626,000 was reflected in accrued expenses in our consolidated balance sheet. As of December 31, 2011, the entire balance was reflected in other long-term obligations in our consolidated balance sheet. The cash paid to settle the contingent consideration liability recognized at fair value as of the acquisition date (including measurement-period adjustments) has been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. During both the three and six-month periods ended June 30, 2012, we had losses of approximately $10,000, compared to losses of approximately $3,000 and $17,000 for the corresponding three and six-month periods ended June 30, 2011, respectively, related to the measurement of non-financial assets at fair value on a non-recurring basis subsequent to their initial recognition. The carrying amount of cash and cash equivalents, receivables, and trade payables approximates fair value because of the immediate, short-term maturity of these financial instruments. The carrying amount of long-term debt approximates fair value, as determined by borrowing rates estimated to be available to us for debt with similar terms and conditions. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents (Level 1).

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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 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: 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. Reference 3: 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=6947722&loc=d3e13433-108611 Reference 4: 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. 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Reference 10: 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=6925170&loc=d3e19207-110258 Reference 11: 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 12: 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. 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