Fair Value Measurements

12 Months Ended

Dec. 31, 2014

15. Fair Value Measurements

Our assets and liabilities subject to fair value measurements on a recurring basis and the required disclosures are:

	Fair		Fair Value Measurements
	Value		Using Fair Value Hierarchy
As of December 31, 2014	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	26,922	$	26,922	$	—	$	—
Corporate bonds		21,704		21,704		—		—
Mortgage-backed and asset-backed securities		1,223		1,223		—		—
Agency bonds		299		299		—		—
Marketable securities		23,226		23,226		—		—
Deferred compensation plan investments		1,282		1,282		—		—
Assets at fair value	$	51,430	$	51,430	$	—	$	—
Liabilities:
Interest rate swap	$	240		—	$	240		—
Deferred compensation		873		873		—		—
Liabilities at fair value	$	1,113	$	873	$	240	$	—

	Fair		Fair Value Measurements
	Value		Using Fair Value Hierarchy
As of December 31, 2013	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	41,904	$	41,904	$	—	$	—
Corporate bonds		18,833		18,833		—		—
Mortgage-backed and asset-backed securities		1,171		1,171		—		—
Marketable securities		20,004		20,004		—		—
Deferred compensation plan investments		1,003		1,003		—		—
Assets at fair value	$	62,911	$	62,911	$	—	$	—
Liabilities:
Deferred compensation	$	637	$	637	$	—	$	—
Contractual acquisition earn-outs		369		—		—		369
Liabilities at fair value	$	1,006	$	637	$	—	$	369

The carrying values of financial instruments, including accounts receivable, unbilled receivables, and accounts payable, approximate their fair values due to their short-term maturities.

We hold marketable securities that are investment grade and are classified as available-for-sale. The securities include corporate bonds, agency bonds, mortgage and asset backed securities that are carried at fair market value based on quoted market prices; see Note 5.

We hold trading securities as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans. The funds held are all managed by a third party and include fixed income funds, equity securities, and money market accounts, or other investments for which there is an active quoted market. The related deferred compensation liabilities are valued based on the underlying investment selections in each participant’s account.

The interest rate swap was valued based on forward curves observable in the market, using Level 2 inputs; see Note 12. The effectiveness of the interest rate swap is computed by comparing the present value of the cumulative change in the expected future cash flows of the variable leg of the swap and the present value of the cumulative change in the expected future variable interest payments designated in the hedging relationship.

The contractual acquisition earn-outs were part of the consideration paid for the 2012 microDATA acquisition. The fair value of the earn-outs was based on probability-weighted payouts under different scenarios, discounted using a discount rate commensurate with the risk.

The following table summarizes the changes in the contractual acquisition earn-outs measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2014:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Balance at December 31, 2012	$	508
Fair value adjustment recognized in earnings		(139	)
Balance at December 31, 2013		369
Fair value adjustment recognized in earnings		(101	)
Settlements		(268	)
Balance at December 31, 2014	$	—

Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, and goodwill. These items are recognized at fair value when they are considered to be other than temporarily impaired using significant unobservable inputs (Level 3). In 2013, Our Platforms and Applications reporting unit’s goodwill and long-lived assets with a carrying value of $65,406 were written down to their estimated fair value of $33,429, resulting in an impairment charge of $31,977.

Long-term debt, excluding leases, consists of borrowings under a commercial bank term loan agreement, 7.75% convertible senior notes, and promissory notes; see Note 12. The long-term debt, excluding leases, is currently reported at the borrowed amount outstanding. At December 31, 2014, the estimated fair value of the long-term debt, excluding leases, was approximately $123,000 versus a carrying value of $124,567. At December 31, 2013, the fair value of long-term debt, including 4.5% convertible senior notes and excluding leases, was approximately $133,000 versus a carrying value of $135,455. The estimated fair value is based on a market approach using quoted market prices or current market rates for similar debt with approximately the same remaining maturities, where possible.

There were no transfers in or out of Level 1, 2, or 3 (as defined in Note 1) during the year ended December 31, 2014.

- 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.

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