Fair value measurement

6 Months Ended

Jun. 30, 2013

Fair value measurement

Fair value measurement

6. Fair value measurement

ASC 820 establishes a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require us to use present value and other valuation techniques in the determination of fair value (Level 3). The following table sets forth our financial assets that are measured at fair value on a recurring basis:

At June 30, 2013	Level 1		Level 2		Level 3			Total
Assets:
Cash equivalents	$	41,165	$	—	$	—		$	41,165
Marketable securities	—		39,426		—			39,426
Restricted cash	30		—		—			30
Total assets	$	41,195	$	39,426	$	—		$	80,621
Liabilities:
Contingent consideration	$	—	$	—	$	(1,329	)	$	(1,329	)
Total liabilities	$	—	$	—	$	(1,329	)	$	(1,329	)

At December 31, 2012	Level 1		Level 2		Total
Assets:
Cash equivalents	$	39,001	$	2,460	$	41,461
Marketable securities	—		41,558		41,558
Restricted cash	30		—		30
Total assets	$	39,031	$	44,018	$	83,049

Our marketable securities available-for-sale utilize Level 2 inputs and consist primarily of corporate securities which include commercial paper and corporate debt instruments including notes issued by foreign or domestic corporations which pay in U.S. dollars and carry a rating of A or better. The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs.  Due to variations in trading volumes and the lack of quoted market prices in active markets, our fixed maturities are classified as Level 2 securities. The fair value of our fixed maturity marketable securities available-for-sale is derived through the use of a third party pricing source or recent reported trades for identical or similar securities, making adjustments through the reporting date based upon available market observable data.

The Company used the income approach to value the contingent consideration as of June 30, 2013. The contingent consideration used a discounted cash flow method with probability weighted cash flows and a discount rate of 50.5%. The following table presents a reconciliation of the beginning and ending amounts related to the fair value of contingent consideration for the Endeka acquisition, categorized as Level 3:

Beginning balance, January 1, 2013	$	—
Contingent consideration for acquisition of business	1,329
Change in fair value	—
Balance, June 30, 2013	$	1,329