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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2020

The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The Company reports assets and liabilities measured at fair value using a three level hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

•Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets. The Company has the ability to access these prices as of the measurement date.

Level 1 assets include: cash held at banks; certificates of deposit; money market funds; investment grade corporate debt securities and U.S. government agency and municipal debt securities.

•Level 2—Level 2 securities are valued using third-party pricing sources that apply relevant inputs and data in their models to estimate fair value. Inputs are quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices but that are observable for the asset or liability (e.g., interest rates; yield curves); and inputs that are derived principally from or corroborated by observable market data, by correlation, or by other means (i.e., market corroborated inputs).

Level 2 assets include: investment grade corporate debt securities, U.S. government agency and municipal debt securities; other fixed income securities; and SERP (Supplemental Executive Retirement Plan) assets. The fair

value of the restricted marketable securities is recorded in Other assets on the condensed consolidated balance sheets.

•Level 3—Unobservable inputs that reflect the Company’s own assumptions. These are based on the best information available, including the Company’s own data.

There were no level 3 assets as of March 31, 2020 or December 31, 2019.

Financial Assets

The Company’s financial assets that are required to be measured at fair value on a recurring basis are as follows (dollars in thousands):


			Fair Value Measurements at March 31, 2020 (unaudited)
	Total Fair Value at March 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	19,911	$	19,911	$	—
Money market funds	205,856		205,856
Marketable securities
Corporate debt securities	174,939		—		174,939
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	524,683		255		524,428
U.S. government agency debt securities	10,029		—		10,029
Other noncurrent assets
Marketable securities - restricted (SERP)	342		8		334
Total assets at fair value	$	935,925	$	226,030	$	709,895


			Fair Value Measurements at December 31, 2019 (unaudited)
	Total Fair Value at December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash and cash equivalents
Cash	$	78,912	$	78,912	$	—
Money market funds	102,469		102,469		—
Marketable securities
Corporate debt securities	165,527		—		165,527
Municipal debt securities	165		—		165
Long term marketable securities
Corporate debt securities	571,828		254		571,574
U.S. government agency and municipal debt securities	19,945		—		19,945
Other noncurrent assets
Marketable securities - restricted (SERP)	418		3		415
Total assets at fair value	$	939,264	$	181,638	$	757,626

The carrying amounts of other financial instruments, including accounts receivable, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

Unrestricted available-for-sale marketable securities held by the Company are as follows, (dollars in thousands):


	March 31, 2020		December 31, 2019
	(unaudited)
Corporate and U.S. government agency and municipal debt securities
Amortized cost	$	710,072	$	747,598
Gross unrealized gains	5,362		10,031
Gross unrealized losses	(5,618)		(164)
Total fair value	$	709,816	$	757,465

The contractual maturities of the unrestricted available-for-sale marketable securities held by the Company are as follows, (dollars in thousands):


	March 31, 2020
	(unaudited)
Less than 1 year	$	175,104
1 year to 2 years	181,141
2 years to 3 years	199,207
3 years to 4 years	154,364
Greater than 4 years	—
Total	$	709,816

As of March 31, 2020, there was no impairment due to credit loss on any available-for-sale marketable securities.

Financial Liabilities

The following table sets forth the Company’s financial liabilities that are not carried at fair value, (dollars in thousands):


	March 31, 2020						December 31, 2019
	(unaudited)
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
2023 Notes	$	349,232	$	328,038	$	345,170	$	366,023

The fair value is estimated based on actual trading information, as well as quoted prices provided by bond traders.

- 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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