Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2022

Fair Value of Financial Instruments and Contingent Consideration

Fair Value of Financial Instruments

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 unrelated market participants.

The Company reports the fair value of assets and liabilities using a three level measurement hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy consists of the following three levels:

•Level 1—Valuations based on unadjusted quoted prices in active markets that are accessible at measurement date for identical assets.

•Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and model-based valuations in which all significant inputs are observable in the market, either directly or indirectly (e.g., interest rates; yield curves).

•Level 3—Valuations using significant inputs that are unobservable in the market and inputs that reflect the Company’s own assumptions. These are based on the best information available, including the Company’s own data.

The fair value of the restricted marketable securities which are classified as Level 2 financial assets are recorded in Other assets on the condensed consolidated balance sheets. There have been no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy.

Financial Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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


			Fair Value Measurements at September 30, 2022 (unaudited)
	Total Fair Value at September 30, 2022		Level 1		Level 2		Level 3
Assets:	(unaudited)
Cash and cash equivalents
Cash	$	111,087	$	111,087	$	—	$	—
Money market funds	405		405		—		—
Marketable securities
Corporate and municipal debt securities	280,297		—		280,297		—
Long term marketable securities
Corporate and municipal debt securities	131,937		—		131,937		—

Other noncurrent assets
Marketable securities - restricted (SERP)	464		9		455		—
Total assets at fair value	$	524,190	$	111,501	$	412,689	$	—
Liabilities:
Contingent consideration	$	57,371	$	—	$	—	$	57,371
Total liabilities at fair value	$	57,371	$	—	$	—	$	57,371


			Fair Value Measurements at December 31, 2021
	Total Fair Value at December 31, 2021		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents
Cash	$	148,863	$	148,863	$	—	$	—
Money market funds	54,571		54,571		—		—
Marketable securities
Corporate and municipal debt securities	136,246		251		135,995		—

Long term marketable securities
Corporate and municipal debt securities	119,166		—		119,166		—

Other noncurrent assets
Marketable securities - restricted (SERP)	630		7		623		—
Total assets at fair value	$	459,476	$	203,692	$	255,784	$	—
Liabilities:
Contingent consideration	$	80,477	$	—	$	—	$	80,477
Total liabilities at fair value	$	80,477	$	—	$	—	$	80,477

Other Financial Instruments

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

Financial Liabilities Recorded at Carrying Value

The following table sets forth the carrying value and fair value of the Company's financial liabilities that are not carried at fair value (dollars in thousands):


	September 30, 2022				December 31, 2021
	(unaudited)
	Carrying Value		Fair Value (Level 2)		Carrying Value		Fair Value (Level 2)
2023 Notes	$	401,438	$	392,438	$	379,252	$	400,236

The fair value has been estimated based on actual trading information, and quoted prices, both provided by bond traders. As discussed in Note 2, the Company adopted ASU 2020-06 on January 1, 2022 using the modified retrospective method of transition resulting in an increase in the carrying amount of the debt by $20.6 million as of the adoption date. Refer to Note 2, Summary of Significant Accounting Policies, for further discussion of the accounting standard adoption.

- 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 + Details