Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments

Fair Value of Financial Instruments

5.  Fair Value of Financial Instruments

Due to the short term nature of certain of our financial instruments, including cash and cash equivalents, accounts receivable, amounts due from related parties, accounts payable, and certain current liabilities, we believe that their historical cost approximated fair value.

We also held investments in marketable securities and derivative financial instruments that we assessed and reported on our balance sheet at fair value as of March 31, 2013 and December 31, 2012.  We use a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation.  The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

· Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets.  Level 1 assets include investments in trading securities, primarily asset-backed securities.

· Level 2 is defined as observable inputs other than Level 1 prices.  These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Our Level 2 assets and liabilities include derivative financial instruments with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

· Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.  We had no Level 3 investments as of March 31, 2013 or December 31, 2012.

The tables below set forth, by level, our financial assets and liabilities that are recorded at fair value in the accompanying condensed consolidated balance sheets (in thousands).  As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Fair Value at March 31, 2013
Description	Level 1		Level 2		Total
Assets
Money market funds(1)	$	145,400	$	—	$	145,400
Derivative financial instruments	$	—	$	27,461	$	27,461
Investments in marketable securities	$	—	$	80,473	$	80,473

	Fair Value at December 31, 2012
Description	Level 1		Level 2		Total
Assets
Money market funds(1)	$	145,422	$	—	$	145,422
Derivative financial instruments	$	—	$	13,785	$	13,785
Investments in marketable securities	$	—	$	80,341	$	80,341

(1) Included in cash and cash equivalents in the consolidated balance sheets along with $73.2 million and $52.3 million of demand deposits at March 31, 2013 and December 31, 2012, respectively.

We did not have any transfers between levels during the three months ended March 31, 2013.  Our policy is to value all transfers between levels using the beginning of period valuation.