Note 3 - Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

All of our financial instruments are recognized in our consolidated balance sheets. Carrying values approximate fair value of most financial assets and liabilities. Investments and restricted cash and investments are recorded at market value. The interest rates on our investments approximate current market rates for these types of investments.

In determining the fair value of our financial assets, the Company predominately uses the market approach. In determining the fair value of all its corporate bonds, mortgage backed securities, U.S. treasuries, U.S. government agency securities, commercial paper, money market funds, municipal bonds, and asset backed securities, the Company utilizes non-binding quotes provided by our investment brokers.

Factors used in determining the fair value of our financial assets and liabilities are summarized into three levels as established in the fair value hierarchy framework. The three levels of the fair value hierarchy are described below.

Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 – Inputs to the valuation methodology include:

•

Quoted prices for similar assets or liabilities in active markets;

•

Quoted prices for identical or similar assets or liabilities in inactive markets;

•

Inputs other than quoted prices that are observable for the asset or liability;

•

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

In determining the fair value measurement of our financial assets, the fair value measurement level within the hierarchy is based on the lowest level input and is applied to each financial asset. Valuation techniques are used to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table summarizes the Company’s investments at December 31, 2017 and 2016 measured at fair value on a recurring basis (in thousands):

	December 31, 2017							December 31, 2016
										Gross
			Gross							Unrealized
			Unrealized			Recorded				Gains			Recorded
	Cost		(Losses)			Basis		Cost		(Losses)			Basis
Current:
Cash equivalents:
Money market funds	$	121	$	—		$	121	$	1,943	$	—		$	1,943
U.S. treasuries		100		—			100		—		—			—
Total cash equivalents		221		—			221		1,943		—			1,943
Investments:
Corporate bonds		400		—			400		225		(1	)		224
U.S. treasuries		199		—			199		—		—			—
U.S. government agency securities		65		—			65		—		—			—
Municipal bonds		10		—			10		713		1			714
Certificates of deposit		—		—			—		4,737		—			4,737
Total current investments		674		—			674		5,675		—			5,675
Long term:
Investments:
Mortgage backed securities		577		(5	)		572		—		—			—
Corporate bonds		419		(2	)		417		567		(1	)		566
U.S. treasuries		202		(2	)		200		—		—			—
Asset backed securities		10		—			10		—		—			—
Municipal bonds		—		—			—		76		—			76
Total long term investments		1,208		(9	)		1,199		643		(1	)		642
Restricted cash and investments ⁽¹⁾:
Corporate bonds		184,808		(953	)		183,855		2,886		2			2,888
Mortgage backed securities		86,240		(595	)		85,645		—		—			—
U.S. treasuries		45,833		(143	)		45,690		834		—			834
U.S. government agency securities		38,168		(222	)		37,946		—		—			—
Commercial paper		18,973		—			18,973		—		—			—
Money market funds		16,018		—			16,018		284,593		—			284,593
Municipal bonds		472		(14	)		458		2,069		(6	)		2,063
Certificates of deposit		—		—			—		6,047		—			6,047
Total restricted cash and investments		390,512		(1,927	)		388,585		296,429		(4	)		296,425
Total investments	$	392,615	$	(1,936	)	$	390,679	$	304,690	$	(5	)	$	304,685

(1) Included in restricted cash and investments within the consolidated balance sheet as of December 31, 2017 is restricted cash and long term workers' compensation deposits of $6.3 million, which is excluded from the table above. Restricted cash and investments are classified as current and noncurrent on the balance sheet based on the nature of the restriction.

The following table summarizes the Company's financial assets measured at fair value on a recurring basis by fair value hierarchy level (in thousands):

	December 31, 2017											December 31, 2016
	Total											Total
	Recorded											Recorded
	Basis			Level 1		Level 2		Level 3		Other ⁽¹⁾		Basis		Level 1		Level 2		Level 3		Other ⁽¹⁾
Cash equivalents:
Money market funds	$	121	$		—	$	—	$	—	$	121	$	1,943	$	—	$	—	$	—	$	1,943
U.S. treasuries		100			—		100		—				—		—		—		—		—
Investments:
Corporate bonds		817			—		817		—		—		790		—		790		—		—
Mortgage backed securities		572			—		572		—		—		—		—		—		—		—
U.S. treasuries		399			—		399		—		—		—		—		—		—		—
U.S. government agency securities		65			—		65		—		—		—		—		—		—		—
Municipal bonds		10			—		10		—		—		790		—		790		—		—
Asset backed securities		10			—		10		—		—		—		—				—		—
Certificates of deposit		—			—		—		—		—		4,737		—		4,737		—		—
Restricted cash and investments:
Corporate bonds		183,855			—		183,855		—		—		2,888		—		2,888		—		—
Mortgage backed securities		85,645			—		85,645		—		—		—		—		—		—		—
U.S. treasuries		45,690			—		45,690		—		—		834		—		834		—		—
U.S. government agency securities		37,946			—		37,946		—		—		—		—		—		—		—
Commercial paper		18,973			—		18,973		—		—		—		—		—		—		—
Money market funds		16,018			—		—		—		16,018		284,593		—		—		—		284,593
Municipal bonds		458			—		458		—		—		2,063		—		2,063		—		—
Certificates of deposit		—			—		—		—		—		6,047		—		6,047		—		—
Total investments	$	390,679	$		—	$	374,540	$	—	$	16,139	$	304,685	$	—	$	18,149	$	—	$	286,536

(1) Investments in money market funds measured at fair value using the net asset value per share practical expedient are not subject to hierarchy level classification disclosure. The Company invests in money market funds that seek to maintain a stable net asset value. These investments include commingled funds that comprise high-quality short-term securities representing liquid debt and monetary instruments where the redemption value is likely to be the fair value. Redemption is permitted daily without written notice.