INVESTMENTS

A summary of the Company’s short-term investments at December 31, 2014 and 2013 was as follows (in thousands):



	December 31, 2014									December 31, 2013
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Corporate Debt Securities	$	43,327	$	3	$	(68	)	$	43,262	$	36,947	$	10	$	—		$	36,957
Commercial Paper	14,975		5		(3		)	14,977		13,991		2		—			13,993
Municipal Securities	5,191		3		—			5,194		13,858		—		(2		)	13,856
U.S. Government Agencies Securities	2,000		—		(5		)	1,995		—		—		—			—
Total	$	65,493	$	11	$	(76	)	$	65,428	$	64,796	$	12	$	(2	)	$	64,806

At December 31, 2014, the Company had no short-term investments that have been in a significant continuous unrealized loss position for more than twelve months.

A summary of the Company’s long-term investments at December 31, 2014 and December 31, 2013 was as follows (in thousands):



	December 31, 2014									December 31, 2013
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Auction Rate Notes	$	1,500	$	—	$	(64	)	$	1,436	$	4,700	$	—	$	(505	)	$	4,195

During the year ended December 31, 2014, the Company sold $3.2 million of auction-rate notes at par value. At December 31, 2014, the Company had remaining $1.5 million principal value of auction-rate notes, the fair value of which has been measured using Level 3 inputs. Auction-rate notes are securities that are structured with short-term interest rate reset dates of generally less than ninety days, but with contractual maturities that can be in excess of ten years. At the end of each reset period, which occurs every seven or twenty eight days for the securities held by the Company, investors can sell or continue to hold the securities at par. As a result of sell orders exceeding buy orders, auctions for the student loan-backed notes held by the Company have failed at December 31, 2014. To date, the Company has collected all interest receivable on all of its auction-rate notes when due and expects to continue to do so in the future. The principal associated with failed auctions will not be accessible until a successful auction occurs, a buyer is found outside of the auction process, the issuers redeem the securities, or the issuers repay principal over time from cash flows prior to final maturity or final payments come due according to a contractual maturity of 33 years. The Company has classified all auction-rate notes as long-term investments at December 31, 2014 and 2013. In the event of a failed auction, the notes bear interest at a predetermined maximum rate based on the credit rating of notes as determined by one or more nationally recognized statistical rating organizations. For the auction-rate notes held by the Company at December 31, 2014, the maximum interest rate is generally one month LIBOR plus 1.5% based on the notes’ rating as of that date.

To determine the fair value of financial instruments, the Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). The three levels of the fair value hierarchy are described below:


•	Level 1 - Quoted prices in active markets for identical assets or liabilities.


•	Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices 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.


•	Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company's short-term investments are classified within Level 2 of the fair value hierarchy because they are valued using quoted market prices for similar securities, broker or dealer quotations, or other observable inputs.

The types of instruments valued based on quoted market prices in active markets include money market funds. Such instruments are generally classified within Level 1 of the fair value hierarchy. The types of instruments valued based on other observable inputs include commercial paper, corporate debt securities, municipal securities and U.S. government agencies securities. Such instruments are generally classified within Level 2 of the fair value hierarchy. The types of instruments valued based on unobservable inputs consist of the auction-rate notes held by the Company. Such instruments are generally classified within Level 3 of the fair value hierarchy. The Company estimated the fair value of these auction-rate notes using a combination of observable transactions for similar securities and a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions include estimates for interest rates, timing and amount of cash flows and expected holding periods of the auction-rate notes. Based on this assessment of fair value, at December 31, 2014, the Company determined there was a cumulative decline in the fair value of its auction-rate notes and recorded less than $0.1 million ($0.1 million pre-tax) temporary impairment of these securities to accumulated other comprehensive loss, a component of shareholders’ equity.

Financial assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):



	December 31, 2014
	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	4,725	$	—	$	—	$	4,725
Corporate Debt Securities (2)	—		43,262		—		43,262
Commercial Paper (2)	—		14,977		—		14,977
Municipal Securities (2)	—		5,194		—		5,194
U.S. Government Agencies Securities (2)	—		1,995		—		1,995
Auction-rate notes (3)	—		—		1,436		1,436
Total	$	4,725	$	65,428	$	1,436	$	71,589



	December 31, 2013
	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
Money Market Funds (1)	$	16,945	$	—	$	—	$	16,945
Corporate Debt Securities (2)	—		36,957		—		36,957
Commercial Paper (2)	—		13,993		—		13,993
Municipal Securities (2)	—		13,856		—		13,856
Auction-rate notes (3)	—		—		4,195		4,195
Total	$	16,945	$	64,806	$	4,195	$	85,946

__________

(1) Included in cash and cash equivalents

(2) Included in short-term investments

(3) Included in long-term investments

There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy.

For the year ended December 31, 2014, the changes in the Company’s Level 3 securities (consisting of auction-rate notes) were as follows (in thousands):



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Beginning balance, December 31, 2013	$	4,195
Transfers in and/or out of Level 3	—
Total unrealized gains, before tax, included in other comprehensive income	441
Sales	(3,200		)
Ending balance, December 31, 2014	$	1,436