FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2011

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

3.  FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

· Level 1—Quoted prices in active markets for identical assets or liabilities.

· Level 2—Observable inputs other than quoted prices included in Level 1, such as 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; or other inputs that are observable or can be corroborated by observable market data.

· 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. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

We have classified our assets and liabilities that are measured at fair value on a recurring basis (at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

The tables below set forth by level, assets and liabilities that were accounted for at fair value as of June 30, 2011 and December 31, 2010. The tables do not include cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):

	Fair Value Measurements at June 30, 2011
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Assets:
Cash equivalents	$	53,828	$	—	$	—	$	53,828
Liabilities:
Match Point earnout	$	—	$	—	$	1,754	$	1,754

	Fair Value Measurements at December 31, 2010
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value Measurements
Assets:
Cash equivalents	$	36,537	$	—	$	—	$	36,537
Equity securities—restricted stock	—		300		—		300
Put/call option on equity securities	—		200		—		200
Total	$	36,537	$	500	$	—	$	37,037
Liabilities:
Match Point earnout	$	—	$	—	$	1,602	$	1,602

Our cash equivalents consist of highly liquid money market funds. Fair values of our cash equivalents and equity securities—restricted stock were determined based upon market prices. The value of the put option, net of a call option, is based upon the Black-Scholes option pricing model using observable inputs.  In April 2011, we exercised our put option and received the combined recorded value of the equity securities—restricted stock and the put/call option on equity securities of $0.5 million.

The earnout was determined based upon our estimate of expected future Match Point revenues and the corresponding earnout levels achieved, discounted to their present value. The change in fair value has been recorded in cost of revenues in the accompanying consolidated statement of income.  The earnout liability is recorded net of a $1.0 million escrow deposit made. The following table provides a reconciliation of changes in the fair values of our Level 3 liabilities (in thousands):

	Match Point Earnout
Beginning balance, December 31, 2010	$	1,602
Change in fair value during the period	152
Ending balance, June 30, 2011	$	1,754