Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
NOTE 4—FAIR VALUE MEASUREMENTS
The Company currently has various financial instruments carried at fair value, such as marketable securities, derivatives and contingent consideration, but does not currently have nonfinancial assets and nonfinancial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from all levels of the fair value hierarchy as defined in the FASB guidance for fair values. For this categorization, only inputs that are significant to the fair value are considered. The three levels are defined as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.) and inputs that are derived principally from or corroborated by observable market data by correlation or other means (i.e., market corroborated inputs).
Level 3—Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data.
In accordance with the fair value hierarchy described above, the following table shows the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis, which are classified on the balance sheets as cash and cash equivalents, other current assets, other long-term assets, other current liabilities and other long-term liabilities:
 
Fair Value Measurements 
 at June 30, 2013
 
Fair Value Measurements 
 at December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
(in thousands)
 
 
 
 
 
(in thousands)
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents
$
227,138

 
$
—

 
$
—

 
$
227,138

 
$
61,996

 
$
—

 
$
—

 
$
61,996

Forward currency contracts
—

 
3,509

 
—

 
3,509

 
—

 
81

 
—

 
81

Stock options
—

 
—

 
17

 
17

 
—

 
—

 
204

 
204

Total
$
227,138

 
$
3,509

 
$
17

 
$
230,664

 
$
61,996

 
$
81

 
$
204

 
$
62,281

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
—

 
$
1,980

 
$
—

 
$
1,980

 
$
—

 
$
2,811

 
$
—

 
$
2,811

Forward currency contracts
—

 
228

 
—

 
228

 
—

 
625

 
—

 
625

Contingent consideration
—

 
—

 
5,806

 
5,806

 
—

 
—

 
6,718

 
6,718

Total
$
—

 
$
2,208

 
$
5,806

 
$
8,014

 
$
—

 
$
3,436

 
$
6,718

 
$
10,154


Cash equivalents consist of money market funds. Fair values for cash equivalents are based on quoted prices in an active market. Fair values for forward currency contracts are based on observable market transactions of spot and forward rates. Fair values for the interest rate swaps and the interest rate cap are based on inputs corroborated by observable market data with similar tenors. The fair value of the interest rate cap, which expired on June 30, 2013, was de minimis at December 31, 2012.
The Company has certain contingent consideration obligations related to acquisitions which are measured at fair value using Level 3 inputs. The amounts due to the sellers are based on the achievement of agreed-upon financial performance metrics by the acquired companies where the contingent obligation is either earned or not earned. The Company records the liability at the time of the acquisition based on management’s best estimates of the future results of the acquired companies compared to the agreed-upon metrics. Subsequent to the date of acquisition, the Company updates the original valuation to reflect current projections of future results of the acquired companies and the passage of time. Accretion of, and changes in the valuations of, contingent consideration are reported in acquisition transaction expenses. See Note 5—Commitments and Contingent Liabilities for additional information related to the contingent payments.
The Company has stock options in a company that became publicly-traded in the third quarter of 2011 which are measured at fair value using Level 3 inputs. The stock options were received as consideration in connection with a licensing agreement entered into by a subsidiary of the Company and became fully-vested in the second quarter of 2011. The Company has recorded an asset for these options which is valued using the Black-Scholes option pricing model. The Company recorded revenue based on the valuation of the options as of the measurement date, which was the vesting date. The changes in the valuation after the measurement date are recorded in other expense (income), net.
During the second quarter of 2012, the Company recorded impairments related to definite-lived intangible assets of $13.9 million, as a component of depreciation and amortization. The impairment charges primarily related to intangible assets for revenue-generating contracts and client/vendor relationships in the Concerts segment. It was determined that these assets were impaired since the estimated undiscounted cash flows associated with these assets were less than their carrying value. These cash flows were calculated using operating cash flows which were discounted to approximate fair value. The operating cash flows for these non-recurring fair value measurements are considered Level 3 inputs. There were no impairments related to definite-lived intangible assets recorded for the six months ended June 30, 2013.
Due to their short maturity, the carrying amounts of accounts receivable, accounts payable and accrued expenses approximated their fair values at June 30, 2013 and December 31, 2012.
The Company’s outstanding debt held by third-party financial institutions is carried at cost, adjusted for discounts. The Company’s debt is not publicly-traded and the carrying amounts typically approximate fair value for the Company’s debt that accrues interest at a variable rate, which are considered to be Level 2 inputs. The estimated fair values of the 7% senior notes, the 8.125% senior notes and the 2.875% convertible senior notes were $238.4 million, $266.4 million and $222.5 million at June 30, 2013, respectively. The estimated fair values of the 7% senior notes, the 8.125% senior notes and the 2.875% convertible senior notes were $236.3 million, $273.4 million and $219.4 million at December 31, 2012, respectively. The estimated fair value of the Company’s third-party fixed-rate debt is based on quoted market prices in active markets for the same or similar debt, which are considered to be Level 2 inputs. The Company has fixed rate debt held by noncontrolling interest partners with a face value of $23.4 million and $24.5 million at June 30, 2013 and December 31, 2012, respectively. The Company is unable to determine the fair value of this debt.