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Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2012
Fair Value of Financial Instruments  
Fair Value of Financial Instruments

14. Fair Value of Financial Instruments

 

The Company tests the pricing inputs by obtaining prices from two different sources for the same security on a sample of its portfolio. The Company has not adjusted the pricing inputs it has obtained. The following table presents the financial instruments that are carried at fair value and summarizes the valuation of its cash equivalents and marketable securities by the above pricing levels as of March 31, 2012 and December 31, 2011:

 

 

 

As of March 31, 2012

 

 

 

Total

 

Quoted
Market
Prices in
Active
Markets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

(In thousands)

 

Money market funds

 

$

172,588

 

$

172,588

 

$

—

 

$

—

 

Corporate notes, bonds and commercial paper

 

43,970

 

—

 

43,970

 

—

 

Total available-for-sale securities

 

$

216,558

 

$

172,588

 

$

43,970

 

$

—

 

 

 

 

As of December 31, 2011

 

 

 

Total

 

Quoted
 Market
 Prices in
 Active
 Markets
 (Level 1)

 

Significant
 Other
 Observable
 Inputs
 (Level 2)

 

Significant
 Unobservable
 Inputs
 (Level 3)

 

 

 

(In thousands)

 

Money market funds

 

$

127,559

 

$

127,559

 

$

—

 

$

—

 

Corporate notes, bonds and commercial paper

 

137,108

 

—

 

137,108

 

—

 

Total available-for-sale securities

 

$

264,667

 

$

127,559

 

$

137,108

 

$

—

 

 

The Company monitors the investment for other-than-temporary impairment and records appropriate reductions in carrying value when necessary. The Company made an investment of $2.0 million in a non-marketable equity security of a private company during the third quarter of 2009. The Company evaluated the fair value of the investment in the non-marketable security as of March 31, 2012 and determined that there were no events that caused a decrease in its fair value below the carrying cost.

 

The following table presents the financial instruments that are measured and carried at cost on a nonrecurring basis as of March 31, 2012 and December 31, 2011:

 

 

 

As of March 31, 2012

 

(in thousands)

 

Carrying
Value

 

Quoted
market
prices in
active
markets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Impairment
charges for the
three months
ended
March 31,
2012

 

Investment in non-marketable securities

 

$

2,000

 

$

—

 

$

—

 

$

2,000

 

$

—

 

 

 

 

As of December 31, 2011

 

(in thousands)

 

Carrying
Value

 

Quoted
market
prices in
active
markets
(Level 1)

 

Significant
other
observable
inputs
(Level 2)

 

Significant
unobservable
inputs
(Level 3)

 

Impairment
charges for the
year
ended
December 31,
2011

 

Investment in non-marketable securities

 

$

2,000

 

$

—

 

$

—

 

$

2,000

 

$

—

 

 

For the three months ended March 31, 2012 and 2011, there were no transfers of financial instruments between different categories of fair value.

 

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of March 31, 2012 and December 31, 2011:

 

 

 

 

As of March 31, 2012

 

As of December 31, 2011

 

(in thousands)

 

Face
Value

 

Carrying
Value

 

Fair Value

 

Face
Value

 

Carrying
Value

 

Fair Value

 

5% Convertible Senior Notes due 2014

 

$

172,500

 

$

136,845

 

$

172,716

 

$

172,500

 

$

133,493

 

$

170,289

 

 

The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a level two measurement. As of March 31, 2012, the convertible notes are carried at face value of $172.5 million less any unamortized debt discount. The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

 

The Company monitors its investments for other than temporary losses by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any other than temporary loss is reported under “Interest and other income (expense), net” in the condensed consolidated statement of operations. For the three months ended March 31, 2012, the Company has not incurred any impairment loss on its investments.