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Fair Value Measurements | 12 Months Ended
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Sep. 30, 2012
Fair Value Measurements [Abstract] |
Fair Value Measurements |
4. | Fair Value Measurements
The accounting guidance on fair value measurements defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. The guidance is applicable for all financial assets and financial liabilities and for all nonfinancial assets and nonfinancial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Hierarchy Accounting guidance on fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories: Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities. The Company’s Level 1 asset consists of its investment in OctoPlus (see Note 2 for further information). The fair market value of this investment is based on the quoted price of OctoPlus shares as traded on the Euronext Amsterdam Stock Exchange. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities 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 asset or liability. The Company’s Level 2 assets consist of money market funds, U.S. Treasury securities, corporate bonds, municipal bonds, U.S. government agency securities, government agency and municipal securities and certain asset-backed and mortgage-backed securities. Fair market values for these assets are based on quoted vendor prices and broker pricing where all significant inputs are observable. Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. There were no Level 3 assets at September 30, 2012. The Company’s Level 3 assets at September 30, 2011 included certain asset-backed and mortgage-backed securities. The fair market values of these investments were determined by broker pricing where not all significant inputs were observable. In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company did not significantly change its valuation techniques from prior periods. Assets and Liabilities Measured at Fair Value on a Recurring Basis In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 (in thousands):
|  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Fair Value as of September 30, 2012 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | — |  |  | $ | 5,101 |  |  | $ | — |  |  | $ | 5,101 |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agency obligations |  |  | — |  |  |  | 28,854 |  |  |  | — |  |  |  | 28,854 |
Mortgage-backed securities |  |  | — |  |  |  | 2,999 |  |  |  | — |  |  |  | 2,999 |
Municipal bonds |  |  | — |  |  |  | 3,213 |  |  |  | — |  |  |  | 3,213 |
Asset-backed securities |  |  | — |  |  |  | 598 |  |  |  | — |  |  |  | 598 |
Corporate bonds |  |  | — |  |  |  | 6,886 |  |  |  | — |  |  |  | 6,886 |
Other assets |  |  | 718 |  |  |  | — |  |  |  | — |  |  |  | 718 |
Total assets measured at fair value |  | $ | 718 |  |  | $ | 47,651 |  |  | $ | — |  |  | $ | 48,369 |
The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2011 (in thousands):
|  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Fair Value as of September 30, 2011 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash equivalents |  | $ | — |  |  | $ | 8,419 |  |  | $ | — |  |  | $ | 8,419 |
Available-for-sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agency obligations |  |  | — |  |  |  | 30,603 |  |  |  | — |  |  |  | 30,603 |
Mortgage-backed securities |  |  | — |  |  |  | 3,933 |  |  |  | 15 |  |  |  | 3,948 |
Municipal bonds |  |  | — |  |  |  | 3,614 |  |  |  | — |  |  |  | 3,614 |
Asset-backed securities |  |  | — |  |  |  | 1,279 |  |  |  | 9 |  |  |  | 1,288 |
Corporate bonds |  |  | — |  |  |  | 2,497 |  |  |  | — |  |  |  | 2,497 |
Other assets |  |  | 1,190 |  |  |  | — |  |  |  | — |  |  |  | 1,190 |
Total assets measured at fair value |  | $ | 1,190 |  |  | $ | 50,345 |  |  | $ | 24 |  |  | $ | 51,559 |
The consolidated balance sheets include held-to-maturity investments totaling $3.0 million as of September 30, 2011. Held-to-maturity investments are carried at amortized cost. These investments matured during fiscal 2012. Valuation Techniques The valuation techniques used to measure the fair value of assets are as follows: Cash equivalents — These assets are classified as Level 2 and are carried at historical cost which is a reasonable estimate of fair value because of the relatively short time between origination of the instrument and its expected realization. Available-for-sale debt securities — These securities are classified as Level 2 and include various types of debt securities. These securities are valued based on quoted vendor prices in active markets underlying the securities. Other assets — This asset is classified as Level 1 and represents the Company’s investment in OctoPlus. This investment is valued based on the quoted market price of OctoPlus shares. Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis The following tables provide a reconciliation of fiscal 2012 and 2011 financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands). Transfers of instruments into and out of Level 3 are based on beginning of year values.
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) For the Year Ended September 30, 2012 Available-for-Sale Debt Securities |
| Mortgage- Backed Securities |  |  | Asset- Backed Securities |  |  | Total |
Balance at September 30, 2011 |  | $ | 15 |  |  | $ | 9 |  |  | $ | 24 |
Transfers into/out of Level 3 |  |  | (15 | ) |  |  | (9 | ) |  |  | (24 | )
Total realized and unrealized gains (losses): |  |  |  |  |  |  |  |  |  |  |  |
Included in other comprehensive income (loss) |  |  | — |  |  |  | — |  |  |  | — |
Purchases |  |  | — |  |  |  | — |  |  |  | — |
Issuances |  |  | — |  |  |  | — |  |  |  | — |
Sales |  |  | — |  |  |  | — |  |  |  | — |
Settlements |  |  | — |  |  |  | — |  |  |  | — |
Balance at September 30, 2012 |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) For the Year Ended September 30, 2011 Available-for-Sale Debt Securities |
| U.S. Government Obligations |  |  | Mortgage- Backed Securities |  |  | Asset- Backed Securities |  |  | Total |
Balance at September 30, 2010 |  | $ | 704 |  |  | $ | 69 |  |  | $ | — |  |  | $ | 773 |
Transfers into Level 3 |  |  | — |  |  |  | 17 |  |  |  | 14 |  |  |  | 31 |
Transfers out of Level 3 |  |  | (695 | ) |  |  | (68 | ) |  |  | — |  |  |  | (763 | )
Total realized and unrealized gains (losses): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in other comprehensive income (loss) |  |  | 19 |  |  |  | (3 | ) |  |  | (3 | ) |  |  | 13 |
Purchases |  |  | — |  |  |  | 620 |  |  |  | — |  |  |  | 620 |
Issuances |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Sales |  |  | (28 | ) |  |  | (620 | ) |  |  | (2 | ) |  |  | (650 | )
Settlements |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance at September 30, 2011 |  | $ | — |  |  | $ | 15 |  |  | $ | 9 |  |  | $ | 24 |
As of September 30, 2011, marketable securities measured at fair value using Level 3 inputs comprised less than $50,000 and included one asset-backed security and one mortgage-backed security within the Company’s available-for-sale investment portfolio. These securities were measured using observable market data and Level 3 inputs as a result of the lack of market activity and liquidity. The fair value of these securities was based on the Company’s assessment of the underlying collateral and the creditworthiness of the issuer of the securities. During fiscal 2012, these securities were reclassified from Level 3 to Level 2. During fiscal 2012, readily determinable market prices allowed for the securities to be properly measured and the securities were reclassified to Level 2. Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis The Company’s investments in non-marketable securities of private companies are accounted for using the cost method as the Company does not exert significant influence over the investees’ operating or financial activities. These investments, as well as held-to-maturity securities, are measured at fair value on a non-recurring basis when they are deemed to be other-than-temporarily impaired. In determining whether a decline in value of non-marketable equity investments in private companies has occurred and is other than temporary, an assessment is made by considering available evidence, including the general market conditions in the investee’s industry, the investee’s product development status and subsequent rounds of financing and the related valuation and/or the Company’s participation in such financings. The Company also assesses the investee’s ability to meet business milestones and the financial condition and near-term prospects of the individual investee, including the rate at which the investee is using its cash and the investee’s need for possible additional funding at a potentially lower valuation. The valuation methodology for determining the decline in value of non-marketable equity securities is based on inputs that require management judgment and are Level 3 inputs. In the fourth quarter of fiscal 2011, the Company recognized asset impairment charges totaling $28.1 million, writing down long-lived assets (fixed assets of $23.3 million and intangibles of $4.8 million) which are presented as part of the discontinued operations associated with the Pharmaceuticals segment. The Company wrote down these long-lived assets to $30.0 million based on the current valuation of the assets relative to their carrying value. The valuation methodology for determining the decline in value of long-lived assets is based on inputs that require management judgment and are Level 3 inputs. See Note 3 for further information. The Company wrote down three investments totaling $7.9 million in the year ended September 30, 2010, as the investments were deemed to be other-than-temporarily impaired. A pending round of financing at a substantially lower valuation at one of the private companies resulted in impairment loss of $2.4 million. Another company sold off assets in light of current market conditions and this action resulted in an impairment loss of $0.2 million. In addition, an impairment loss of $5.3 million was recognized related to a third company, which continues to face operational and financing difficulties and potential rounds of future financing at lower valuations. Management utilized Level 3 inputs which included information about pending financings as well as market input to determine the fair value of these investments. The Company also recognized long-lived asset impairment charges totaling $4.9 million in fiscal 2010 ($3.0 million in continuing operations and $1.9 million in discontinued operations). Fair value measurements used in the impairment reviews of property and equipment and intangible assets are Level 3 measurements that require management judgment. The Company recorded a $1.3 million asset impairment charge in fiscal 2010 associated with certain long-lived assets where no ongoing business was expected in the foreseeable future based on current market conditions. Furthermore, a $1.3 million asset impairment charge associated with certain fixed asset costs located in Minnesota and a $0.4 million asset impairment charge associated with prototypes and other equipment related to a development project for which no ongoing business was expected in the foreseeable future in light of market conditions were also recognized. The assets associated with these charges had limited remaining value and, as such, were written down to zero value. The Company recorded an asset impairment charge, included in discontinued operations, totaling $1.9 million associated with writing down one of its facilities in Alabama to fair value based on a decision to sell the facility, which decision was reversed later in fiscal 2010. The $2.1 million carrying value of this Alabama facility was based on a real estate market appraisal obtained during the year. The fair value was determined to be a Level 3 measurement that required management judgment. See Note 2 for additional information related to these impairments. See also Note 3 for further information related to the discontinued operations impairments.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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