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Fair Value Measurement Of Assets And Liabilities
9 Months Ended
Sep. 30, 2011
Fair Value Measurement Of Assets And Liabilities [Abstract] 
Fair Value Measurement Of Assets And Liabilities

6. Fair Value Measurement of Assets and Liabilities

The Company's fair value measurements relate to its cash equivalents, marketable debt securities, and marketable equity securities, which are classified pursuant to authoritative guidance for fair value measurements. The Company places its cash equivalents and marketable debt securities in instruments that meet credit quality standards, as specified in its investment policy guidelines. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument.

Our financial instruments consist principally of cash and cash equivalents, short-term and long-term marketable securities, and short-term and long-term debt. The Company's cash and cash equivalents consist of its investment in money market securities and treasury bills. The Company's marketable securities consist primarily of government agency securities, municipal bonds, time deposits and investment-grade corporate bonds. From time to time, the Company may utilize foreign exchange forward contracts. These contracts are valued using pricing models that take into account the currency rates as of the balance sheet date (Level 2 of the fair value hierarchy).

Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry & economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds.

Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company's own assumptions.

The fair value of the majority of our cash and cash equivalents and marketable equity securities were determined based on Level 1 inputs. The fair value of our marketable debt securities was determined based on Level 2 inputs. We do not have any securities in the Level 3 category. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table summarizes the Company's financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of September 30, 2011 (in thousands):

 

Description

    September 30, 2011      Level 1      Level 2      Level 3  

Assets:

            

Cash equivalents

            

Money market funds

    $ 137       $ 137       $ 0       $ 0   

US Treasury notes

      4,871         0         4,871         0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total cash equivalents

      5,008         137         4,871         0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Short-term marketable securities:

            

Available-for-sale:

            

Corporate debentures / bonds

      23,316         0         23,316         0   

Muncipal bonds

      3,285         0         3,285         0   

Certificates of deposit

      2,647         0         2,647         0   

Government agency securities

      4,105         0         4,105         0   

Marketable equity securities

      38         38         0         0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total short-term marketable securities

      33,391         38         33,353         0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Long-term marketable securities:

            

Available-for-sale:

            

Muncipal bonds

      7,911         0         7,911         0   

Government agency securities

      1,190         0         1,190         0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total long-term marketable securities

      9,101         0         9,101         0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total financial assets

    $ 47,500       $ 175       $ 47,325       $ 0   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no transfers between Level 1 and Level 2 securities during the nine months ended September 30, 2011. All of our long-term marketable debt securities had maturities of between one and two years in duration at September 30, 2011.

The table below presents Level 3 activity for our contingent consideration liability for the nine months ended September 30, 2011 (in thousands):

 

Contingent consideration liability

    Level 3  

Beginning balance at January 1, 2011

    $ (880 ) 

Adjustments

      880   
  

 

 

  

Ending balance at September 30, 2011

    $ —     
  

 

 

  

As of September 30, 2011, the Company had no outstanding foreign currency exchange forward contracts. On December 31, 2010, the Company recorded an unrealized loss of $8,000 on its outstanding foreign currency exchange forward contracts. These contracts were utilized to hedge the Company's Euro-denominated cash and accounts receivable balances.

 

During the three and nine months ended September 30, 2011, the Company recorded foreign currency losses on Euro-denominated foreign currency exchange forward contracts of approximately $0 and $19,000, respectively. During the same periods in 2010, the Company recorded losses on its foreign currency exchange forward contracts of approximately $857,000 and $498,000, respectively. All recorded gains and losses on foreign currency exchange transactions are recorded in other (income) expense.