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Fair Value Measurement of Assets and Liabilities
 9 Months Ended
Sep. 30, 2012
Fair Value Measurement of Assets and Liabilities [Abstract]  
Fair Value Measurement of Assets and Liabilities

5. 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, and short-term and long-term marketable debt securities. The Company’s cash and cash equivalents consist of its investment in money market securities and treasury bills. The Company’s marketable debt securities consist primarily of government agency securities, municipal bonds, time deposits and investment-grade corporate bonds.

Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree to which 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, 2012 (in thousands):

 

                         

Description

   September 30, 2012     Level 1     Level 2  

Assets:

                        

Cash equivalents

                        

Money market funds

   $ 5,146     $ 5,146     $ —    

US Treasury securities

     1,438       —         1,438  
   

 

 

    

 

 

    

 

 

  

Total cash equivalents

     6,584       5,146       1,438  
   

 

 

    

 

 

    

 

 

  

Short-term marketable securities:

                        

Available-for-sale:

                        

Government agency securities

     3,681       —         3,681  

Municipal bonds

     14,689       —         14,689  

Certificates of deposit

     4,081       —         4,081  

Corporate debentures / bonds

     17,507       —         17,507  
   

 

 

    

 

 

    

 

 

  

Total short-term marketable securities

     39,958       —         39,958  
   

 

 

    

 

 

    

 

 

  

Long-term marketable securities:

                       

Available-for-sale:

                        

Government agency securities

     3,001       —         3,001  

Municipal bonds

     805       —         805  

Certificates of deposit

     2,368       —         2,368  
   

 

 

    

 

 

    

 

 

  

Total long-term marketable securities

     6,174       —         6,174  
   

 

 

    

 

 

    

 

 

  

Total financial assets

   $ 52,716     $ 5,146     $ 47,570  
   

 

 

    

 

 

    

 

 

  

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 December 31, 2011 (in thousands):

 

                         

Description

   December 31, 2011     Level 1     Level 2  

Assets:

                        

Cash equivalents

                        

Money market funds

   $ 25,137     $ 25,137     $ —    

US Treasury securities

     5,784       —         5,784  
   

 

 

    

 

 

    

 

 

  

Total cash equivalents

     30,921       25,137       5,784  
   

 

 

    

 

 

    

 

 

  

Short-term marketable securities:

                        

Available-for-sale:

                        

Government agency securities

     6,912       —         6,912  

Municipal bonds

     8,384       —         8,384  

Certificates of deposit

     4,321       —         4,321  

Corporate debentures / bonds

     8,612       —         8,612  

Marketable equity securities

     38       38       —    
   

 

 

    

 

 

    

 

 

  

Total short-term marketable securities

     28,267       38       28,229  
   

 

 

    

 

 

    

 

 

  

Long-term marketable securities:

                        

Available-for-sale:

                        

Government agency securities

     3,738       —         3,738  

Municipal bonds

     5,969       —         5,969  

Certificates of deposit

     3,788       —         3,788  
   

 

 

    

 

 

    

 

 

  

Total long-term marketable securities

     13,495       —         13,495  
   

 

 

    

 

 

    

 

 

  

Total financial assets

   $ 72,683     $ 25,175     $ 47,508