Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2014

Note 2. Fair Value of Financial Instruments

The estimated fair values of financial instruments outstanding were as follows (in thousands):

	September 30, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	4,685	$	—	$	—		$	4,685
Short-term investments:
U.S. government-sponsored enterprise bonds	$	2,252	$	1	$	—		$	2,253
Municipal bonds	3,424		1		—			3,425
Corporate notes	12,609		10		(5		)	12,614
Certificates of deposit	3,624		1		—			3,625
Total short-term investments	$	21,909	$	13	$	(5	)	$	21,917
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	—	$	(5	)	$	995
Corporate notes	6,070		—		(10		)	6,060
Total long-term investments	$	7,070	$	—	$	(15	)	$	7,055

	December 31, 2013
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash and cash equivalents	$	4,364	$	—	$	—		$	4,364
Short-term investments:
U.S. government-sponsored enterprise bonds	$	6,543	$	—	$	(1	)	$	6,542
Municipal bonds	13,401		11		—			13,412
Corporate notes	7,245		2		(2		)	7,245
Certificates of deposit	4,994		1		(2		)	4,993
Total short-term investments	$	32,183	$	14	$	(5	)	$	32,192
Long-term investments:
U.S. government-sponsored enterprise bonds	$	2,752	$	—	$	—		$	2,752
Municipal bonds	264		—		—			264
Corporate notes	9,466		9		(1		)	9,474
Certificates of deposit	1,440		—		(4		)	1,436
Total long-term investments	$	13,922	$	9	$	(5	)	$	13,926

The estimated fair values of available-for-sale securities with unrealized losses were as follows (in thousands):

	September 30, 2014
	Cost		Unrealized Losses			Fair Value
Short-term investments:
Corporate notes	$	2,188	$	(5	)	$	2,183
Total short-term investments	$	2,188	$	(5	)	$	2,183
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,000	$	(5	)	$	995
Corporate notes	6,070		(10		)	6,060
Total long-term investments	$	7,070	$	(15	)	$	7,055

	December 31, 2013
	Cost		Unrealized Losses			Fair Value
Short-term investments:
U.S. government-sponsored enterprise and municipal bonds	$	5,289	$	(1	)	$	5,288
Corporate notes	3,844		(2		)	3,842
Certificates of deposit	3,080		(2		)	3,078
Total short-term investments	$	12,213	$	(5	)	$	12,208
Long-term investments:
U.S. government-sponsored enterprise bonds	$	1,253	$	—		$	1,253
Corporate notes	1,001		(1		)	1,000
Certificates of deposit	1,440		(4		)	1,436
Total short-term investments	$	3,694	$	(5	)	$	3,689

As of September 30, 2014 and December 31, 2013, all of the available-for-sale securities with unrealized losses had been in a loss position for less than 12 months.

Cost and fair value of investments based on two maturity groups were as follows (in thousands):

	September 30, 2014
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	21,909	$	13	$	(5	)	$	21,917
Due in 1-2 years	7,070		—		(15		)	7,055
Total	$	28,979	$	13	$	(20	)	$	28,972

	December 31, 2013
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Due within 1 year	$	32,183	$	14	$	(5	)	$	32,192
Due in 1-2 years	13,922		9		(5		)	13,926
Total	$	46,105	$	23	$	(10	)	$	46,118

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) as of September 30, 2014 and December 31, 2013 (in thousands):

	September 30, 2014
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	3,661	$	3,661	$	—	$	—
Certificates of deposit	3,625		—		3,625		—
Corporate notes	18,674		—		18,674		—
U.S. government-sponsored enterprise bonds	3,248		—		3,248		—
Municipal bonds	3,425		—		3,425		—
Total assets	$	32,633	$	3,661	$	28,972	$	—

	December 31, 2013
	Fair Value		Level 1		Level 2		Level 3
Money market funds	$	3,012	$	3,012	$	—	$	—
Certificates of deposit	6,429		—		6,429		—
Corporate notes	16,719		—		16,719		—
U.S. government-sponsored enterprise bonds	9,295		—		9,295		—
Municipal bonds	13,675		—		13,675		—
Total assets	$	49,130	$	3,012	$	46,118	$	—

There were no transfers in or out of Level 1 and Level 2 securities during the three and nine months ended September 30, 2014 and 2013.

- 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.

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