v2.3.0.11
Fair Value Measurements
 6 Months Ended
Jun. 30, 2011
Fair Value Measurements  
Fair Value Measurements

4. Fair Value Measurements

The Company adheres to FASB's authoritative guidance related to the fair value measurements of assets and liabilities. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For certain of our financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable, and other current liabilities the carrying amounts approximate their fair value due to the relatively short maturity of these balances. The Company also believes that the carrying value of its note payable approximates fair value as the interest rate on this note is based on a floating market rate.

The Company has assets that are valued in accordance with the provisions of the authoritative guidance that addresses fair value measurements. This guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

 

  •  

Level 1—Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access.

 

  •  

Level 2—Valuations based on inputs on other than quoted prices included within level 1, for which all significant inputs are observable, either directly or indirectly.

 

  •  

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Assets Measured at Fair Value on a Recurring Basis

The following table represents information about the Company's investments measured at fair value on a recurring basis (in thousands).

 

     Fair value of investments as of June 30, 2011  
     Total      Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		  

Money market funds (1)

    $ 13,578      $ 13,578       $ —         $ —     

Term deposits (1)

      1,342        1,342         —           —     

Commercial paper (3)

      2,998        —           2,998         —     

Corporate bonds (2)

      8,407        —           8,407         —     

Federal and municipal obligations (2)

      1,001        —           1,001         —     
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 27,326      $ 14,920       $ 12,406       $ —     
  

 

 

     

 

 

     

 

 

     

 

 

  
     Fair value of investments as of December 31, 2010  
     Total      Quoted Prices
In Active
Markets for
Identical
Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Significant
Unobservable
Inputs
(Level 3)		  

Money market funds (1)

    $ 7,319       $ 7,319       $ —         $ —     

Term deposits (1)

      5,056         5,056         —           —     

Commercial paper (3)

      17,486         —           17,486         —     

Corporate bonds (2)

      28,071         —           28,071         —     

Federal and municipal obligations (2)

      1,998         —           1,998         —     
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 59,930       $ 12,375       $ 47,555       $ —     
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) Included in cash and cash equivalents in the Company's condensed consolidated balance sheets.
(2) Of these amounts, approximately $1.3 million was included in cash and cash equivalents at June 30, 2011, and the remainder was included in short-term investments in the Company's condensed consolidated balance sheets.
(3) Of these amounts, approximately $2 million and $1.5 million were included in cash and cash equivalents at June 30, 2011 and December 31, 2010, respectively, and the remainder was included in short-term investments in the Company's condensed consolidated balance sheets.

Certain items in the table above are classified as Level 2 items because quoted prices in an active market are not readily accessible for those specific financial assets, and the Company may have relied on alternative pricing methods that do not rely exclusively on quoted prices to determine the fair value of the investments.

 

The Company's cash, cash equivalents, and short-term investments are as follows (in thousands):

 

     Cost      Gross
Unrealized
Gains		      Gross
Unrealized
(Losses)		     Estimated
Fair Value		  

Balance at June 30, 2011

           

Classified as cash and cash equivalents:

           

Cash

    $ 27,597      $ —         $ —        $ 27,597  

Term deposits

      1,342        —           —          1,342  

Money market funds

      13,578        —           —          13,578  

Commercial paper (4)

      2,000        —           (1 )     1,999  

Corporate bonds (4)

      1,265        —           (1 )     1,264  
  

 

 

     

 

 

     

 

 

    

 

 

  
     45,782        —           (2 )     45,780  

Classified as short-term investments:

           

Commercial paper (4)

      1,000        —           (1 )     999  

Corporate bonds (4)

      7,145        8        (10 )     7,143  

Federal and municipal obligations

      1,001        —           —          1,001  
  

 

 

     

 

 

     

 

 

    

 

 

  
     9,146        8        (11 )     9,143  
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 54,928      $ 8      $ (13 )   $ 54,923  
  

 

 

     

 

 

     

 

 

    

 

 

  

(4) Securities totaling approximately $9.4 million were in an unrealized loss position at June 30, 2011. None of these securities were in a continuous unrealized loss position for greater than 12 months.

 

     Cost      Gross
Unrealized
Gains		      Gross
Unrealized
(Losses)		     Estimated
Fair Value		  

Balance at December 31, 2010

           

Classified as cash and cash equivalents:

           

Cash

    $ 19,394       $ —         $ —        $ 19,394   

Term deposits

      5,056         —           —          5,056   

Money market funds

      7,319         —           —          7,319   

Commercial paper

      1,500         —           —          1,500   
  

 

 

     

 

 

     

 

 

    

 

 

  
     33,269         —           —          33,269   

Classified as short-term investments:

           

Commercial paper (4)

      15,989         2         (5 )      15,986   

Corporate bonds

      28,059         47         (35 )      28,071   

Federal and municipal obligations

      2,000         —           (2 )      1,998   
  

 

 

     

 

 

     

 

 

    

 

 

  
     46,048         49         (42 )      46,055   
  

 

 

     

 

 

     

 

 

    

 

 

  

Total

    $ 79,317       $ 49       $ (42 )    $ 79,324   
  

 

 

     

 

 

     

 

 

    

 

 

  

(4) Securities totaling approximately $15 million were in an unrealized loss position at December 31, 2010. None of these securities were in a continuous unrealized loss position for greater than 12 months.

Short-term investments are classified as available-for-sale and are recorded on the Company's Consolidated Balance Sheet at fair market value with unrealized gains or losses reported as a separate component of Accumulated Other Comprehensive Income. At June 30, 2011, the Company has classified all of its securities with original maturities beyond 90 days as short-term investments, even though the stated maturity dates may be one year or more beyond the current balance sheet date as these investments remain highly liquid and available for use in current operations.

Assets Measured at Fair Value on a Nonrecurring Basis

The fair value of other identifiable intangible assets is based on detailed valuations using the income approach. Other intangible assets consist of purchased technology and patents, customer lists and relationships, distribution agreements, and trademarks, all of which are amortized using the straight-line method over their estimated useful lives, ranging from 5 to 7 years. The Company reviews other intangible assets for impairment as changes in circumstance or the occurrence of events suggest the carrying value may not be recoverable. During the second quarter of fiscal 2011, the Company recorded $1.7 million of in-process research and development ("IPR&D") impairment charges. The Company had previously recorded IPR&D representing the fair value of a project that was underway at Xenos at the time of acquisition. The product underlying this IPR&D item was released on June 28, 2010 and the fair value of this intangible asset was amortized on a straight-line basis over the respective estimated useful life of seven years beginning July 2010. During the second quarter of 2011, the Company deemed that it was necessary to impair this IPR&D due to the fact that changes in circumstances indicated to management that the carrying value of the IPR&D was not recoverable. Accordingly, the Company used level 3 inputs to measure the fair value associated with this IPR&D. Based on an analysis of historical sales of the product since its release in the second quarter of fiscal 2010, as well as the calculation of a discounted cash flow analysis projecting expected cash flows through the remaining useful life of the product, it was determined that the IPR&D balance should be impaired down to zero.