Investments and Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Investments and Fair Value Measurements [Abstract]

Investments and Fair Value Measurements

Note 3. Investments and Fair Value Measurements

Our cash, cash equivalents and investments are classified as follows (in thousands):

	September 30, 2012									December 31, 2011
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gain		(Loss)			Value		Cost		Gain		(Loss)			Value
Classified as:
Cash	$	27,490	$	-	$	-		$	27,490	$	25,299	$	-	$	-		$	25,299
Cash equivalents:
Money market funds		8,013		-		-			8,013		857		-		-			857
Total cash equivalents		8,013		-		-			8,013		857		-		-			857
Total cash and cash equivalents		35,503		-		-			35,503		26,156		-		-			26,156
Investments (Available for sale):
Certificates of deposit		6,878		7		(4	)		6,881		3,561		5		(3	)		3,563
US Treasury and agency securities		-		-		-			-		1,200		-		(1	)		1,199
Corporate bonds		9,085		12		(34	)		9,063		9,859		2		(137	)		9,724
Total investments		15,963		19		(38	)		15,944		14,620		7		(141	)		14,486
Total cash, cash equivalents and investments	$	51,466	$	19	$	(38	)	$	51,447	$	40,776	$	7	$	(141	)	$	40,642
Contractual maturities on investments:
Due within 1 year	$	10,581						$	10,577	$	5,521						$	5,505
Due after 1 through 5 years		5,382							5,367		9,099							8,981
	$	15,963						$	15,944	$	14,620						$	14,486

We manage our investments as a single portfolio of highly marketable securities that is intended to be available to meet our current cash requirements. We have no investments in auction rate securities. For both the three months ended September 30, 2012 and 2011, we did not have any realized gain or loss on sales of our available-for-sale securities. For the nine months ended September 30, 2012 and 2011, we had none and $8,000 of gross realized loss on sales of our available-for-sale securities, respectively.

The gross unrealized losses related to our portfolio of available-for-sale securities were primarily due to changes in interest rates and market and credit conditions of the underlying securities. We have determined that the gross unrealized losses on our available-for-sale securities as of September 30, 2012 are temporary in nature. We periodically review our investment portfolio to

identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality and our ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2012 (in thousands):

	In Loss Position < 12 months					In Loss Position > 12 months					Total In Loss Position
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		(Loss)			Value		(Loss)			Value		(Loss)
Investments:
Certificates of deposit	$	3,314	$	(3	)	$	200	$	(1	)	$	3,514	$	(4	)
Corporate bonds		2,725		(17	)		1,517		(17	)		4,242		(34	)
Total in loss position	$	6,039	$	(20	)	$	1,717	$	(18	)	$	7,756	$	(38	)

The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2011 (in thousands):

	In Loss Position < 12 months							Total In Loss Position
				Gross							Gross
	Fair			Unrealized				Fair			Unrealized
	Value			(Loss)				Value			(Loss)
Investments:
Certificates of Deposit			678			(3	)			678			(3	)
US Treasury and agency securities			1,199			(1	)			1,199			(1	)
Corporate bonds		$	8,221		$	(137	)		$	8,221		$	(137	)
Total in loss position		$	10,098		$	(141	)		$	10,098		$	(141	)

Investments in Privately-held Companies

We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business (see Note 10). The investment balances for the companies, including indirect minority investments in privately-held companies by our consolidated joint ventures, are accounted for under the equity method and are included in "other assets" in the condensed consolidated balance sheets and totaled $9.1 million and $8.3 million as of September 30, 2012 and December 31, 2011, respectively. We also maintain minority investments in other unconsolidated privately-held companies which are accounted for under the cost method. Our investments in these privately-held companies are reviewed for other than temporary declines in value on a quarterly basis. These are accounted for under the cost method as we do not have the ability to exercise significant influence over their operations. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. Reasons for other than temporary declines in value include whether the related company would have insufficient cash flow to operate for the next twelve months, significant changes in the operating performance and changes in market conditions. As of both September 30, 2012 and December 31, 2011, our investments in these unconsolidated privately-held companies had a carrying value of $392,000 and are also included in "other assets" in the condensed consolidated balance sheets.

Fair Value Measurements

Our financial assets and liabilities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily-available pricing sources for comparable instruments. Level 3 instrument valuations are obtained from unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. As of September 30, 2012, we did not have any Level 3 assets or liabilities. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, we measure certain financial assets and liabilities at fair value, primarily consisting of our short-term and long-term investments.

The type of instrument valued based on quoted market prices in active markets include our money market funds, which are generally classified within Level 1 of the fair value hierarchy. We classify all of our available-for-sale securities including certificates of deposit and corporate bonds as having Level 2 inputs. The valuation techniques used to measure the fair value of these financial instruments having Level 2 inputs were derived from quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.  There were no changes in valuation techniques or related inputs in the three months ended September 30, 2012.  There have been no transfers between fair value measurement levels during the three month ended September 30, 2012.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of September 30, 2012 (in thousands):

	Balance as of September 30, 2012		Quoted Prices in Active Markets of Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash equivalents and investments:
Money market fund	$	8,013	$	8,013	$	-
Certificates of deposit		6,881		-		6,881
Corporate bonds		9,063		-		9,063
Total	$	23,957	$	8,013	$	15,944
Liabilities	$	-	$	-	$	-

 The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of December 31, 2011 (in thousands):

	Balance as of December 31, 2011		Quoted Prices in Active Markets of Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Cash equivalents and investments:
Money market fund – cash	$	857	$	857	$	—
Certificates of deposit		3,563		—		3,563
US Treasury and agency securities		1,199		—		1,199
Corporate bonds		9,724		—		9,724
Total	$	15,343	$	857	$	14,486
Liabilities	$	—	$	—	$	—

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets that are subject to nonrecurring fair value measurements are not included in the table above. We have investments in privately-held companies accounted for by equity and cost method (See Note 10), which are periodically assessed for other-than-temporary iimpairment.  If we determine that an other-than-temporary impairment has occured, we write-down the investment to its fair value.  For the three and nine months ended September 30, 2012 and 2011, we did not record other-than-temporary impairment charges for these investments.