5. Financial Instruments

The Company considers all highly liquid investments held at major banks, certificates of deposit and other securities with original maturities of three months or less to be cash equivalents.

The Company classifies all of its investments as available-for-sale at the time of purchase because management intends that these investments are available for current operations and includes these investments on its balance sheet as short-term investments. Investments with original maturities longer than three months include commercial paper, U.S. agency securities, non-U.S. government securities and investment-grade corporate debt securities. Investments classified as available-for-sale are recorded at fair market value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are recorded based on specific identification of each security’s cost basis.

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels of inputs that may be used to measure fair value, as follows:

Level 1— Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2— Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets in non-active markets;

Inputs other than quoted prices that are observable for the asset or liability; and

Inputs that are derived principally from or corroborated by other observable market data.

Level 3— Unobservable inputs that cannot be corroborated by observable market data and require the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The following tables summarize the amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category for cash, cash equivalents and short-term investments (in thousands):

	December 31, 2016
								Estimated Fair Value
			Gross		Gross			Cash and
	Amortized		Unrealized		Unrealized			Cash		Short-term
	Cost		Gains		Losses			Equivalents		Investments
Cash	$	67,350	$	—	$	—		$	67,350	$	—

Level 1
Money market funds	2,122		—		—			2,122		—


Level 2
U.S. government agency securities	38,993		—		(85		)	—		38,908

Total	$	108,465	$	—	$	(85	)	$	69,472	$	38,908

	June 30, 2016
								Estimated Fair Value
			Gross		Gross			Cash and
	Amortized		Unrealized		Unrealized			Cash		Short-term
	Cost		Gains		Losses			Equivalents		Investments
Cash	$	95,906	$	—	$	—		$	95,906	$	—

Level 1
Money market funds	13,362		—		—			13,362		—

	13,362		—		—			13,362		—

Level 2
Commercial paper	14,704		—		—			8,938		5,766
U.S. government agency securities	28,000		7		(17		)	—		27,990
U. S. treasury securities	3,997		1		—			—		3,998
Municipal debt securities	1,565		—		—			1,565		—
Corporate debt securities	9,491		—		(6		)	—		9,485

	57,757		8		(23		)	10,503		47,239

Total	$	167,025	$	8	$	(23	)	$	119,771	$	47,239

Certain investments in the table above are classified as having Level 2 inputs because quoted prices in an active market are not readily accessible for those specific financial assets, or 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 had investments that were in an unrealized loss position as of December 31, 2016. The Company determined that (i) it does not have the intent to sell any of these investments and (ii) it is not likely that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company reviews its investments quarterly to identify and evaluate investments that have an indication of possible impairment. As of December 31, 2016, the Company anticipates that it will recover the entire carrying value of such investments and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three and six months ended December 31, 2016.

Contractual maturities of available-for-sale securities at December 31, 2016 were as follows (in thousands):

	December 31, 2016
	Amortized		Estimated
	Cost		Fair Value
Due in 1 year or less	$	14,122	$	14,110
Due in 1-2 years	26,993		26,920

	$	41,115	$	41,030

The following table summarizes the available-for-sale debt securities that were in a continuous unrealized loss position, but were not deemed to be other-than-temporarily impaired (in thousands):

	Less Than 12 Months					12 Months or Greater					Total
	Gross					Gross					Gross
	Unrealized			Estimated		Unrealized			Estimated		Unrealized			Estimated
	Losses			Fair Value		Losses			Fair Value		Losses			Fair Value
December 31, 2016
Debt Securities:
U. S. government agency securities	$	(12	)	$	11,988	$	(73	)	$	26,920	$	(85	)	$	38,908

Total	$	(12	)	$	11,988	$	(73	)	$	26,920	$	(85	)	$	38,908

June 30, 2016
Debt Securities:
Corporate debt securities	$	(3	)	$	6,325	$	(3	)	$	3,160	$	(6	)	$	9,485
U. S. government agency securities	—			—		(17		)	19,988		(17		)	19,988

Total	$	(3	)	$	6,325	$	(20	)	$	23,148	$	(23	)	$	29,473

The Company held a total of 13 positions as of December 31, 2016 and 11 positions as of June 30, 2016 that were in an unrealized loss position. Based on the Company’s review of these securities, the Company believes it had no other-than-temporary impairments on these securities as of December 31, 2016 and June 30, 2016 because it does not intend to sell these securities and believes it is not more likely than not that it will be required to sell these securities before the recovery of their amortized cost basis. Gross realized gains and gross realized losses were insignificant for the three and six months ended December 31, 2016 and the year ended June 30, 2016.

Assets and Liabilities That are Measured at Fair Value on a Nonrecurring Basis

The Company’s non-marketable equity investments and non-financial assets, such as goodwill, intangible assets, and property, plant, and equipment (measured at fair value if a write-down is recognized) are evaluated for impairment annually or when indicators of impairment exist. The fair value measurement of non-marketable equity investments is performed by a third-party analyst using Level 3 inputs. Non-financial assets such as identified intangible assets acquired in connection with an acquisition are measured at fair value using Level 3 inputs, which include discounted cash flow methodologies, or similar techniques, when there is limited market activity and the determination of fair value requires significant judgment and estimates. In addition, in evaluating the fair value of goodwill impairment, further corroboration is obtained using the Company’s market capitalization. The Company did not record any impairment charges for non-marketable equity investments or non-financial assets in the three and six months ended December 31, 2016.

The following table summarizes the carrying values and estimated fair values of our short-term and long-term debt (in thousands):

	December 31, 2016				June 30, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
3.75% Convertible Notes	$	—	$	—	$	36,400	$	36,487
3.50% Convertible Notes	43,642		47,472		43,195		51,450
3.50% Series A Convertible Notes	67,748		74,785		66,613		81,053
Secured Loan (1)	58,778		58,778		64,204		64,204

Total	$	170,168	$	181,035	$	210,412	$	233,194

(1)

The carrying value of the Secured Loan approximates fair value as the Company did not elect the fair value option for the Secured Loan.

The Convertible Notes are measured on a non-recurring basis using Level 2 inputs based upon observable inputs of the Company’s underlying stock price and the time value of the conversion option, since an observable quoted price of the Convertible Notes is not readily available.