Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

FAIR VALUE OF FINANCIAL INSTRUMENTS

Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels that are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:

• Level 1—Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.

The following tables present the Company’s financial instruments that were measured at fair value on a recurring basis as of December 31, 2015 and 2014 by level within the fair value hierarchy (in thousands):

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash equivalents	$	3	$	18,900	$	—	$	18,903
Marketable securities	3,722		47,287		—		51,009
Total	$	3,725	$	66,187	$	—	$	69,912
Financial Liabilities
Derivative liabilities	$	—	$	—	$	82	$	82

	December 31, 2014
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash equivalents	$	1,880	$	7,828	$	—	$	9,708
Marketable securities	4,897		159,722		—		164,619
Total	$	6,777	$	167,550	$	—	$	174,327
Financial Liabilities
Derivative liabilities	$	—	$	—	$	83	$	83

Other than assets impaired as a result of the 2014 and 2015 Restructuring Plans (see Note 3), the Company had no transactions measured at fair value on a nonrecurring basis as of December 31, 2015 and 2014.

Cash Equivalents and Marketable Securities - Cash equivalents and marketable securities classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers and internal assumptions of the independent pricing services. The Company corroborates the reasonableness of non-binding quotes received from the independent pricing services by comparing them to quotes of identical or similar instruments from other pricing sources.

Derivative Liabilities - The 2018 Notes and the 2019 Notes contain early conversion payment features pursuant to which a holder may convert its Notes into shares of the Company's common stock. With respect to any conversion of 2018 Notes prior to November 1, 2016 or any conversion of 2019 Notes prior to January 1, 2018, in addition to the shares deliverable upon conversion, holders are entitled to receive an early conversion payment equal to $83.33 per $1,000 principal amount of Notes surrendered for conversion that may be settled, at the Company’s election, in cash or in shares of the Company’s common stock. These early conversion payment features have been identified as embedded derivatives and are separated from the host contracts, the Notes, and recorded at fair value each reporting period.

The Company used a Monte Carlo simulation model to estimate the fair values of the embedded derivatives related to the early conversion payment features of the Notes using a "with-and-without method".

The following tables set forth the Level 3 inputs to the Monte Carlo simulation models that were used to determine the fair values of the embedded derivatives for the Notes:

Constant Inputs	2018 Notes		2019 Notes
Conversion rate	121.1240		75.7576
Conversion price	$	8.26	$	13.20
Maturity date of the Notes	February 1, 2018		October 1, 2019
Maturity date of early payment feature	November 1, 2016		January 1, 2018

Variable Inputs	December 31, 2015			December 31, 2015			December 31, 2014			December 31, 2014
	2018 Notes			2019 Notes			2018 Notes			2019 Notes
Stock price	$	2.48		$	2.48		$	2.58		$	2.58
Estimated credit spread	4,685 basis points			3,978 basis points			2,450 basis points			2,900 basis points
Estimated stock volatility	55		%	55		%	55		%	55		%

The following table sets forth the estimated fair values of the embedded derivatives (in thousands):

	December 31, 2015		December 31, 2014
2018 Notes	$	26	$	35
2019 Notes	$	56	$	48

The total net decrease in the estimated fair value of the Level 3 embedded derivative for the Notes between December 31, 2014 and December 31, 2015 represents an unrealized gain that has been recorded as a gain from change in fair value of derivative liabilities in the consolidated statements of operations for the year ended December 31, 2015.

As of December 31, 2015 and 2014, the carrying values of the Company’s accounts receivables and secured and unsecured debt obligations, excluding the Notes, approximated their fair values. The Company has estimated the fair value of the Notes to be $105.9 million at December 31, 2015 based upon Level 2 inputs using the market price of the Notes derived from actual trades quoted from Bloomberg, and the fair value of the Notes to be $127.1 million at December 31, 2014 using a midmarket pricing convention (the midpoint price between bid and ask prices) quoted from Bloomberg.