Fair Value of Financial Instruments

9 Months Ended

Apr. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Available-for-sale investments within cash equivalents and investments consist of the following:

	April 30, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
	(in thousands)
U.S. agency securities	$	31,120	$	21	$	—		$	31,141
Commercial paper	58,029		17		—			58,046
Corporate bonds	47,831		25		(8		)	47,848
Foreign government bonds	790		—		(3		)	787
Money market funds	42,021		—		—			42,021
Municipal debt securities	6,189		8		(2		)	6,195
Total	$	185,980	$	71	$	(13	)	$	186,038

	July 31, 2012
	Amortized Cost	Unrealized Gains	Unrealized Losses	Estimated Fair Value
	(in thousands)
Money market funds	105,107	—	—	105,107
Certificates of deposit	3,726	—	—	3,726
Total	108,833	—	—	108,833

The following table shows the gross unrealized losses and fair value of the Company's investments with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:

	As of April 30, 2013
	Less Than 12 Months					12 Months or Greater				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Corporate bonds	$	10,074	$	(8	)	$	—	$	—	$	10,074	$	(8	)
Foreign government bonds	787		(3		)	—		—		787		(3		)
Municipal debt securities	1,098		(2		)	—		—		1,098		(2		)
Total	$	11,959	$	(13	)	$	—	$	—	$	11,959	$	(13	)

As of April 30, 2013, the Company had 12 investments in an unrealized loss position. The unrealized losses on our available-for-sale securities were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. We do not intend to sell, nor do we believe we will need to sell, these securities before we recover the associated unrealized losses. We do not consider any portion of the unrealized losses at April 30, 2013 to be an other-than-temporary impairment, nor do we consider any of the unrealized losses to be credit losses.

The following table summarizes the contractual maturities of the Company’s available-for-sale securities as of April 30, 2013:

	Expected maturities for the year ending July 31,
	2013		2014		2015		Total
	(in thousands)
U.S. agency securities	$	3,608	$	8,093	$	19,440	$	31,141
Commercial paper	46,266		11,780		—		58,046
Corporate bonds	3,501		38,054		6,293		47,848
Foreign government bonds	—		787		—		787
Money market funds	42,021		—		—		42,021
Municipal debt securities	—		1,886		4,309		6,195
Total	$	95,396	$	60,600	$	30,042	$	186,038

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The current accounting guidance for fair value measurements defines a three-level valuation hierarchy for disclosures as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

Level 3—Unobservable inputs that are supported by little or no market activity, which require the Company to develop its own assumptions.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying value of the Company's accounts receivable, accounts payable and accrued liabilities approximates their fair value due to the short-term nature of these instruments.

We base the fair value of our Level 1 financial instruments, which are in active markets, using quoted market prices for identical instruments.

We obtain the fair value of our Level 2 financial instruments, which are not in active markets, from a third-party professional pricing service using quoted market prices for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Our professional pricing service gathers observable inputs for all of our fixed income securities from a variety of industry data providers (e.g. large custodial institutions) and other third-party sources. Once the observable inputs are gathered, all data points are considered and an average price is determined.

We validate the quoted market prices provided by our primary pricing service by comparing their assessment of the fair values of our Level 2 investment portfolio balance against the fair values of our Level 2 investment portfolio balance provided by our investment managers. Our investment managers use similar techniques to our professional pricing service to derive pricing as described above.

We did not have any Level 3 financial assets or liabilities as of April 30, 2013 or July 31, 2012.

The following tables summarize the Company's financial assets measured at fair value on a recurring basis, by level within the fair value hierarchy as of April 30, 2013:

	April 30, 2013
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
U.S. agency securities	$	—	$	1,683	$	—	$	1,683
Commercial paper	—		29,271		—		29,271
Money market funds	42,021		—		—		42,021
Short-term investments:
U.S. agency securities	—		6,466		—		6,466
Commercial paper	—		28,775		—		28,775
Corporate bonds	—		26,378		—		26,378
Foreign government bonds	—		787		—		787
Municipal debt securities	—		1,185		—		1,185
Long-term investments:
U.S. agency securities	—		22,992		—		22,992
Corporate bonds	—		21,470		—		21,470
Municipal debt securities	—		5,010		—		5,010
Total assets	$	42,021	$	144,017	$	—	$	186,038

The following table summarizes the Company's financial assets measured at fair value on a recurring basis, by level within the fair value hierarchy as of July 31, 2012:

	July 31, 2012
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets
Cash equivalents:
Money market funds	$	105,107	$	—	$	—	$	105,107
Certificates of deposit	3,726		—		—		3,726
Total assets	$	108,833	$	—	$	—	$	108,833