Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2012

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 7 - Fair Value of Financial Instruments

In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The amendments intend to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards.  The guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements.  The new amendments will be effective for interim and annual periods beginning after December 15, 2011.  The adoption of this guidance did not materially impact our financial statements or disclosures.

We performed an analysis of our investments held at June 30, 2012 and December 31, 2011 to determine the significance and character of all inputs to their fair value determination. The standard requires additional disclosures about the inputs used to develop the measurements and the effect of certain measurements on changes in fair value for each reporting period.

The FASB's fair value measurement guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.

· Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

· Level 2 - Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument's anticipated life.

· Level 3 - Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations.  The following table presents our assets measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011.

Assets							Fair Value as of June 30, 2012
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	56,050	$	-	$	-	$	56,050
Short-term investments*		30,143		-		-		30,143
Other investments*		11,521		-		-		11,521
Auction-rate municipal securities		-		-		963		963
Total	$	97,714	$	-	$	963	$	98,677

* The amortized cost of these investments approximates fair market value.

Assets							Fair Value as of December 31, 2011
(in thousands)	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	63,077	$	-	$	-	$	63,077
Short-term investments*		24,740		-		-		24,740
Other investments*		20,271		-		-		20,271
Auction-rate municipal securities		-		-		998		998
Total	$	108,088	$	-	$	998	$	109,086

* The amortized cost of these investments approximates fair market value.

At June 30, 2012, we held $30.1 million of short-term investments classified as held-to-maturity which included $14.0 million in commercial paper, $9.1 million in corporate bonds, and $7.0 million in U.S agency bonds.  As of June 30, 2012, the remaining maturity dates for commercial paper, corporate bonds, and U.S agency bonds range from 0.1 to 0.4 years, 0.1 to 0.8 years, and 0.2 to 1.0 years, respectively.  At December 31, 2011, we held $24.7 million of short-term investments classified as held-to-maturity which included $18.7 million in commercial paper, $4.0 million in U.S agency bonds, and $2.0 million in corporate bonds.  As of December 31, 2011, the maturity dates for commercial paper, U.S agency bonds, and corporate bonds range from 9 days to 0.6 years, 13 days to 0.7 years, and 0.6 years, respectively.  The amortized cost of these investments approximates fair market value.

At both June 30, 2012 and December 31, 2011, the par value of the auction-rate municipal securities ("ARS") was $1.3 million, respectively.  As described in more detail below, all of our ARS have unrealized losses which have been recorded in accumulated other comprehensive loss.  The maturity date for our auction-rate municipal securities is in December 2045.

In addition to the auction-rate municipal securities discussed above, at June 30, 2012, we had $11.5 million of other investments classified as held-to-maturity securities which included $5.0 million in U.S. agency bonds, $3.5 million in U.S. Treasury Notes, and $3.0 million in corporate bonds.  These other investments are recorded at amortized cost.  As of June 30, 2012, the maturity dates for the agency bonds, U.S. Treasury Notes, and corporate bonds range from 1.1 to 1.9 years, 1.1 to 1.8 years, and 1.1 years, respectively.  At December 31, 2011, we had $20.3 million of other investments classified as held-to-maturity securities which included $10.2 million in commercial paper, $8.1 million in U.S. agency bonds, and $2.0 million in U.S. Treasury Notes.  These other investments are recorded at amortized cost.  As of December 31, 2011, the maturity dates for the commercial paper, U.S. agency bonds, and U.S. Treasury Notes range from 1.1 to 1.6 years, 1.2 to 1.9 years, and 1.6 years, respectively.  The amortized cost of these investments approximates fair market value.

Level 3 Gains and Losses

The table presented below summarizes the change in balance sheet carrying values associated with Level 3 financial instruments for the six months ended June 30, 2012.

	Auction-rate
(in thousands)	municipal securities			Total
Balance at December 31, 2011	$	998		$	998
Purchases		-			-
Settlements (at par)		-			-
Transfers in/out of Level 3		-			-
Gains
Realized		-			-
Unrealized		-			-
Losses
Realized		-			-
Unrealized		(35	)		(35	)
Balance at June 30, 2012	$	963		$	963

All of the above ARS have been in a continuous unrealized loss position for 12 months or longer.  We continue to receive regular interest payments from each of our ARS at current market rates.

Historically, the ARS market was an active and liquid market where we could purchase and sell our ARS on a regular basis through auctions. As such, we classified our ARS as Level 1 investments in accordance with the FASB's guidance at December 31, 2007. Beginning in February 2008, several of our ARS failed at auction due to a decline in liquidity in the ARS and other capital markets. We will not be able to access our investments in ARS until future auctions are successful, ARS are called for redemption by the issuers, or until sold in a secondary market. As all of our investments in ARS currently lack short-term liquidity, we have classified these investments as non-current investments as of June 30, 2012 and December 31, 2011.

The estimated fair value of our holdings of ARS at June 30, 2012 was $1.0 million. To value our ARS, we determined the present value of the ARS at the balance sheet date by discounting the estimated future cash flows based on a fair value rate of interest and an expected time horizon to liquidity. We also evaluated the credit rating of the issuer and found them all to be investment grade securities. There was no change in our valuation method during the three and six months ended June 30, 2012 as compared to prior reporting periods. Our valuation analysis showed that our ARS have nominal credit risk. The impairment is due to liquidity risk. Additionally, as of June 30, 2012, we do not intend to sell the ARS, it is not more likely than not that we will be required to sell the ARS before recovery of their amortized cost bases, which may be at maturity, and we expect to recover the full amortized cost basis of these securities. As a result of our valuation analysis, our investment strategy, recurring dividend stream from these investments, and our strong cash and cash equivalents position, we have determined that the fair value of our ARS was temporarily impaired as of June 30, 2012.

We continue to monitor the market for ARS and consider its impact, if any, on the fair value of our investments. If current market conditions deteriorate further, we may be required to record additional unrealized losses in accumulated other comprehensive (loss) income. If the credit rating of the security issuers deteriorates, the anticipated recovery in market values does not occur, or we stop receiving dividends, we may be required to adjust the carrying value of these investments through impairment charges in our Consolidated Statements of Operations and Comprehensive Loss.