Investments and Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Abstract]

INVESTMENTS AND FAIR VALUE MEASUREMENTS

INVESTMENTS AND FAIR VALUE MEASUREMENTS

The Company's recurring financial assets and liabilities subject to fair value measurements are as follows:

	Fair Value Measurements as of March 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	162,649	$	162,649	$	—	$	—
Certificates of deposit	2,231		—		2,231		—
Bonds	4,308		4,308		—		—
Investment securities available for sale	65,242		60,577		4,665		—
Warrants (1)	1,319		—		—		1,319
Total	$	235,749	$	227,534	$	6,896	$	1,319
Liabilities:
Fair value of derivatives embedded within convertible debt	$	154,555	$	—	$	—	$	154,555

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(1) Warrants include 1,000,000 of LTS Warrants received on November 4, 2011 which were carried at $1,248 as of March 31, 2012 and are included in "Other assets". The company recognized a loss of $642 for the three months ended March 31, 2012 related to the change in fair value.

	Fair Value Measurements as of December 31, 2011
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	194,259	$	194,259	$	—	$	—
Certificates of deposit	2,206		—		2,206		—
Bonds	4,573		4,573		—		—
Investment securities available for sale	76,486		70,884		5,602		—
Warrants (1)	1,962		—		—		1,962
Total	279,486		269,716		7,808		1,962
Liabilities:
Fair value of derivatives embedded within convertible debt	$	133,500	$	—	$	—	$	133,500

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(1) Warrants include 1,000,000 of LTS Warrants received on November 4, 2011 which were carried at $1,890 as of December 31, 2011 and are included in "Other assets".

The fair value of investment securities available for sale included in Level 1 is based on quoted market prices from various stock exchanges. The Level 2 investment securities available for sale were not registered and do not have direct market quotes.

The fair value of derivatives embedded within convertible debt was $154,555 and $142,067 as of March 31, 2012 and 2011, respectively. The fair value of derivatives embedded within convertible debt was derived using a valuation model and have been classified as Level 3. The valuation model assumes future dividend payments by the Company and utilizes interest rates and credit spreads for secured to unsecured debt and unsecured to subordinated debt to determine the fair value of the derivatives embedded within the convertible debt. The changes in fair value of derivatives embedded within convertible debt are presented on the Condensed Consolidated Statements of Operations.

The value of the embedded derivatives is contingent on changes in interest rates of debt instruments maturing over the duration of the convertible debt, our stock price as well as projections of future cash and stock dividends over the term of the debt.  The interest rate component of the value of the embedded derivative is computed by comparing the yield on the Company's 11% Senior Secured Notes to the average difference in interest yields on unsecured, subordinated debt and comparable risk-free investments. Thus, the yields of the Company's 11% Senior Secured Notes, unsecured and subordinated debt and the comparable risk-free investments all affect the discount rate used to compute the value of embedded derivatives.  

The Company recognized charges of $21,057 and $575 for the three months ended March 31, 2012 and 2011, respectively.

The fair value of the warrants was derived using the Black-Scholes model and has been classified as Level 3. The assumptions used under the Black-Scholes model in computing the fair value of the warrants are based on contractual term of the warrants, volatility of the underlying stock based on the historical quoted prices of the underlying stock, assumed future dividend payments and a risk-free rate of return.

The unobservable inputs related to the valuations of the Level 3 assets and liabilities are as follows at March 31, 2012:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at March 31, 2012		Valuation Technique	Unobservable Input	Range (Actual)
Warrants	$	1,319	Option model	Stock price	$	1.78
				Exercise price	$	1.68
				Term (in years)	4.6
				Volatility	93.81		%
				Dividend rate	—
				Risk-free return	0.94		%
Fair value of derivatives embedded within convertible debt	154,555		Discounted cash flow	Assumed annual stock dividend	5		%
				Assumed annual cash dividend	$	1.60
				Yield to worst call on the Company's Senior Secured Notes	5.57		%
				Average spread of unsecured debt	1.26		%
				Average spread of subordinated debt	1.46		%
				Discount rate	7.75% - 8.75% (8.25%)

The unobservable inputs related to the valuations of the Level 3 assets and liabilities are as follows at December 31, 2011:

	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at December 31, 2011		Valuation Technique	Unobservable Input	Range (Actual)
Warrants	$	1,962	Option model	Stock price	$	2.48
				Exercise price	$	1.68
				Term (in years)	4.9
				Volatility	94.12		%
				Dividend rate	—
				Risk-free return	0.83		%
Fair value of derivatives embedded within convertible debt	133,500		Discounted cash flow	Assumed annual stock dividend	5		%
				Assumed annual cash dividend	$	1.60
				Yield to worst call on the Company's senior secured notes	9.33		%
				Average spread of unsecured debt	1.49		%
				Average spread of subordinated debt	1.89		%
				Discount rate	12% - 13% (12.5%)

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record assets and liabilities at fair value on a nonrecurring basis. Generally, assets and liabilities are recorded at fair value on a nonrecurring basis as a result of impairment charges. The Company had no nonrecurring nonfinancial assets subject to fair value measurements as of March 31, 2012 and 2011, respectively.