Note 7 - Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Disclosures [Text Block]

7.   Fair Value Measurements

Fair value is defined as the price that would be received for selling an asset or 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. The accounting standard surrounding fair value measurements establishes a fair value hierarchy, consisting of three levels, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Financial Assets Measured at Fair Value on a Recurring Basis

The Company utilized levels 1 and 2 to value its financial assets on a recurring basis.  Level 1 instruments use quoted prices in active markets for identical assets or liabilities, which include the Company’s cash accounts, short-term deposits and money market funds as these specific assets are liquid.  Level 1 instruments also include United States government securities, government agencies, state and municipalities, and substantially all mortgage-backed securities as these securities are backed by the federal or state governments and traded in active markets frequently with sufficient volume.  Level 2 instruments are valued using the market approach, which uses 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 and include corporate obligations and asset-backed securities as similar or identical instruments can be found in active markets. At both September 30, 2011 and December 31, 2010, there were no significant transfers that occurred between levels 1 and 2 of the Company’s financial assets.  At both September 30, 2011 and December 31, 2010, the Company did not utilize level 3 to value its financial assets on a recurring basis.  Level 3 is supported by little or no market activity and requires a high level of judgment to determine fair value.

A summary of financial assets measured at fair value on a recurring basis at September 30, 2011 and December 31, 2010 were as follows:

			September 30, 2011						December 31, 2010
			Fair Value Measurements						Fair Value Measurements
			at Reporting Date Used						at Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs				Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs
	Total		(Level 1)		(Level 2)		Total		(Level 1)		(Level 2)
	(in thousands)
Cash, including short-term deposits (1)	$	10,225	$	10,225	$	-	$	19,598	$	19,598	$	-
United States government securities (2)		338,959		338,959		-		57,756		57,756		-
Government agencies (2)		3,536		3,536		-		53,322		53,322		-
Mortgage-backed securities (2)		-		-		-		32,266		31,870		396
State and municipalities (2)		-		-		-		3,984		3,984		-
Corporate obligations (3)		1,532		-		1,532		184,976		-		184,976
Asset-backed securities (2)		-		-		-		509		-		509
Total	$	354,252	$	352,720	$	1,532	$	352,411	$	166,530	$	185,881

(1) At September 30, 2011, the Company recorded $10.1 million and $0.1 million within “Cash and cash equivalents,” and “Marketable securities,” respectively.  At December 31, 2010, the Company recorded $19.5 million and $0.1 million within “Cash and cash equivalents” and “Marketable securities,” respectively.

(2) Recorded within “Marketable securities.”

(3) At September 30, 2011, the Company recorded zero and $1.5 million within “Cash and cash equivalents” and “Marketable securities,” respectively.  At December 31, 2010, the Company recorded $18.8 million and $166.2 million within “Cash and cash equivalents” and “Marketable securities,” respectively.

The Company’s other financial instruments include accounts payable and accrued and other liabilities.  Carrying values of these financial liabilities approximate their fair values due to the relatively short maturity of these items.  The related cost basis for the Company’s 3/4% Convertible Senior Notes due December 22, 2023 (the “3/4% Notes”) at both September 30, 2011 and December 31, 2010 was approximately $0.3 million. Although the remaining balance of its 3/4% Notes is relatively small and the market trading is very limited, the Company expects the cost basis for the 3/4% Notes of approximately $0.3 million at both September 30, 2011 and December 31, 2010 to approximate fair value. The Company’s convertible debt is recorded at its carrying value, not the estimated fair value.

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

The Company utilized level 3 to value its non-financial assets on a non-recurring basis.  Level 3, which is categorized as significant unobservable inputs, included the Company’s long-lived assets classified as held for sale and non-controlling interest in certain non-public companies through two venture capital funds, Pacven Walden Ventures V Funds and APV Technology Partners II, L.P.  Although the Company used the market approach for the fair value of its long-lived assets classified as held for sale based on similar assets either sold, pending sale or available for sale, the terms of these similar assets are highly subjective, resulting in the classification as level 3.  The Company regularly monitors its two venture capital funds and records these investments within “Other long-term assets” on the Condensed Balance Sheets based on quarterly statements the Company receives from each of the funds.  The statements are generally received one quarter in arrears, as more timely valuations are not practical.  The statements reflect the net asset value, which the Company uses to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company.  The assumptions used by the Company, due to lack of observable inputs, may impact the fair value of these equity investments in future periods.  In the event that the carrying value of its equity investments exceeds their fair value, or the decline in value is determined to be other-than-temporary, the carrying value is reduced to its current fair value, which is recorded in “Interest and other income, net,” in the Condensed Statements of Operations.  At both September 30, 2011 and December 31, 2010, there were no transfers in or out of level 3 related to the Company’s long-lived assets classified as held for sale and the Company’s two venture capital funds.

Non-financial assets measured at fair value on a non-recurring basis at September 30, 2011 were as follows:

			Fair Value Measurement at
			Reporting Date Used
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Non-controlling interests in certain funds	$	1,117	$	-	$	-	$	1,117

Non-financial assets measured at fair value on a non-recurring basis at December 31, 2010 were as follows:

			Fair Value Measurement at
			Reporting Date Used
			Quoted Prices  in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Non-controlling interests in certain funds	$	1,184	$	-	$	-	$	1,184
Long-lived asset held for sale		6,000		-		-		6,000
	$	7,184	$	-	$	-	$	7,184