Investments

3 Months Ended

Mar. 31, 2012

Investments

Investments

C.    Investments

As of March 31, 2012 and December 31, 2011, the combined total of our short- and long-term investments equaled $180.2 million and $166.2 million, respectively, and consisted of securities classified as available-for-sale in accordance with accounting standards which provide guidance related to accounting and classification of certain investments in debt and equity securities.

The following is a summary of our short- and long-term investments as of March 31, 2012 and December 31, 2011 (in thousands):

	March 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term investments:
Corporate debt securities
Due in one year or less	$	53,623	$	120	$	(21	)	$	53,722
Due in one to three years	43,795		93		(29		)	43,859
U.S. treasury and government agency securities
Due in one year or less	17,474		72		(1		)	17,545
Due in one to three years	40,584		159		(18		)	40,725
Commercial paper
Due in one year or less	3,999		—		(1		)	3,998
Due in one to three years	2,992		—		(8		)	2,984
Total short-term investments	$	162,467	$	444	$	(78	)	$	162,833
Long-term investments:
Auction rate securities
Due after five years	19,800		—		(2,391		)	17,409
Total long-term investments	$	19,800	$	—	$	(2,391	)	$	17,409
Total short and long-term investments	$	182,267	$	444	$	(2,469	)	$	180,242

	December 31, 2011
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
Short-term investments:
Corporate debt securities
Due in one year or less	$	74,687	$	81	$	(115	)	$	74,653
Due in one to three years	19,950		73		(50		)	19,973
U.S. treasury and government agency securities
Due in one year or less	26,770		67		(7		)	26,830
Due in one to three years	21,028		228		—			21,256
Commercial paper
Due in one year or less	5,997		—		(6		)	5,991
Total short-term investments	$	148,432	$	449	$	(178	)	$	148,703
Long-term investments:
Auction rate securities
Due after five years	19,900		—		(2,373		)	17,527
Total long-term investments	$	19,900	$	—	$	(2,373	)	$	17,527
Total short and long-term investments	$	168,332	$	449	$	(2,551	)	$	166,230

Auction Rate Securities

As of March 31, 2012, we held a total of $17.4 million in fair market value of ARS, reflecting a reduction of approximately $2.4 million from the par value of these securities of approximately $19.8 million. As of March 31, 2012, all of our ARS were municipal bonds with an auction reset feature and were classified as available-for-sale. The majority of our ARS portfolio was rated AAA as of March 31, 2012 by at least one of the major securities rating agencies and was primarily collateralized by student loans substantially guaranteed by the U.S. government under the Federal Family Education Loan Program. As of March 31, 2012, all of our ARS continue to pay interest according to their stated terms.

In February 2008, our ARS began to experience failed auctions and have continued to experience failed auctions since that time. As a result of the lack of significant observable ARS market activity since February 2008, we use a discounted cash flow methodology to value these securities as opposed to valuing them at their par value. Our valuation analysis considers, among other items, assumptions that market participants would use in their estimates of fair value, such as the collateral underlying the security, the creditworthiness of the issuer and any associated guarantees, credit ratings of the security by the major securities rating agencies, the ability or inability to sell the investment in an active market or to the issuer, the timing of expected future cash flows, and the expectation of the next time the security will have a successful auction or when call features may be exercised by the issuer. In addition, for all available-for-sale debt securities with unrealized losses, management performs an analysis to assess whether we intend to sell or whether we would more likely than not be required to sell the security before the expected recovery of the amortized cost basis. In the event that we intend to sell a security, or may be required to do so, the decline in fair value of the security would be deemed to be other-than-temporary and the full amount of the unrealized loss would be recorded in our condensed consolidated statement of operations as an impairment loss. Regardless of our intent to sell a security, we perform additional analyses on all securities with unrealized losses to evaluate whether there could be a credit loss associated with the security. Based on the methodology and the analysis above, we have estimated the fair value of our ARS to be $17.4 million and have recorded the $2.4 million reduction in fair value as an unrealized loss to accumulated other comprehensive loss as of March 31, 2012.

Due to our belief that the market for ARS will likely take in excess of twelve months to fully recover, we have classified our portfolio of ARS as long-term investments in our condensed consolidated balance sheet as of March 31, 2012. We believe that the impairment related to our ARS is primarily attributable to the lack of liquidity of these investments, coupled with the ongoing uncertainty in the credit and capital markets, and we have no reason to believe that any of the underlying issuers of our ARS are presently at risk of default. All of our ARS have final maturity dates which occur approximately 20 to 35 years in the future. We believe we will ultimately be able to liquidate our investments in ARS without significant loss prior to their maturity dates primarily due to the collateral securing most of our ARS. However, it could take until final maturity of the ARS to realize the par value of our remaining ARS investments. As a result, we believe the decline in value of our ARS is a temporary impairment and similarly, any future fluctuation in fair value related to our ARS that we deem to be temporary, including any recoveries of previous write-downs, would be recorded to accumulated other comprehensive loss. If we determine that any future unrealized loss is other-than-temporary, we will record a charge to our condensed consolidated statement of operations. In the event that we need to access our investments in these securities, we will not be able to do so until a future auction is successful, the issuer calls the security pursuant to a mandatory tender or redemption prior to maturity, a buyer is found outside the auction process, or the securities mature. In the event we are forced to seek a buyer outside the auction process, we may realize a significant loss on the sale of these securities. In addition, as part of our determination of the fair value of our investments, we consider credit ratings provided by independent investment rating agencies as of the valuation date. These ratings are subject to change, and we may be required to adjust our future valuation of these ARS which may adversely affect the value of these investments. Based upon the various analyses described above, we did not recognize any unrealized credit losses related to our securities during the three months ended March 31, 2012.

Impairments and Unrealized Gains and Losses on Investments

The following is a summary of the fair value of our investments with unrealized losses that are deemed to be temporarily impaired and their respective gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2012 and December 31, 2011 (in thousands):

	March 31, 2012
	Less than 12 Months					12 Months or Greater					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Corporate debt securities	$	23,682	$	(50	)	$	—	$	—		$	23,682	$	(50	)
U.S. treasury and government agency securities	14,937		(19		)	—		—			14,937		(19		)
Commercial paper	6,982		(9		)	—		—			6,982		(9		)
Auction rate securities	—		—			17,409		(2,391		)	17,409		(2,391		)
	$	45,601	$	(78	)	$	17,409	$	(2,391	)	$	63,010	$	(2,469	)

	December 31, 2011
	Less than 12 Months					12 Months or Greater					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Corporate debt securities	$	34,097	$	(161	)	$	4,124	$	(4	)	$	38,221	$	(165	)
U.S. treasury and government agency securities	8,841		(7		)	—		—			8,841		(7		)
Commercial paper	5,991		(6		)	—		—			5,991		(6		)
Auction rate securities	—		—			19,900		(2,373		)	19,900		(2,373		)
	$	48,929	$	(174	)	$	24,024	$	(2,377	)	$	72,953	$	(2,551	)

We did not recognize any other-than-temporary impairment losses in our condensed consolidated statements of operations related to our securities during either as of March 31, 2012 or 2011. Future events may occur, or additional information may become available, which may cause us to identify credit losses where we do not expect to receive cash flows sufficient to recover the entire amortized cost basis of a security and which may necessitate the recording of future realized losses on securities in our portfolio. Significant losses in the estimated fair values of our investments could have a material adverse effect on our earnings in future periods.

Realized Gains and Losses on Investments

Gains and losses are determined on the specific identification method. Realized gains were insignificant during both the three months ended March 31, 2012 and 2011.