Fair Value Measurements

3 Months Ended

Dec. 31, 2013

Under FASB guidance, fair value is defined as the price expected to be received from the sale of an asset or paid to transfer a liability in a transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. The FASB guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that the market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect a company’s judgment concerning the assumptions that market participants would use in pricing the asset or liability developed based on the best information available at that time. The fair value hierarchy is broken down into the following three levels based on the reliability of inputs:


•	Level 1 – Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices which are readily and regularly available in an active market, valuation of these products can be done without a significant degree of judgment.


•	Level 2 – Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments and model-derived valuations in which all significant inputs and significant value drives are observable in active markets.


•	Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

As of December 31, 2013, the Company’s financial assets utilizing Level 1 inputs included investment securities traded on an active securities exchange. The Company did not have any financial assets utilizing Level 2 or Level 3 inputs at December 31, 2013 or September 30, 2013.

The following table represents the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis:



	December 31, 2013		September 30, 2013
	(Level 1)		(Level 1)
	(In thousands)
Money market instruments (1)	$	19,319	$	19,318
Semiconductor Manufacturing International Corp.
(SMIC) common stock (2)	2,351		1,793
Nanya Technology Corporation (Nanya) common stock (2)	9,021		16,624
	$	30,691	$	37,735


(1)	Included in cash and cash equivalents


(2)	Included in short-term investments

There were no transfers in or out of Level 1 assets during the three months ended December 31, 2013.

As of December 31, 2013, the Company did not have any liabilities or non-financial assets that are measured at fair value on a recurring basis.

Available-for-sale marketable securities consisted of the following:



December 31, 2013	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Money market instruments	$	19,319		$	—	$	—	$	19,319
Certificates of deposit	14,160			—		—		14,160
SMIC common stock	1,099			1,252		—		2,351
Nanya common stock	4,324			4,697		—		9,021
Total	38,902			5,949		—		44,851
Less: Amounts included in cash and cash
equivalents	(31,485		)	—		—		(31,485		)
	$	7,417		$	5,949	$	—	$	13,366

September 30, 2013	Amortized Cost			Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
				(In thousands)
Money market instruments	$	19,318		$	—	$	—	$	19,318
Certificates of deposit	15,595			—		—		15,595
SMIC common stock	1,099			694		—		1,793
Nanya common stock	7,100			9,524		—		16,624
Total	43,112			10,218		—		53,330
Less: Amounts included in cash and cash
equivalents	(31,772		)	—		—		(31,772		)
	$	11,340		$	10,218	$	—	$	21,558

During the three months ended December 31, 2013, the Company sold approximately 42.2 million shares of Nanya common stock for approximately $5.9 million which resulted in a pre-tax gain of approximately $3.1 million.

As of December 31, 2013 and September 30, 2013, the Company had cash, cash equivalents and short-term investments in foreign financial institutions of $65.3 million ($4.0 million of which was in China and subject to exchange control regulations) and $71.2 million, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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