Fair Value Measurements

9 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

4. Fair Value Measurements

The accounting guidance on fair value measurements defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. The guidance is applicable for all financial assets and financial liabilities and for all nonfinancial assets and nonfinancial liabilities recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and also considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.

Fair Value Hierarchy

Accounting guidance on fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Company’s Level 1 asset consists of its investment in OctoPlus, N.V. (“OctoPlus”) (see Note 7 for further information). The fair market value of this investment is based on the quoted price of OctoPlus shares as traded on the Euronext Amsterdam Stock Exchange.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities 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 asset or liability.

The Company’s Level 2 assets consist of money market funds, U.S. Treasury securities, corporate bonds, municipal bonds, U.S. government agency securities, government agency and municipal securities and certain asset-backed and mortgage-backed securities. Fair market values for these assets are based on quoted vendor prices and broker pricing where all significant inputs are observable.

Level 3 - Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

Level 3 assets can include asset-backed and mortgage-backed securities. When applicable, the fair market values of these investments are determined by broker pricing where not all significant inputs are observable. There were no Level 3 assets at March 31, 2011, June 30, 2011, March 31, 2012 or June 30, 2012 and there was no Level 3 activity during the third quarter of fiscal 2012 or fiscal 2011.

In valuing assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company did not significantly change its valuation techniques from prior periods.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 (in thousands):

	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value as of June  30, 2012
Assets:
Cash equivalents	$	—	$	14,601	$	—	$	14,601
Available-for-sale debt securities:
U.S. government and government agency obligations		—		32,774		—		32,774
Mortgage-backed securities		—		3,305		—		3,305
Municipal bonds		—		3,212		—		3,212
Asset-backed securities		—		910		—		910
Corporate bonds		—		2,119		—		2,119
Other assets		877		—		—		877
Total assets measured at fair value	$	877	$	56,921	$	—	$	57,798

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2011 (in thousands):

	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value as of September 30, 2011
Assets:
Cash equivalents	$	—	$	8,419	$	—	$	8,419
Available-for-sale debt securities:
U.S. government and government agency obligations		—		30,603		—		30,603
Mortgage-backed securities		—		3,933		15		3,948
Municipal bonds		—		3,614		—		3,614
Asset-backed securities		—		1,279		9		1,288
Corporate bonds		—		2,497		—		2,497
Other assets		1,190		—		—		1,190
Total assets measured at fair value	$	1,190	$	50,345	$	24	$	51,559

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following tables provide a reconciliation of financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands). Transfers of instruments into and out of Level 3 are based on beginning of period values.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Nine Months Ended June 30, 2012 Available-for-Sale Debt Securities
	Mortgage- Backed  Securities			Asset- Backed  Securities			Total
Balance at September 30, 2011	$	15		$	9		$	24
Transfers into Level 3		—			—			—
Transfers out of Level 3		(15	)		(9	)		(24	)
Total realized and unrealized gains (losses):
Included in other comprehensive (loss) income		—			—			—
Purchases		—			—			—
Issuances		—			—			—
Sales		—			—			—
Settlements		—			—			—
Balance at June 30, 2012	$	—		$	—		$	—

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Nine Months Ended June 30, 2011 Available-for-Sale Debt Securities
	U.S.  Government Obligations			Mortgage- Backed  Securities			Total
Balance at September 30, 2010	$	704		$	69		$	773
Transfers into Level 3		—			—			—
Transfers out of Level 3		(695	)		(68	)		(763	)
Total realized and unrealized gains (losses):
Included in other comprehensive (loss) income		19			(1	)		18
Purchases		—			620			620
Issuances		—			—			—
Sales		(28	)		(620	)		(648	)
Settlements		—			—			—
Balance at June 30, 2011	$	—		$	—		$	—