Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

v2.4.0.8
Financial Instruments
 9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Financial Instruments
Financial Instruments
The composition of financial instruments is as follows:
 
September 30, 2013
Amortized
Cost
 
Gross Unrealized
 
Fair
Value
Gains
 
Losses
 
Money market funds
$
3,670

 
$
—

 
$
—

 
$
3,670

Government debt securities
19,770

 
11

 
(1
)
 
19,780

Corporate debt securities
36,730

 
15

 
(6
)
 
36,739

 
60,170

 
26

 
(7
)
 
60,189

Less amounts included in cash and cash equivalents
(3,670
)
 
—

 
—

 
(3,670
)
 
$
56,500

 
$
26

 
$
(7
)
 
$
56,519

 
December 31, 2012
Amortized
Cost
 
Gross Unrealized
 
Fair
Value
Gains
 
Losses
 
Money market funds
$
4,643

 
$
—

 
$
—

 
$
4,643

Government debt securities
6,000

 
3

 
—

 
6,003

Corporate debt securities
49,441

 
6

 
(4
)
 
49,443

 
60,084

 
9

 
(4
)
 
60,089

Less amounts included in cash and cash equivalents
(4,643
)
 
—

 
—

 
(4,643
)
 
$
55,441

 
$
9

 
$
(4
)
 
$
55,446


As of September 30, 2013, the Company held 11 corporate and government debt securities with an aggregate fair value of $15.3 million that were in an unrealized loss position for less than 12 months. The gross unrealized losses of $0.01 million at September 30, 2013 represent temporary impairments on corporate and government debt securities related to multiple issuers, and were primarily caused by fluctuations in U.S. interest rates. The Company has determined that the gross unrealized losses on these securities at September 30, 2013 are temporary in nature. The Company evaluates securities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer; including changes in the financial condition of the security’s underlying collateral; any downgrades of the security by a rating agency; nonpayment of scheduled interest, or the reduction or elimination of dividends; as well as our intent and ability to hold the security in order to allow for an anticipated recovery in fair value. All of the Company’s long-term available-for-sale securities were due between 1 and 2 years as of September 30, 2013.
The fair values of the Company’s financial instruments are the amounts that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants and are recorded using a hierarchal disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The levels are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available.
The Company classifies its financial instruments within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted market prices or alternate pricing sources and models utilizing market observable inputs, respectively. The Company’s money market funds were valued based on quoted prices for the specific securities in an active market and were therefore classified as Level 1. The government and corporate debt securities have been valued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models. The pricing services may use a consensus price which is a weighted average price based on multiple sources or mathematical calculations to determine the valuation for a security, and have been classified as Level 2. The Company reviews Level 2 inputs and fair value for reasonableness and the values may be further validated by comparison to independent pricing sources. In addition, the Company reviews third-party pricing provider models, key inputs and assumptions and understands the pricing processes at its third-party providers in determining the overall reasonableness of the fair value of its Level 2 financial instruments. As of September 30, 2013 and December 31, 2012, the Company has not made any adjustments to the prices obtained from its third party pricing providers. The Company held no Level 3 financial instruments as of September 30, 2013 and December 31, 2012.
The following table presents a summary of the Company’s financial instruments that are measured on a recurring basis:
 
 
 
Fair Value Measurements at September 30, 2013
 
Balance at
September 30,
2013
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Money market funds
$
3,670

 
$
3,670

 
$
—

 
$
—

Government debt securities
19,780

 
—

 
19,780

 
—

Corporate debt securities
36,739

 
—

 
36,739

 
—

 
$
60,189

 
$
3,670

 
$
56,519

 
$
—

 
 
 
Fair Value Measurements at December 31, 2012
 
Balance at
December 31,
2012
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Money market funds
$
4,643

 
$
4,643

 
$
—

 
$
—

Government debt securities
6,003

 
—

 
6,003

 
—

Corporate debt securities
49,443

 
—

 
49,443

 
—

 
$
60,089

 
$
4,643

 
$
55,446

 
$
—


There were no transfers between Level 1, Level 2 or Level 3 securities in the nine months ended September 30, 2013.