Shutterfly 2011 Annual Report Download - page 59

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Recent Accounting Pronouncements
Effective January 1, 2010, the Company adopted revised guidance issued by the Financial Accounting Standards Board ("FASB") that was
intended to improve disclosures related to fair value measurements. This guidance requires the Company to separate information about
significant transfers in and out of Level 1 and Level 2 and the reason for such transfers, and also requires information related to purchases, sales,
issuances, and settlements of Level 3 financial assets to be included in the rollforward of activity. The guidance also requires the Company to
provide certain disaggregated information on the fair value of financial assets and requires the Company to disclose valuation techniques and
inputs used for both recurring and nonrecurring fair value measurements of our Level 2 and Level 3 financial assets. The Company has provided
the additional required disclosures effective January 1, 2010.
Note 3 – Fair Value Measurement
The components of the Company’
s cash equivalents and investments, including the recognized gains (losses) associated with each are as
follows (in thousands):
In January 2008, the Company purchased Auction Rate Securities ("ARS") investment held with UBS AG ("UBS"), one of the Company’
s
investment providers. Since inception in 2008 and due to uncertainties in the credit markets, all scheduled auctions began to fail and the
investments were illiquid resulting in Level 3 financial asset classification. In November 2008, the Company accepted an offer (the “Right”
)
from UBS entitling the Company to sell at par value ARS purchased from UBS at anytime during a two-
year period from June 30, 2010 through
July 2, 2012. On June 30, 2010, the Company exercised the Right to liquidate its remaining ARS investments at par value. On July 1, 2010, that
transaction was executed and the Company received proceeds of $26.3 million, which were immediately invested in Treasury securities. As of
December 31, 2010, the Company only held Level 1 financial assets which were all invested in money market funds, primarily in U.S. Treasury
and U.S. agency securities.
The following table provides a summary of activity related to the Company’s ARS investments and the Right (in thousands):
Note 4 — Balance Sheet Components
Intellectual Property Prepaid Royalties
Total amortization for these license agreements in 2010 and 2009 were $694,000 and $234,000, respectively. As of December 31, 2010, the
Company had a balance of $4.8 million in unamortized prepaid royalties. Amortization of these licenses is estimated as follows (in thousands):
Table of Contents
December 31, 2010
December 31, 2009
Cost
Recognized
Gains /
(Losses)
included in
earnings
Fair Value
Cost
Recognized
Gains /
(Losses)
included in
earnings
Fair Value
Cash Equivalents
Money Market Funds
$
211,385
$
—
$
211,385
$
113,966
$
—
$
113,966
Total Cash Equivalents
211,385
—
211,385
113,966
—
113,966
Auction Rate Securities
—
—
—
47,925
(6,266
)
41,659
Rights from UBS
—
—
—
—
6,266
6,266
Total Cash Equivalents and Investments
$
211,385
$
—
$
211,385
$
161,891
$
—
$
161,891
Rights
ARS
Balance at December 31, 2009
$
6,266
$
41,659
Sales of ARS investments
—
(
47,925
)
Recognized gain/(loss) included in earnings (Interest and other income, net)
(6,266
)
6,266
Balance at December 31, 2010
$
—
$
—
Year Ending:
2011
$
730
2012
730
2013
730
2014
730
2015
498
Thereafter
1,370
$
4,788
50