Price | 3.72 | EPS | -0 | |
Shares | 40 | P/E | -178 | |
MCap | 150 | P/FCF | 20 | |
Net Debt | -28 | EBIT | -0 | |
TEV | 122 | TEV/EBIT | -1,874 | TTM 2019-09-30, in MM, except price, ratios |
10-Q | 2020-09-30 | Filed 2020-11-06 |
10-Q | 2020-06-30 | Filed 2020-08-10 |
10-Q | 2020-03-31 | Filed 2020-05-08 |
10-K | 2019-12-31 | Filed 2020-03-12 |
10-Q | 2019-09-30 | Filed 2019-11-08 |
10-Q | 2019-06-30 | Filed 2019-08-08 |
10-Q | 2019-03-31 | Filed 2019-05-08 |
10-K | 2018-12-31 | Filed 2019-03-11 |
10-Q | 2018-09-30 | Filed 2018-11-07 |
10-Q | 2018-06-30 | Filed 2018-08-07 |
10-Q | 2018-03-31 | Filed 2018-05-04 |
10-K | 2017-12-31 | Filed 2018-03-09 |
10-Q | 2017-09-30 | Filed 2017-11-08 |
10-Q | 2017-06-30 | Filed 2017-08-04 |
10-Q | 2017-03-31 | Filed 2017-05-08 |
10-K | 2016-12-31 | Filed 2017-02-27 |
10-Q | 2016-09-30 | Filed 2016-11-04 |
10-Q | 2016-06-30 | Filed 2016-08-05 |
10-Q | 2016-03-31 | Filed 2016-05-06 |
10-K | 2015-12-31 | Filed 2016-03-11 |
10-Q | 2015-09-30 | Filed 2015-11-06 |
10-Q | 2015-06-30 | Filed 2015-08-07 |
10-Q | 2015-03-31 | Filed 2015-05-08 |
10-K | 2014-12-31 | Filed 2015-03-13 |
10-Q | 2014-09-30 | Filed 2014-11-06 |
10-Q | 2014-06-30 | Filed 2014-08-08 |
10-Q | 2014-03-31 | Filed 2014-05-09 |
10-K | 2013-12-31 | Filed 2014-03-14 |
10-Q | 2013-09-30 | Filed 2013-11-08 |
10-Q | 2013-06-30 | Filed 2013-08-09 |
10-Q | 2013-03-31 | Filed 2013-05-10 |
10-K | 2012-12-31 | Filed 2013-03-15 |
10-Q | 2012-09-30 | Filed 2012-11-09 |
10-Q | 2012-06-30 | Filed 2012-08-09 |
10-Q | 2012-03-31 | Filed 2012-05-10 |
10-K | 2011-12-31 | Filed 2012-03-15 |
10-Q | 2011-09-30 | Filed 2011-11-08 |
10-Q | 2011-06-30 | Filed 2011-08-09 |
10-Q | 2011-03-31 | Filed 2011-05-10 |
10-K | 2010-12-31 | Filed 2011-03-16 |
10-Q | 2010-09-30 | Filed 2010-11-09 |
10-Q | 2010-06-30 | Filed 2010-08-09 |
10-Q | 2010-03-31 | Filed 2010-05-17 |
10-K | 2009-12-31 | Filed 2010-03-22 |
8-K | 2021-02-18 | Earnings, Exhibits |
8-K | 2020-12-25 | Enter Agreement |
8-K | 2020-11-13 | |
8-K | 2020-10-28 | |
8-K | 2020-07-22 | |
8-K | 2020-05-21 | |
8-K | 2020-04-22 | |
8-K | 2020-02-19 | |
8-K | 2019-12-23 | |
8-K | 2019-10-30 | |
8-K | 2019-10-02 | |
8-K | 2019-07-24 | |
8-K | 2019-05-23 | |
8-K | 2019-04-24 | |
8-K | 2019-02-20 | |
8-K | 2019-01-14 | |
8-K | 2018-11-06 | |
8-K | 2018-10-31 | |
8-K | 2018-07-25 | |
8-K | 2018-05-25 | |
8-K | 2018-04-25 | |
8-K | 2018-04-11 | |
8-K | 2018-02-21 | |
8-K | 2018-02-21 |
Part I. Financial Information |
Item 1. Financial Statements (Unaudited) |
Note 1. Basis of Presentation |
Note 2. Investments and Fair Value Measurements |
Note 3. Inventories |
Note 4. Property, Plant and Equipment, Net |
Note 5. Accrued Liabilities |
Note 6. Related Party Transactions |
Note 7. Investments in Privately - Held Raw Material Companies |
Note 8. Stockholders' Equity |
Note 9. Stock - Based Compensation |
Note 10. Net Income (Loss) per Share |
Note 11. Segment Information and Foreign Operations |
Note 12. Commitments and Contingencies |
Note 13. Other Income (Expense), Net |
Note 14. Income Taxes |
Note 15. Revenue |
Note 16. Bank Loans and Line of Credit |
Note 17. Leases |
Note 18. Recent Accounting Pronouncements |
Note 19. Subsequent Events |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
Item 4. Controls and Procedures |
Part II. Other Information |
Item 1. Legal Proceedings |
Item 1A. Risk Factors |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. Defaults Upon Senior Securities |
Item 4. Mine Safety Disclosures |
Item 5. Other Information |
Item 6. Exhibits |
EX-31.1 | tmb-20200930xex31d1.htm |
EX-31.2 | tmb-20200930xex31d2.htm |
EX-32.1 | tmb-20200930xex32d1.htm |
EX-32.2 | tmb-20200930xex32d2.htm |
Balance Sheet | Income Statement | Cash Flow |
---|---|---|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
0
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended
Or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer |
(Address of principal executive offices) (Zip code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
| Trading Symbol |
| Name of each exchange on which registered: |
Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check-mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check-mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ◻ | ⌧ | |
Non-accelerated filer ◻ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check-mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ⌧
NO
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at November 1, 2020 | |
Common Stock, $0.001 par value |
AXT, INC.
FORM 10-Q
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
AXT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)
| September 30, |
| December 31, |
| |||
2020 | 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Short-term investments |
| |
| | |||
Accounts receivable, net of allowances of $ |
| |
| | |||
Inventories |
| |
| | |||
Prepaid expenses and other current assets |
| |
| | |||
Total current assets |
| |
| | |||
Long-term investments |
| |
| — | |||
Property, plant and equipment, net |
| |
| | |||
Operating lease right-of-use assets | | | |||||
Other assets |
| |
| | |||
Total assets | $ | | $ | | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | | $ | | |||
Accrued liabilities |
| |
| | |||
Bank loan | | | |||||
Total current liabilities |
| |
| | |||
Long-term portion of royalty payments |
| |
| — | |||
Noncurrent operating lease liabilities | | | |||||
Other long-term liabilities |
| |
| | |||
Total liabilities |
| |
| | |||
Commitments and contingencies (Note 12) | |||||||
Stockholders’ equity: | |||||||
Preferred stock Series A, $ |
| |
| | |||
Common stock, $ |
| |
| | |||
Additional paid-in capital |
| |
| | |||
Accumulated deficit |
| ( |
| ( | |||
Accumulated other comprehensive loss |
| ( |
| ( | |||
Total AXT, Inc. stockholders’ equity |
| |
| | |||
Noncontrolling interests |
| |
| | |||
Total stockholders’ equity |
| |
| | |||
Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
3
ub
AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
| Three Months Ended |
| Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||||
2020 |
| 2019 | 2020 |
| 2019 | |||||||||
Revenue | $ | | $ | | $ | | $ | | ||||||
Cost of revenue |
| |
| |
| |
| | ||||||
Gross profit |
| |
| |
| |
| | ||||||
Operating expenses: | ||||||||||||||
Selling, general and administrative |
| |
| |
| |
| | ||||||
Research and development |
| |
| |
| |
| | ||||||
Total operating expenses |
| |
| |
| |
| | ||||||
Income (loss) from operations |
| |
| ( |
| |
| | ||||||
Interest income (expense), net |
| ( |
| |
| ( |
| | ||||||
Equity in income (loss) of unconsolidated joint ventures |
| |
| ( |
| ( |
| ( | ||||||
Other income (expense), net |
| ( |
| |
| |
| ( | ||||||
Income (loss) before provision for income taxes |
| |
| ( |
| |
| | ||||||
Provision for income taxes |
| |
| |
| |
| | ||||||
Net income (loss) |
| |
| ( |
| |
| | ||||||
Less: Net income attributable to noncontrolling interests |
| ( |
| ( |
| ( |
| ( | ||||||
Net income (loss) attributable to AXT, Inc. | $ | | $ | ( | $ | | $ | ( | ||||||
Net income (loss) attributable to AXT, Inc. per common share: | ||||||||||||||
Basic | $ | | $ | ( | $ | | $ | ( | ||||||
Diluted | $ | | $ | ( | $ | | $ | ( | ||||||
Weighted-average number of common shares outstanding: | ||||||||||||||
Basic |
| |
| |
| |
| | ||||||
Diluted |
| |
| |
| |
| |
See accompanying notes to condensed consolidated financial statements.
4
AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| |||||
Net income (loss) | $ | | $ | ( | $ | | $ | | |||||
Other comprehensive income (loss), net of tax: | |||||||||||||
Change in foreign currency translation gain (loss), net of tax |
| |
| ( |
| |
| ( | |||||
Change in unrealized gain on available-for-sale debt investments, net of tax |
| ( |
| ( |
| |
| | |||||
Reclassification adjustment for gains included in net loss upon deconsolidation of a subsidiary | — | — | — | ( | |||||||||
Total other comprehensive income (loss), net of tax |
| |
| ( |
| |
| ( | |||||
Comprehensive income (loss) |
| |
| ( |
| |
| ( | |||||
Less: Comprehensive income attributable to noncontrolling interests |
| ( |
| ( |
| ( |
| ( | |||||
Comprehensive income (loss) attributable to AXT, Inc. | $ | | $ | ( | $ | | $ | ( |
See accompanying notes to condensed consolidated financial statements.
5
AXT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended | |||||||
September 30, | |||||||
| 2020 |
| 2019 | ||||
Cash flows from operating activities: | |||||||
Net income | $ | | $ | | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization |
| |
| | |||
Amortization of marketable securities premium |
| |
| | |||
Impairment charge on equity investee | — | | |||||
Stock-based compensation |
| |
| | |||
Provision for doubtful accounts |
| |
| — | |||
Loss on disposal of equipment |
| |
| | |||
Gain from deconsolidation of a subsidiary | — | ( | |||||
Loss from equity method investments, net |
| |
| | |||
Return on equity method investments | — | | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable |
| ( |
| | |||
Inventories |
| |
| | |||
Prepaid expenses and other current assets |
| ( |
| | |||
Other assets |
| ( |
| ( | |||
Accounts payable |
| |
| ( | |||
Accrued liabilities |
| ( |
| ( | |||
Other long-term liabilities, including royalties |
| |
| | |||
Net cash provided by operating activities |
| |
| | |||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment |
| ( |
| ( | |||
Purchases of available-for-sale debt securities |
| ( |
| ( | |||
Proceeds from sales and maturities of available-for-sale debt securities |
| |
| | |||
Net cash used in investing activities |
| ( |
| ( | |||
Cash flows from financing activities: | |||||||
Proceeds from common stock options exercised |
| |
| | |||
Proceeds from sale of previously consolidated subsidiary shares | — | | |||||
Consideration paid to repurchase subsidiary shares from noncontrolling interests | — | ( | |||||
Payments on short-term loan | ( | — | |||||
Proceeds from short-term loan |
| |
| | |||
Proceeds from sale of subsidiary shares to noncontrolling interests | | — | |||||
Dividends paid by joint ventures to their minority shareholders |
| ( |
| — | |||
Net cash provided by (used in) financing activities |
| ( |
| | |||
Effect of exchange rate changes on cash and cash equivalents |
| |
| ( | |||
Net increase (decrease) in cash and cash equivalents |
| ( |
| | |||
Cash and cash equivalents at the beginning of the year |
| |
| | |||
Cash and cash equivalents at the end of the year | $ | | $ | | |||
Supplemental disclosure of non-cash flow information: | |||||||
Consideration payable to repurchase subsidiary shares from noncontrolling interests, included in accrued liabilities | $ | — | $ | | |||
Reduction of noncontrolling interests in excess (deficit) of total consideration paid and payable in connection with the repurchase of subsidiary shares from noncontrolling interests | $ | — | $ | ( |
See accompanying notes to condensed consolidated financial statements.
6
AXT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements of AXT, Inc. (“AXT,” the “Company,” “we,” “us,” and “our” refer to AXT, Inc. and all of its consolidated subsidiaries) are unaudited, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, this interim quarterly financial report does not include all disclosures required by US GAAP. In the opinion of our management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of AXT and our consolidated subsidiaries for all periods presented.
Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with US GAAP. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. These estimates and assumptions may change as new events occur and additional information is obtained. Actual results could differ materially from those estimates.
The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these condensed consolidated financial statements be read in conjunction with our consolidated financial statements and the notes thereto included in our 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2020 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and June 30, 2020 filed with the SEC on May 8, 2020 and August 7, 2020, respectively.
The condensed consolidated financial statements include the accounts of AXT, our wholly-owned subsidiaries, Beijing Tongmei Xtal Technology Co., Ltd. (“Tongmei”), Baoding Tongmei Xtal Technology Co., Ltd. (“Tongmei Baoding”), ChaoYang Tongmei Xtal Technology Co., Ltd. (“Tongmei ChaoYang”), and ChaoYang LiMei Semiconductor Technology Co., Ltd. (“LiMei ChaoYang”), and, except as discussed below and in Note 7, our majority-owned subsidiaries, Nanjing JinMei Gallium Co., Ltd. (“JinMei”), ChaoYang JinMei Gallium Ltd., MaAnShan JinMei Gallium Ltd., and Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd. (“BoYu”). Tongmei Baoding is located in the city of Dingxing, China. Each of Tongmei ChaoYang and LiMei ChaoYang is located in the city of Kazuo, China. All significant inter-company accounts and transactions have been eliminated. Investments in business entities in which we do not have controlling interests, but have the ability to exercise significant influence over operating and financial policies (generally 20-50% ownership), are accounted for by the equity method. As of September 30, 2020 and December 31, 2019, we have
When market conditions are warranted, we intend to construct facilities at the LiMei ChaoYang location to provide us with additional production capacity. For the three and nine months ended September 30, 2020, expenses associated with LiMei ChaoYang had a de minimis impact on our condensed consolidated financial statements.
As discussed in Note 7, “Investments in Privately-Held Companies”, effective as of March 11, 2019 we reduced our ownership in Beijing JiYa Semiconductor Material Co., Ltd. (“JiYa”) from
7
Financial Officer was no longer a member of JiYa’s board of financial supervisors. Therefore, we deconsolidated JiYa from our consolidated financial statements as of March 11, 2019 in accordance with Accounting Standards Codification (“ASC”) Topic 810 Consolidation (“ASC 810”). As of March 12, 2019, we accounted for our retained investment in JiYa under the equity method of accounting, as we continue to exercise significant influence.
Our condensed consolidated balance sheet as of December 31, 2019, as reported, does not include the assets and liabilities of JiYa since we deconsolidated JiYa as of March 11, 2019. Our unaudited condensed consolidated statement of operations for the nine months ended September 30, 2019 includes JiYa’s results for the period through March 11, 2019.
As discussed in Note 7, in May 2019, we purchased the remaining
Note 2. Investments and Fair Value Measurements
Our cash and cash equivalents consist of cash and instruments with original maturities of less than three months. Our investments consist of instruments with original maturities of more than three months. As of September 30, 2020 and December 31, 2019, our cash, cash equivalents and debt investments are classified as follows (in thousands):
September 30, 2020 | December 31, 2019 |
| |||||||||||||||||||||||
|
| Gross |
| Gross |
|
|
| Gross |
| Gross |
|
| |||||||||||||
Amortized | Unrealized | Unrealized | Fair | Amortized | Unrealized | Unrealized | Fair |
| |||||||||||||||||
| Cost |
| Gain |
| (Loss) |
| Value |
| Cost |
| Gain |
| (Loss) |
| Value |
| |||||||||
Classified as: | |||||||||||||||||||||||||
Cash | $ | | $ | — | $ | — | $ | | $ | | $ | — | $ | — | $ | | |||||||||
Cash equivalents: | |||||||||||||||||||||||||
Certificates of deposit 1 | — | — | — | — | — | — | — | — | |||||||||||||||||
Total cash and cash equivalents |
| |
| — |
| — |
| |
| |
| — |
| — |
| | |||||||||
Investments (available-for-sale): | |||||||||||||||||||||||||
Certificates of deposit 2 |
| |
| | — |
| |
| |
| | — |
| | |||||||||||
Corporate bonds |
| |
| |
| — |
| |
| |
| |
| ( |
| | |||||||||
Total investments |
| |
| |
| — |
| |
| |
| |
| ( |
| | |||||||||
Total cash, cash equivalents and investments | $ | | $ | | $ | — | $ | | $ | | $ | | $ | ( | $ | | |||||||||
Contractual maturities on investments: | |||||||||||||||||||||||||
Due within 1 year 3 | $ | | $ | | $ | | $ | | |||||||||||||||||
Due after 1 through 5 years 4 |
| |
| |
| — |
| — | |||||||||||||||||
$ | | $ | | $ | | $ | |
1. | Certificates of deposit with original maturities of less than three months. |
2. | Certificates of deposit with original maturities of more than three months. |
3. | Classified as “Short-term investments” in our condensed consolidated balance sheets. |
4. | Classified as “Long-term investments” in our condensed consolidated balance sheets. |
8
We manage our debt investments as a single portfolio of highly marketable securities that is intended to be available to meet our current cash requirements. Certificates of deposit and corporate bonds are typically held until maturity.
Historically, the gross unrealized losses related to our portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations and not due to increased credit risk or other valuation concerns. There were no gross unrealized losses on our available-for-sale debt securities as of September 30, 2020, and historically, such gross unrealized losses have been temporary in nature and we believe that it is probable the principal and interest will be collected in accordance with the contractual terms. We review our debt investment portfolio at least quarterly, or when there are changes in credit risks or other potential valuation concerns, to identify and evaluate whether an allowance for credit losses or impairment would be necessary. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and our ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.
None of our debt investments would generate a loss if we sold them on September 30, 2020.
The following table summarizes the fair value and gross unrealized losses related to available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2019 (in thousands):
In Loss Position | In Loss Position | Total In |
| ||||||||||||||||
< 12 months | > 12 months | Loss Position |
| ||||||||||||||||
|
|
| Gross |
|
|
| Gross |
|
|
| Gross |
| |||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized |
| |||||||||||||
As of December 31, 2019 | Value | (Loss) | Value | (Loss) | Value | (Loss) |
| ||||||||||||
Investments: | |||||||||||||||||||
Corporate bonds |
| |
| ( |
| — |
| — |
| | ( | ||||||||
Total in loss position | $ | | $ | ( | $ | — | $ | — | $ | | $ | ( |
Investments in Privately-held Raw Material Companies
We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business (see Note 7). The investment balances for the non-consolidated companies are accounted for under the equity method and included in “Other assets” in the condensed consolidated balance sheets and totaled $
Fair Value Measurements
We invest primarily in money market accounts, certificates of deposits, corporate bonds and notes, and government securities. We review our debt investment portfolio for credit loss at least quarterly or when there are changes in credit risk or other potential valuation concerns. As of September 30, 2020 and December 31, 2019, the total unrealized loss, net of tax, included in accumulated other comprehensive loss was immaterial. We believe it is probable the principal and interest will be collected in accordance with the contractual terms, and the unrealized loss on these securities was due to normal market fluctuations, and not due to increased credit risk or other valuation concerns. ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes three levels of inputs that may be used to measure fair value. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets of the asset or identical assets. Level 2 instrument valuations are obtained from readily-available, observable pricing sources for comparable instruments. Level 3 instrument valuations are obtained from unobservable inputs in which there is little or no market data, which require us to develop our own assumptions. On a recurring basis,
9
we measure certain financial assets and liabilities at fair value, primarily consisting of our short-term and long-term debt investments.
The type of instrument valued based on quoted market prices in active markets include our money market funds, which are generally classified within Level 1 of the fair value hierarchy. We classify our available-for-sale debt securities including certificates of deposit and corporate bonds as having Level 2 inputs. The valuation techniques used to measure the fair value of these financial instruments having Level 2 inputs were derived from bank statements, quoted market prices, broker or dealer statements or quotations, or alternative pricing sources with reasonable levels of price transparency.
We place short-term foreign currency hedges that are intended to offset the potential cash exposure related to fluctuations in the exchange rate between the United States dollar and Japanese yen. We measure the fair value of these foreign currency hedges at each month end and quarter end using current exchange rates and in accordance with US GAAP. At quarter end, any foreign currency hedges not settled are netted in “Accrued liabilities” on the condensed consolidated balance sheet and classified as Level 3 assets and liabilities. As of September 30, 2020, the net change in fair value from the placement of the hedge to settlement at each month end during the quarter had a de minimis impact on the condensed consolidated results.
There were no changes in valuation techniques or related inputs in the three and nine months ended September 30, 2020. There have been
The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis in accordance with ASC 820 as of September 30, 2020 (in thousands):