Conceptus (CPTS)

Cash Equivalents and Marketable Securities

        We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008 long-term investments consist of auction rate securities ("ARS").

        As of December 31, 2008, we held $48.5 million (par value) in ARS backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

        In November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus

38

Table of Contents

accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, at its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159, Establishing the Fair Value Option for Financial Assets and Liabilities. As a result, upon acceptance of the offer from UBS, we recorded approximately $5.1 million as the fair value of the Rights with a corresponding credit to other income. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not change net income (loss) for the applicable accounting period.

        In connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the probability of future successful auctions occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In the future we expect any changes in the fair value of our ARS to be materially offset in part by changes in the fair value of our put option with UBS.

        We continue to monitor the market for ARS and consider its impact (if any) on the fair market value of our investments. If the market conditions deteriorate further, we may be required to record additional unrealized losses in earnings, offset partially by corresponding increases in the put option. We believe that, based on our current cash and cash equivalents balance, the current lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, cash flows or ability to fund our operations.

39

Table of Contents

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS. See Note 11—Credit Line, for more information about this line of credit, Note 3—Long-term Investment and Note 4—Fair Value Measurements of our Notes to Consolidated Financial Statements for information about the accounting treatment of our ARS.

Cash Equivalents and Marketable Securities

        We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008 long-term investments consist of auction rate securities ("ARS").

        As of December 31, 2008, we held $48.5 million (par value) in ARS backed by federal and state student loans which are variable rate debt instruments and bear interest rates that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

        In November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus

38

Table of Contents

accrued but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, at its discretion, to purchase or sell our ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159, Establishing the Fair Value Option for Financial Assets and Liabilities. As a result, upon acceptance of the offer from UBS, we recorded approximately $5.1 million as the fair value of the Rights with a corresponding credit to other income. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not change net income (loss) for the applicable accounting period.

        In connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the probability of future successful auctions occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In the future we expect any changes in the fair value of our ARS to be materially offset in part by changes in the fair value of our put option with UBS.

        We continue to monitor the market for ARS and consider its impact (if any) on the fair market value of our investments. If the market conditions deteriorate further, we may be required to record additional unrealized losses in earnings, offset partially by corresponding increases in the put option. We believe that, based on our current cash and cash equivalents balance, the current lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, cash flows or ability to fund our operations.

39

Table of Contents

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to recover the par value support from UBS. See Note 11—Credit Line, for more information about this line of credit, Note 3—Long-term Investment and Note 4—Fair Value Measurements of our Notes to Consolidated Financial Statements for information about the accounting treatment of our ARS.

Cash Equivalents and Marketable Securities

        We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We
maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear
minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance
limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or
are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008
long-term investments consist of auction rate securities ("ARS").

        As
of December 31, 2008, we held $48.5 million (par value) in ARS backed by federal and state student loans which are variable rate debt instruments and bear interest rates
that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our
ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were
highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have
experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our
ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

        In
November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to
purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus

38

HREF="#bg10801a_main_toc">Table of Contents

accrued
but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, at its discretion, to purchase or sell our
ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are
not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as
determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's
obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has
disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We
have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159, Establishing the Fair Value Option for Financial Assets and
Liabilities. As a result, upon acceptance of the offer from UBS, we recorded approximately
$5.1 million as the fair value of the Rights with a corresponding credit to other income. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be
included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated
recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although
the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in
assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior
to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our
available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not
change net income (loss) for the applicable accounting period.

        In
connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we
transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put
option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We
recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated
other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized
loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use
of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the
probability of future successful auctions occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance
wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In
the future we expect any changes in the fair value of our ARS to be materially offset in part by changes in the fair value of our put option with UBS.

        We
continue to monitor the market for ARS and consider its impact (if any) on the fair market value of our investments. If the market conditions deteriorate further, we may be required
to record additional unrealized losses in earnings, offset partially by corresponding increases in the put option. We believe that, based on our current cash and cash equivalents balance, the current
lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, cash flows or ability to fund our operations.

39

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Table of Contents

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value
of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as
security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any
outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to
recover the par value support from UBS. See Note 11—Credit Line, for more information about this line of credit, Note 3—Long-term Investment and
Note 4—Fair Value Measurements of our Notes to Consolidated Financial Statements for information about the accounting treatment of our ARS.

Cash Equivalents and Marketable Securities

        We consider all highly liquid investments with maturity from date of purchase of three months or less to be cash equivalents. We
maintain deposits with three financial institutions and invest our excess cash primarily in money market funds, commercial paper, corporate notes, municipal bonds and government securities, which bear
minimal risk. Our cash and cash equivalents in our operating accounts are with third party financial institutions. At times, these balances exceed the Federal Deposit Insurance Corporation insurance
limits. While we monitor the cash balances in our operating accounts and adjust the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or
are subject to other adverse conditions in the financial markets. To date we have experienced no loss or lack of access to cash in our operating accounts. At December 31, 2008
long-term investments consist of auction rate securities ("ARS").

        As
of December 31, 2008, we held $48.5 million (par value) in ARS backed by federal and state student loans which are variable rate debt instruments and bear interest rates
that reset approximately every 20-30 days. These ARS have a contractual maturity ranging from 2028 through 2047.

        Our
ARS are long-term debt instruments backed by student loans, a substantial portion of which are guaranteed by the United States government. Prior to 2008, our ARS were
highly liquid, using a Dutch auction process that resets the applicable interest rate at predetermined intervals, typically every 20-30 days, to provide liquidity at par. We have
experienced failed auction in 2008 on all of our ARS. The failures of these auctions do not affect the value of the collateral underlying the ARS, and we continue to earn and receive interest on our
ARS at a pre-determined formula with spreads tied to particular interest rate indexes.

        In
November 2008, we accepted an offer from UBS AG ("UBS"), providing us with rights related to our auction rate security rights (the "Rights"). The Rights permit us to require UBS to
purchase our ARS at par value, which is defined as the price equal to the liquidation preference of the ARS plus

38

HREF="#bg10801a_main_toc">Table of Contents

accrued
but unpaid dividends or interest, at any time during the period of June 30, 2010 through July 2, 2012. Conversely, UBS has the right, at its discretion, to purchase or sell our
ARS at any time until July 2, 2012, so long as we receive payment at par value upon any sale or disposition. We expect to sell our ARS under the Rights at par value. However, if the Rights are
not exercised before July 2, 2012 they will expire and UBS will have no further rights or obligation to buy our ARS. So long as we hold our ARS, they will continue to accrue interest as
determined by the auction process or the terms of the ARS if the auction process fails.

        UBS's
obligations under the Rights are not secured by its assets and do not require UBS to obtain any financing to support its performance obligations under the Rights. UBS has
disclaimed any assurance that it will have sufficient financial resources to satisfy its obligations under the Rights.

        We
have accounted for the Rights as a freestanding financial instrument and elected to record the value of the Rights under the fair value option of SFAS No. 159, Establishing the Fair Value Option for Financial Assets and
Liabilities. As a result, upon acceptance of the offer from UBS, we recorded approximately
$5.1 million as the fair value of the Rights with a corresponding credit to other income. As a result of our elections to record the Rights at fair value, unrealized gains and losses will be
included in earnings in future periods. We estimated the fair value of the Rights using the expected value that we will receive from UBS which was calculated as the difference between the anticipated
recognized loss and par value of the ARS as of the option exercise date. This value was discounted by using a UBS credit default rate to account for the consideration of UBS credit risk.

        Although
the Rights represent the right to sell the securities back to UBS at par, we will be required to periodically assess the economic ability of UBS to meet that obligation in
assessing the fair value of the Rights. We will continue to classify the ARS as long-term investments until June 30, 2009, one year prior to the expected settlement.

        Prior
to accepting the UBS offer, we recorded our ARS as available-for-sale investments. We recorded unrealized gains and losses on our
available-for-sale securities, in accumulated other comprehensive income (loss) in the stockholders' equity section of our balance sheets. Such an unrealized loss did not
change net income (loss) for the applicable accounting period.

        In
connection with our acceptance of the UBS offer in November 2008, resulting in our right to require UBS to purchase our ARS at par value beginning on June 30, 2010, we
transferred our ARS from available-for-sale to trading securities in accordance with SFAS 115. The transfer to trading securities reflects our intent to exercise our put
option during the period June 30, 2010 to July 3, 2012. Prior to our agreement with UBS, our intent was to hold our ARS until we realized the par value.

        We
recorded a temporary reduction in carrying value of $2.8 million for the nine months ended September 30, 2008, which was recorded as an unrealized loss in accumulated
other comprehensive loss. Upon transfer to trading securities, we transferred the $2.8 million recorded as unrealized loss in accumulated other comprehensive loss and recorded an unrealized
loss of $5.3 million in other expense, net in the fourth quarter of 2008, representing the difference between the par and fair value of the ARS at the date of transfer. We determined that use
of a valuation model was the best available technique for measuring the fair value of our ARS. We used a trinomial discount model weighting estimated future cash flows, quality of collateral and the
probability of future successful auctions occurring. In determining a discount factor for each ARS, the model weights various factors, including assessments of credit quality, duration, insurance
wraps, portfolio composition, discount rates, overall capital market liquidity and comparable securities, if any.

        In
the future we expect any changes in the fair value of our ARS to be materially offset in part by changes in the fair value of our put option with UBS.

        We
continue to monitor the market for ARS and consider its impact (if any) on the fair market value of our investments. If the market conditions deteriorate further, we may be required
to record additional unrealized losses in earnings, offset partially by corresponding increases in the put option. We believe that, based on our current cash and cash equivalents balance, the current
lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, cash flows or ability to fund our operations.

39

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Table of Contents

        In November 2008 we entered into a demand revolving credit line agreement with UBS, payable on demand, in an amount equal to a specified percentage of fair value
of our auction rate securities at a net no cost, meaning that the interest we pay on the credit line will not exceed the interest that we receive on the auction rate securities that we have pledged as
security for the credit line. Additionally, under the terms of the settlement agreement, if UBS is able to sell our auction rate securities at par, proceeds would be utilized to first repay any
outstanding balance under the demand revolving credit line. We are still able to sell the auction rate securities, but in such a circumstance, if we sold at less than par, we would not be entitled to
recover the par value support from UBS. See Note 11—Credit Line, for more information about this line of credit, Note 3—Long-term Investment and
Note 4—Fair Value Measurements of our Notes to Consolidated Financial Statements for information about the accounting treatment of our ARS.

Cash Equivalents and Marketable Securities

        We maintain investment portfolio holdings of various issuers and maturities. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. At December 31, 2007, all investment securities are classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) within stockholders' equity. Management assesses whether declines in the fair value of investment securities are other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the individual security is written down to fair value and the amount of the write down is included in earnings. In determining whether a decline is other than temporary, management considers the following factors:

•

Length of the time and the extent to which the market value has been less than cost;



•

The financial condition and near-term prospects of the issuer; and



•

Our intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

41

        At December 31, 2007, we had no declines in fair value that were determined as other than temporary, however, we may in the future have to record an other than temporary impairment charge with respect to our investments.

Cash Equivalents and Marketable Securities

        We maintain investment portfolio holdings of various issuers and maturities. We consider all highly liquid investments purchased with original maturities of three
months or less to be cash equivalents. At December 31, 2007, all investment securities are classified as available-for-sale and consequently are recorded on the balance
sheet at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) within stockholders' equity. Management assesses whether declines in the
fair value of investment securities are other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the individual security is written down to fair value
and the amount of the write down is included in earnings. In determining whether a decline is other than temporary, management considers the following factors:

•

Length
of the time and the extent to which the market value has been less than cost;




•

The
financial condition and near-term prospects of the issuer; and




•

Our
intent and ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in market value.

41

        At
December 31, 2007, we had no declines in fair value that were determined as other than temporary, however, we may in the future have to record an other than temporary
impairment charge with respect to our investments.