3. Auction Rate Securities

Our ARS investments, which are included in non-current investments, have failed to settle in auctions beginning in 2007. These investments are not liquid, and in the event we need to access these funds, we will not be able to do so without a loss of principal, unless redeemed by the issuers or a future auction on these investments is successful. During fiscal 2014 none of our ARS investments were redeemed. During 2013 and 2012, $3.4 million and $10.1 million, respectively, of our ARS investments were redeemed.

As there are currently no active markets for our various failed ARS investments, we have estimated the fair value of these investments as of the end of fiscal 2014 using a trinomial discounted cash flow analysis. The analysis considered, among others, the following factors:

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the collateral underlying the security investments;

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the creditworthiness of the counterparty;

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the timing of expected future cash flows;

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the probability of a successful auction in a future period;

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the underlying structure of each investment;

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the present value of future principal and interest payments discounted at rates considered to reflect current market conditions;

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a consideration of the probabilities of default, passing a future auction, or redemption at par for each period; and

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estimates of the recovery rates in the event of default for each investment.

When possible, our failed ARS investments were compared to other observable market data or securities with similar characteristics. Our estimate of the fair value of our ARS investments could fluctuate materially from period to period depending on future market conditions.

We have ARS investments with a fair value of $13.9 million that mature from fiscal 2016 to 2018, $3.2 million that mature from 2044 to 2046, and $2.7 million that have no maturity. Of our ARS investments, $5.5 million par value are investment grade and the remaining $18.5 million par value are below investment grade.

The various types of ARS investments we held as of the end of fiscal 2014, including the original cost basis, other-than-temporary impairment included in retained earnings, new cost basis, unrealized gain/(loss), and fair value consisted of the following (in thousands):


	Original Cost Basis		Other-than- temporary Impairment in Retained Earnings			New Cost Basis		Unrealized Gain/(Loss)			Fair Value
Student loans	$	3,500	$	(179	)	$	3,321	$	(149	)	$	3,172
Credit linked notes		13,500		(7,513	)		5,987		5,891			11,878
Preferred stock		5,000		(5,000	)		—		2,750			2,750
Municipals		2,000		(83	)		1,917		68			1,985

Total ARS	$	24,000	$	(12,775	)	$	11,225	$	8,560		$	19,785

During fiscal 2014, we recorded $1.1 million of accretion as interest income on our credit linked notes.

All of the ARS investments in the above table with unrealized losses have been in a continuous unrealized loss position for more than 12 months.

The various types of ARS investments we held as of the end of fiscal 2013, including the original cost basis, other-than-temporary impairment included in retained earnings, new cost basis, unrealized gain/(loss), and fair value consisted of the following (in thousands):


	Original Cost Basis		Other-than- temporary Impairment in Retained Earnings			New Cost Basis		Unrealized Gain/(Loss)			Fair Value
Student loans	$	3,500	$	(179	)	$	3,321	$	(168	)	$	3,153
Credit linked notes		13,500		(8,571	)		4,929		4,980			9,909
Preferred stock		5,000		(5,000	)		—		2,000			2,000
Municipals		2,000		(83	)		1,917		(10	)		1,907

Total ARS	$	24,000	$	(13,833	)	$	10,167	$	6,802		$	16,969

All of the ARS investments in the above table with unrealized losses have been in a continuous unrealized loss position for more than 12 months.

We have accounted for all of our ARS investments as non-current as we are not able to reasonably determine when the ARS markets will recover or be restructured. Based on our ability to access our cash and cash equivalents, our expected operating cash flows, and our other sources of cash, we do not intend to sell our ARS investments and it is not more likely than not that we will be required to sell our ARS investments before the recovery of the amortized cost basis. We will continue to monitor our ARS investments and evaluate our accounting for these investments quarterly.