XML 42 R10.htm IDEA: XBRL DOCUMENT v2.3.0.15
Fair Value of Financial Instruments
3 Months Ended
Sep. 25, 2011
Fair Value Disclosures [Abstract] 
Fair Value of Financial Instruments
Fair Value of Financial Instruments
Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., “the exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are obtained from independent sources and can be validated by a third party, whereas, unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is broken down into three levels based on the reliability of inputs as follows:
•
Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
•
Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
•
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.


The financial assets for which the Company performs recurring fair value remeasurements are cash equivalents and short-term investments. As of September 25, 2011, financial assets utilizing Level 1 inputs included money market funds and investments traded on active securities exchanges. Financial assets utilizing Level 2 inputs included certificates of deposit, corporate bonds, municipal bonds and variable rate demand notes, and U.S. agency securities. Level 2 assets are valued using a third-party pricing services consensus price which is a weighted average price based on multiple sources. These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility. The Company does not have any significant financial assets requiring the use of Level 3 inputs. There were no transfers between Level 1 and Level 2 during the three months ended September 25, 2011.
The following table sets forth financial instruments carried at fair value within the U.S. GAAP hierarchy and using the lowest level of input (in thousands):
 
 
Financial Instruments Carried at Fair Value
as of September 25, 2011
 
Financial Instruments Carried at Fair Value as of June 26, 2011
 
 Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit
$
—


 
$
20,000


 
$
—


 
$
20,000


 
$
—


 
$
—


 
$
—


 
$
—


Money market funds
3,643


 
—


 
—


 
3,643


 
7,386


 
—


 
—


 
7,386


Total cash equivalents
3,643


 
20,000


 
—


 
23,643


 
7,386


 
—


 
—


 
7,386


Short-term investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds
—


 
219,782


 
—


 
219,782


 
—


 
395,398


 
—


 
395,398


Corporate bonds
—


 
172,473


 
—


 
172,473


 
—


 
209,438


 
—


 
209,438


Municipal variable rate demand notes
—


 
—


 
—


 
—


 
—


 
295


 
—


 
295


Certificates of deposit
—


 
43,005


 
—


 
43,005


 
—


 
10,015


 
—


 
10,015


Commercial paper
—


 
7,146


 
—


 
7,146


 
—


 
4,999


 
—


 
4,999


U.S. agency securities
—


 
49,634


 
—


 
49,634


 
—


 
68,049


 
—


 
68,049


Non-U.S. government securities
—


 
1,015


 
—


 
1,015


 
—


 
7,005


 
—


 
7,005


Total short-term investments
—


 
493,055


 
—


 
493,055


 
—


 
695,199


 
—


 
695,199


Total assets
$
3,643


 
$
513,055


 
$
—


 
$
516,698


 
$
7,386


 
$
695,199


 
$
—


 
$
702,585






The Company utilizes specific identification in computing realized gains and losses on the sale of investments. Realized gains from the sale of investments of approximately $1.0 million are included in “Other non-operating income, net” and unrealized gains and losses are included as a separate component of equity, net of tax, unless the loss is determined to be “other-than-temporary.”
The Company evaluates its investments for possible impairment or a decline in fair value below cost basis that is deemed to be “other-than-temporary” on a periodic basis. It considers such factors as the length of time and extent to which fair value has been below cost basis, the financial condition of the investee, and its ability and intent to hold the investment for a period of time that may be sufficient for an anticipated recovery in market value.