|
Short-Term and Long-Term Investments
|
3 Months Ended |
|---|---|
|
May 04, 2013
|
|
| Short-Term and Long-Term Investments |
NOTE 6. Short-Term and Long-Term
Investments
Our
short-term investments consist of highly-rated interest-bearing
municipal bonds that have maturities that are less than one year
and are accounted for as available for sale. As of the
end of the first quarter of fiscal 2013 and as of the end of fiscal
2012, short-term investments consisted of municipal bonds of $4.1
million and $6.2 million, respectively. Refer to
“NOTE 8 – Fair Value Measurements” for further
discussion on how we determined the fair value of our short-term
investments. The associated unrealized net gains in both
the first quarter of fiscal 2013 and in the full year of fiscal
2012 were immaterial and have been recorded in the consolidated
statements of comprehensive income.
As
of the end of the first quarter of fiscal 2013 and as of the end of
fiscal 2012, our long-term investment comprised of an auction rate
security. Our auction rate security is a AAA/A3-rated
debt instrument with a maturity of 24 years. It is
accounted for as available for sale and backed by pools of student
loans guaranteed by the U.S. Department of
Education. Its interest rate is reset through an auction
process, most commonly at intervals of approximately 4
weeks. This same auction process is designed to provide
a means by which this security can be sold and prior to 2008 had
provided a liquid market for it. There continues to be
uncertainty in the global credit and capital markets, which has
resulted in the failure of auctions representing the auction rate
security we hold as the amount of securities submitted for sale in
those auctions exceed the amount of bids. While we have
continued to earn and receive interest on our auction rate security
through the date of this report, we concluded that its estimated
fair value no longer approximates par value. Due to the
lack of availability of observable market quotes on our auction
rate security, the fair market value of this security has been
based on a valuation model using current
assumptions. Refer to “NOTE 8 – Fair Value
Measurements” for further discussion on how we determined the
fair value of our auction rate security investment.
As
of the end of the first quarter of fiscal 2013 and as of the end of
fiscal 2012, the fair value of our auction rate security remained
the same at $1.7 million. The fair value of our auction
rate security as of the end of the first quarter of fiscal 2013
reflects a cumulative decline of $0.4 million from the par
value. This cumulative $0.4 million decline ($0.2
million net of tax) is deemed temporary as we have the ability to
hold this security and we do not have the intent to sell it below
par value. Furthermore, it is not likely that we will be
required to sell the security before the recovery of its amortized
cost basis. If uncertainties in the credit and capital
markets continue, we may incur additional losses, some of which may
be other-than-temporary, which could negatively affect our
financial condition or results of operations. In
addition, in the event that we decide to sell this security and it
becomes likely that we will be required to sell the security before
the recovery of its amortized cost basis, we may be required to
recognize impairment charges against income. We have
classified our auction rate security as a non-current asset on our
consolidated balance sheet, as we do not expect it to successfully
auction and recover its full or par value within the next 12
months.
As
of the end of the first quarter of fiscal 2013 and 2012, we
recorded immaterial unrealized gains for our auction rate
securities in the consolidated statements of comprehensive
income.
|