Financial Instruments and Fair Value

12 Months Ended

Apr. 29, 2011

Financial Instruments and Fair Value

Financial Instruments and Fair Value

9. Financial Instruments and Fair Value

We measure assets and liabilities at fair value based upon expected exit price, representing the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value is based on assumptions that market participants would use in pricing an asset or liability. The accounting guidance provides a framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3: Unobservable inputs reflecting our own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and view an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, our own or the counterparty's non-performance risk is considered in determining the fair values of liabilities and assets, respectively.

Investments

The following is a summary of investments at April 29, 2011 and April 30, 2010 (in millions):

	April 29, 2011									April 30, 2010
	Cost		Gross Unrealized					EstimatedFair  Value		Cost		Gross Unrealized					EstimatedFair  Value
			Gains		Losses							Gains		Losses
Corporate bonds	$	1,643.2	$	10.2	$	(0.6	)	$	1,652.8	$	1,128.1	$	3.4	$	(1.8	)	$	1,129.7
Auction rate securities		69.2		0.4		(4.5	)		65.1		71.6		0.7		(3.3	)		69.0
U.S. treasury and government debt securities		661.9		0.6		(0.7	)		661.8		816.9		2.1		(0.1	)		818.9
Commercial paper		5.0		0.0		0.0			5.0		215.9		0.0		0.0			215.9
Municipal bonds		1.5		0.0		0.0			1.5		1.5		0.0		0.0			1.5
Certificates of deposit		96.3		0.0		0.0			96.3		159.0		0.0		0.0			159.0
Money market funds		1,539.6		0.0		0.0			1,539.6		1,211.2		0.0		0.0			1,211.2
Equity funds		20.2		0.0		0.0			20.2		12.6		0.0		0.0			12.6
Investment in privately-held companies		1.3		0.0		0.0			1.3		1.4		0.0		0.0			1.4
Total debt and equity securities	$	4,038.2	$	11.2	$	(5.8	)	$	4,043.6	$	3,618.2	$	6.2	$	(5.2	)	$	3,619.2

We record net unrealized gains or losses on available-for-sale securities that are determined to be temporary in other comprehensive income (loss). The following table shows the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at April 29, 2011 (in millions):

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		UnrealizedLoss			Fair Value		UnrealizedLoss			Fair Value		UnrealizedLoss
Corporate bonds	$	236.7	$	(0.6	)	$	1.1	$	0.0		$	237.8	$	(0.6	)
Auction rate securities		0.0		0.0			51.0		(4.5	)		51.0		(4.5	)
U.S. treasury and government debt securities		193.4		(0.7	)		0.0		0.0			193.4		(0.7	)
Total	$	430.1	$	(1.3	)	$	52.1	$	(4.5	)	$	482.2	$	(5.8	)

The following table shows the gross unrealized losses and fair values of our investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at April 30, 2010 (in millions):

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		UnrealizedLoss			Fair Value		UnrealizedLoss			Fair Value		UnrealizedLoss
Corporate bonds	$	516.1	$	(1.8	)	$	0.0	$	0.0		$	516.1	$	(1.8	)
Auction rate securities		0.0		0.0			59.7		(3.3	)		59.7		(3.3	)
U.S. treasury and government debt securities		165.3		(0.1	)		0.0		0.0			165.3		(0.1	)
Total	$	681.4	$	(1.9	)	$	59.7	$	(3.3	)	$	741.1	$	(5.2	)

The following table presents the contractual maturities of our debt investments as of April 29, 2011 (in millions):

Debt Investment Maturities	Cost		Fair Value
Due in one year or less	$	814.6	$	817.6
Due in one through five years		1,593.2		1,599.8
Due in five through ten years		0.0		0.0
Due after ten years*		69.2		65.1
	$	2,477.0	$	2,482.5

* Consists of auction rate securities which have contractual maturities of greater than 10 years.

Fair Value of Financial Instruments

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of April 29, 2011 (in millions):

	Total			Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)			SignificantUnobservableInputs(Level 3)
Assets
Corporate bonds	$	1,652.8		$	0.0	$	1,652.8		$	0.0
U.S. treasury and government debt securities		661.8			5.0		656.8			0.0
Municipal bonds		1.5			0.0		1.5			0.0
Commercial paper		5.0			0.0		5.0			0.0
Certificates of deposit		96.3			0.0		96.3			0.0
Money market funds		1,539.6			1,539.6		0.0			0.0
Auction rate securities		65.1			0.0		0.0			65.1
Equity funds		20.2			20.2		0.0			0.0
Investment in privately-held companies		1.3			0.0		0.0			1.3
Foreign currency contracts		0.4			0.0		0.4			0.0
Total	$	4,044.0		$	1,564.8	$	2,412.8		$	66.4
Liabilities
Foreign currency contracts	$	(10.9	)	$	0.0	$	(10.9	)	$	0.0

Reported as (in millions):

	Total			Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1)		SignificantOtherObservableInputs(Level 2)			SignificantUnobservableInputs(Level 3)
Assets
Cash equivalents	$	1,539.6		$	1,539.6	$	0.0		$	0.0
Short-term investments		2,417.4			5.0		2,412.4			0.0
Other current assets		4.1			3.7		0.4			0.0
Long-term investments		65.1			0.0		0.0			65.1
Other non-current assets		17.8			16.5		0.0			1.3
Total	$	4,044.0		$	1,564.8	$	2,412.8		$	66.4
Liabilities
Other current liabilities	$	(10.9	)	$	0.0	$	(10.9	)	$	0.0

We classify investments within Level 1 if quoted prices are available in active markets. Level 1 investments generally include trading securities with quoted prices on active markets, and money market funds.

We classify items in Level 2 if the investments are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. These investments include: corporate bonds, commercial paper, U.S. Treasuries, U.S. government agency bonds, municipal bonds, certificates of deposit, and foreign currency contracts. Investments are held by a custodian who obtains investment prices from a third party pricing provider that incorporates standard inputs in various asset price models. We corroborate the prices obtained from the pricing service against other independent sources and, as of April 29, 2011, have not found it necessary to make any adjustments to the prices obtained.

The unrealized losses on our available-for-sale investments in corporate bonds and U.S. treasury and government debt securities were caused by market value declines as a result of the recent economic environment, as well as fluctuations in market interest rates. Because the decline in market value is attributable to changes in market conditions and not credit quality, and because we neither intend to sell nor are likely to be required to sell these investments prior to a recovery of par value, we do not consider these investments to be other-than temporarily impaired at April 29, 2011.

Our foreign currency forward exchange contracts are also classified within Level 2. We determine the fair value of these instruments by considering the estimated amount we would pay or receive to terminate these agreements at the reporting date. We use observable inputs, including quoted prices in active markets for similar assets or liabilities. Our foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on quoted market prices of similar instruments in active markets.

We classify items in Level 3 if the investments are valued using a pricing model or based on unobservable inputs in the market. These investments include auction rate securities and cost method investments. The table below provides a reconciliation of the beginning and ending balance of our Level 3 financial assets measured at fair value on a recurring basis using significant unobservable inputs as of April 29, 2011 (in millions).

	Primary Fund			Auction  RateSecurities			Private EquityFund			Privately-HeldCompanies
Balance at April 24, 2009	$	51.6		$	66.5		$	2.0		$	1.9
Total unrealized gains included in other comprehensive income		0.0			4.2			0.0			0.0
Total realized gains (losses) included in earnings		(0.2	)		0.0			0.8			2.6
Purchases, sales and settlements, net		(51.4	)		(1.7	)		(1.4	)		(4.5	)
Balance at April 30, 2010		0.0			69.0			1.4			0.0
Total unrealized losses included in other comprehensive income		0.0			(1.4	)		0.0			0.0
Total realized losses included in earnings		0.0			0.0			(0.1	)		0.0
Purchases, sales and settlements, net		0.0			(2.5	)		0.0			0.0
Balance at April 29, 2011	$	0.0		$	65.1		$	1.3		$	0.0

As of April 24, 2009, we held an investment in the Reserve Primary Fund (the Primary Fund), a money market fund which had suspended redemptions in September 2008 and was in the process of liquidating its portfolio of investments, with a recorded value of $51.6 million that had been previously written down from its par value of $60.9 million. During fiscal 2010, the Primary Fund made multiple distributions of its assets to its investors and we recognized an additional loss of $0.2 million in our income statement, and as of April 30, 2010, we had recovered $51.4 million of our recorded investment. Future distributions, if any, will be recognized as income upon receipt. During fiscal 2011 and 2010, we received $2.5 million and $1.0 million, respectively, in distributions from our investment in the Primary Fund.

As of April 29, 2011 and April 30, 2010, we had auction rate securities (ARSs) with a par value of $71.3 million and $73.8 million, respectively, and an estimated fair value of $65.1 million and $69.0 million, respectively, which are classified as long-term investments. All of our ARSs are backed by pools of student loans guaranteed by the U.S. Department of Education. As of April 29, 2011, we recorded cumulative net temporary impairment charges of $4.1 million within AOCI. In addition, we recorded other-than-temporary impairment charges of $2.1 million in other income (expense), net, during fiscal 2009 based on an analysis of the fair value and marketability of these investments. We estimated the fair value for each individual ARS using an income (discounted cash flow) approach that incorporates both observable and unobservable inputs to discount the expected future cash flows. Key inputs into the discounted cash flow analysis include managements' expectation of when the principal amount will be recovered either through redemption at par, or some other refinancing event by the issuer; and marketability adjustments. Based on our ability to access our cash and other short-term investments, our expected operating cash flows, and our other sources of cash, we do not intend to sell these investments prior to recovery of value. We will continue to monitor our ARS investments in light of the current debt market environment and evaluate our accounting for these investments.

As of April 29, 2011 and April 30, 2010, we held investments in a private equity fund of $1.3 million and $1.4 million, respectively. During fiscal 2011, we recorded a net other-than-temporary impairment charge of $0.1 million on the private equity fund. During fiscal 2010, we recorded realized gains of $0.8 million on this investment and $2.6 million on equity investments in privately held companies. During fiscal 2009, we recorded $6.3 million of other-than-temporary impairment charges on certain of the equity investments in privately held companies and adjusted their carrying amount to fair value, as we deemed the decline in the value of those assets to be other-than-temporary.

Other Fair Value Disclosures

The fair value of certain of our financial instruments that are not measured at fair value, including accounts receivable, accounts payable, accrued compensation, and other current liabilities, approximates the carrying amount because of their short maturities. The fair value of our Notes is disclosed in Note 10 of the accompanying consolidated financial statements and was determined using quoted market prices for those securities.