Financial Instruments And Fair Value

3 Months Ended

Jul. 29, 2011

Financial Instruments And Fair Value

Financial Instruments And Fair Value

8. Financial Instruments and Fair Value

The accounting guidance for fair value measurements provides a framework for measuring fair value on either a recurring or nonrecurring basis whereby the 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 less active markets; 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 our investments at July 29, 2011 and April 29, 2011, respectively (in millions):

	July 29, 2011									April 29, 2011
			Gross Unrealized					Estimated				Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value		Cost		Gains		Losses			Fair Value
Corporate bonds	$	2,038.5	$	9.7	$	(1.0	)	$	2,047.2	$	1,643.2	$	10.2	$	(0.6	)	$	1,652.8
Auction rate securities		59.5		0.3		(3.5	)		56.3		69.2		0.4		(4.5	)		65.1
U.S. treasury and government debt securities		0.0		0.0		0.0			0.0		661.9		0.6		(0.7	)		661.8
Commercial paper		131.6		0.0		0.0			131.6		5.0		0.0		0.0			5.0
Municipal bonds		1.5		0.0		0.0			1.5		1.5		0.0		0.0			1.5
Certificates of deposit		111.4		0.4		0.0			111.8		96.3		0.0		0.0			96.3
Money market funds		1,524.7		0.0		0.0			1,524.7		1,539.6		0.0		0.0			1,539.6
Equity funds		23.6		0.0		0.0			23.6		20.2		0.0		0.0			20.2
Private equity fund		1.0		0.0		0.0			1.0		1.3		0.0		0.0			1.3
Total debt and equity securities	$	3,891.8	$	10.4	$	(4.5	)	$	3,897.7	$	4,038.2	$	11.2	$	(5.8	)	$	4,043.6

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

	Cost		Fair Value
Due in one year or less	$	748.5	$	750.0
Due in one through five years		1,413.2		1,420.9
Due after ten years*		59.5		56.3
	$	2,221.2	$	2,227.2

* 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 July 29, 2011 (in millions):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Corporate bonds	$	2,047.2	$	0.0	$	2,047.2	$	0.0
Municipal bonds		1.5		0.0		1.5		0.0
Commercial paper		131.6		0.0		131.6		0.0
Certificates of deposit		111.8		0.0		111.8		0.0
Money market funds		1,524.7		1,524.7		0.0		0.0
Auction rate securities		56.3		0.0		0.0		56.3
Equity funds		23.6		23.6		0.0		0.0
Private equity fund		1.0		0.0		0.0		1.0
Foreign currency contracts		1.6		0.0		1.6		0.0
Total	$	3,899.3	$	1,548.3	$	2,293.7	$	57.3
Liabilities
Foreign currency contracts	$	4.2	$	0.0	$	4.2	$	0.0

Reported as (in millions):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents	$	1,645.9	$	1,524.7	$	121.2	$	0.0
Short-term investments		2,170.9		0.0		2,170.9		0.0
Other current assets		5.3		3.7		1.6		0.0
Long-term investments		56.3		0.0		0.0		56.3
Other non-current assets		20.9		19.9		0.0		1.0
Total	$	3,899.3	$	1,548.3	$	2,293.7	$	57.3
Liabilities
Other current liabilities	$	4.2	$	0.0	$	4.2	$	0.0

The unrealized losses on our available-for-sale investments in corporate bonds were caused by market value declines as a result of the 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 as of July 29, 2011.

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 July 29, 2011 (in millions).

	Auction  Rate Securities			Private Equity Fund
Balance at April 29, 2011	$	65.1		$	1.3
Total unrealized gains included in other comprehensive income		0.9			0.0
Settlements		(9.7	)		(0.3	)
Balance at July 29, 2011	$	56.3		$	1.0

All of our auction rate securities (ARSs) are classified as long-term investments and are backed by pools of student loans guaranteed by the U.S. Department of Education. As of July 29, 2011, we recorded cumulative net temporary impairment charges of $3.2 million within accumulated other comprehensive income (AOCI). 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.