Fair Value Measurements

9 Months Ended

Oct. 29, 2011

Fair Value Measurements

NOTE 9.  Fair Value Measurements

Our financial assets and liabilities are valued at the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.  We determine fair value based on assumptions that market participants would use in pricing an asset or liability.  As a basis for considering such assumptions, we prioritize the inputs used in measuring fair value into a three-tier fair value hierarchy, which are as follows:

Level 1: Observable inputs such as quoted prices in active markets (the fair value hierarchy gives the highest priority to Level 1 inputs);

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data and require the reporting entity to develop its own assumptions (the fair value hierarchy gives the lowest priority to Level 3 inputs).

Financial assets and liabilities measured at fair value on a recurring basis as of the end of the third quarter of fiscal 2011 consisted of the following (in thousands):

	Balance at October 29, 2011		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other  Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds (cash equivalent)	$	19,857	$	19,857	$	-	$	-
Municipal bonds* (short-term)		14,710		-		14,710		-
Auction rate securities (long-term)		1,737		-		-		1,737
Total assets	$	36,304	$	19,857	$	14,710	$	1,737
Liabilities:
Deferred compensation plan* (long-term)	$	4,587			$	4,587	$	-
* Municipal bonds and deferred compensation plan were reclassified to Level 2 upon further interpretation.

The fair value of our short-term municipal bonds is based on market prices for similar assets from third- party pricing services using observable market information.  The money market funds fair value is determined based on quoted prices of identical assets that are trading in active markets as of the end of the period for which the values are determined.  The deferred compensation plan liability fair value is determined based on quoted prices of similar assets that are traded in observable markets.  Due to the lack of availability of observable market quotes on our auction rate securities, the fair market value of these securities has been determined based on a valuation model using current assumptions.  The model values the securities by estimating the present value of future principal and interest payments discounted at rates considered to reflect current market conditions.  Assumptions used in the valuation include those made about the liquidity horizon, or period of time expected, before the securities are successfully auctioned; coupon rates; weighted average cost of capital; and holding spreads and yields.  Other factors that impact our valuation include changes to credit ratings of our auction rate securities as well as to the underlying assets supporting these securities and the ongoing strength and quality of the credit markets.  Our valuation is subject to uncertainties that are difficult to predict and could change significantly based on future market conditions.  The deferred compensation plan liability represents the amount that would be earned by participants if the funds were invested in securities traded in active markets.

The activity of our auction rate securities through the third quarter of fiscal 2011, whose fair value was measured using Level 3 inputs, is summarized below (in thousands):

	Non-current
Carrying value as of  January 29, 2011	$	2,475
Redemptions1		(850	)
Total gains
Included in earnings
Included in other comprehensive loss2		112
Carrying value as of  October 29, 2011	$	1,737

1	Redemptions of $100,000, $700,000, and $50,000 occurred during the first, second, and third quarters of fiscal 2011, respectively.
2	Unrealized gains of $21,000, unrealized losses of $17,000, and unrealized losses of $32,000 occurred during the first, second, and third quarters of fiscal 2011, respectively.  In addition, the recovery in fair value of $140,000 which was previously temporarily impaired occurred during the first quarter of fiscal 2011.