Cash, Cash Equivalents and Short-Term Investments

9 Months Ended

Sep. 29, 2012

Cash, Cash Equivalents and Short-Term Investments

3. Cash, Cash Equivalents and Short-Term Investments

Our cash, cash equivalents, and short-term investments consisted primarily of cash, corporate debt securities, government-sponsored enterprise securities, state and municipal securities, money market funds and other investment grade securities. We do not hold investment securities for trading purposes. All short-term investments are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

Gains and losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Factors that could indicate an impairment exists include, but are not limited to: earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented were not significant.

Investments that we have classified as short-term, by security type, are as follows (in thousands):

	September 29, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses (1)		Estimated Fair Value
Corporate debt securities (2)	$	12,021	$	3	$	—	$	12,024
Municipal securities		1,470		—		—		1,470
Government-sponsored enterprise securities		20,948		39		—		20,987
	$	34,439	$	42	$	—	$	34,481

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses(1)		Estimated Fair Value
U.S. Treasury securities	$	3,258	$	9	$	—	$	3,267
Corporate debt securities (2)		22,454		6		2		22,458
Municipal securities		4,315		—		—		4,315
Government-sponsored enterprise securities		19,033		32		15		19,050
Bank certificates of deposit		2,650		—		—		2,650
	$	51,710	$	47	$	17	$	51,740

(1) As of September 29, 2012 there were no investments with loss positions. As of December 31, 2011, the cost and fair value of investments with loss positions was $12.8 million. We evaluated the nature of these investments, credit worthiness of the issuer and the duration of these impairments to determine if an other-than-temporary decline in fair value had occurred and concluded that these losses were temporary.

(2) Corporate debt securities include investments in financial and corporate institutions. No single issuer represents a significant portion of the total corporate debt securities portfolio.

Effective maturities of short-term investments at September 29, 2012 and December 31, 2011, were as follows (in thousands):

.	September 29, 2012				December 31, 2011
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	15,490	$	15,495	$	44,034	$	44,079
Due after one year through two years		18,949		18,986		7,676		7,661
	$	34,439	$	34,481	$	51,710	$	51,740

Our municipal securities include variable rate demand notes which can be put (sold at par) typically on a daily basis with settlement periods ranging from the same day to one week and have varying contractual maturities through 2037. These securities can be used for short-term liquidity needs and are held for limited periods of time. At September 29, 2012 and December 31, 2011 these securities had amortized cost and fair value of $1.5 million and $1.9 million, respectively, and are included in “Due in one year or less” in the table above.

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information, and they are included in Level 2.

The following table summarizes, by major security type, our assets that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

	Fair value measurements at September 29, 2012 using:
	Level 1		Level 2		Level 3		Total estimated fair value
Cash	$	39,033	$	—	$	—	$	39,033
Corporate debt securities		—		12,024		—		12,024
Municipal securities		—		1,470		—		1,470
Government-sponsored enterprise securities		—		20,987		—		20,987
Money market funds		—		36,597		—		36,597
	$	39,033	$	71,078	$	—	$	110,111

	Fair value measurements at December 31, 2011 using:
	Level 1		Level 2		Level 3		Total estimated fair value
Cash	$	25,359	$	—	$	—	$	25,359
U.S. Treasury securities		3,267		—		—		3,267
Corporate debt securities		—		27,208		—		27,208
Municipal securities		—		4,315		—		4,315
Government-sponsored enterprise securities		—		19,050		—		19,050
Money market funds		—		22,753		—		22,753
Bank certificates of deposit		—		3,050		—		3,050
	$	28,626	$	76,376	$	—	$	105,002