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Cash, Cash Equivalents and Short-term Investments
12 Months Ended
Dec. 29, 2012
Cash, Cash Equivalents and Short-term Investments
4. Cash, Cash Equivalents and Short-term Investments

Our cash, cash equivalents, and short-term investments consisted primarily of cash 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):

 

      At December 29, 2012  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses (1)
    Estimated
Fair
Value
 
          
          

Municipal securities

   $ 1,470      $      $      $ 1,470  

Government-sponsored enterprise securities

     5,937        14               5,951  
  

 

 

    

 

 

    

 

 

   

 

 

 
   $ 7,407      $ 14      $      $ 7,421  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     At December 31, 2011  
     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    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 December 29, 2012, there were no investments in our portfolio in a loss position. As of December 31, 2011, the cost and fair value of investments with loss positions were approximately $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 and we have the ability and intent to hold these investments to maturity.

 

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

Effective maturities of short-term investments at December 29, 2012, were as follows:

 

(in thousands)

   Amortized
Cost
     Estimated
Fair Value
 
     

Due in one year or less

   $ 7,407      $ 7,421  
  

 

 

    

 

 

 

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 December 29, 2012 these securities had amortized cost and fair value of $1.5 million 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.

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 December 29, 2012 using:  
     Level 1      Level 2      Level 3      Total estimated
fair value
 
           

Cash

   $ 101,054      $      $       $ 101,054  

Municipal securities

            1,470               1,470  

Government-sponsored enterprise securities

            5,951               5,951  

Money market funds

            1,754               1,754  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 101,054      $ 9,175      $       $ 110,229  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     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