Investments

Investments that have original maturities of three months or less are accounted for as cash equivalents. This includes money market funds, time deposits and United States (“U.S.”) government obligations. Temporary and long-term investments consist of government, bank and corporate obligations, and bank time deposits with original maturity dates in excess of three months. Temporary investments have original maturities in excess of three months, but mature within twelve months of the balance sheet date. Long-term investments have original maturities in excess of twelve months. The Company determines the cost of securities sold based on the specific identification method. Realized gains or losses are reported in “Non-operating expense, net” within the condensed consolidated statements of income.

The Company classifies its investments as “available-for-sale” because it may sell some securities prior to maturity. The Company’s investments are subject to market risk, primarily interest rate and credit risks. The Company’s investments are managed by a limited number of outside professional managers that operate within investment guidelines set by the Company. These guidelines include specified permissible investments, minimum credit quality ratings and maximum average duration restrictions and are intended to limit market risk by restricting the Company’s investments to high quality debt instruments with relatively short-term maturities.

As of July 27, 2014, all of the Company’s long-term investments mature on various dates through fiscal year 2016.

The following table summarizes the Company’s available-for-sale investments:



	July 27, 2014						January 26, 2014
(in thousands)	Market Value		Adjusted Cost		Gross Unrealized Gain		Market Value		Adjusted Cost		Gross Unrealized Gain
Agency securities	$	550	$	550	$	—	$	3,674	$	3,673	$	1
Total investments	$	550	$	550	$	—	$	3,674	$	3,673	$	1

Agency securities are specific securities that are issued by U.S. government agencies such as Ginnie Mae, Fannie Mae, Freddie Mac or the Federal Home Loan Banks. Due to the expectation of federal backing, these securities usually hold the highest credit rating possible.

The following table summarizes the maturities of the Company’s available-for-sale investments:



	July 27, 2014				January 26, 2014
(in thousands)	Market Value		Adjusted Cost		Market Value		Adjusted Cost
Within 1 year	$	—	$	—	$	—	$	—
After 1 year through 5 years	550		550		3,674		3,673
Total investments	$	550	$	550	$	3,674	$	3,673

Unrealized gains and losses are the result of fluctuations in the market value of the Company’s available-for-sale investments and are included in “Accumulated other comprehensive income” within the condensed consolidated balance sheets. The following table summarizes net unrealized losses arising in the periods presented in addition to the tax associated with these comprehensive income items:



	Three Months Ended						Six Months Ended
(in thousands)	July 27, 2014			July 28, 2013			July 27, 2014		July 28, 2013
Unrealized loss, net of tax	$	(1	)	$	(4	)	$	—	$	(5	)
Increase to deferred tax liability	(1		)	(3		)	—		(3		)

The following table summarizes interest income generated from investments and cash and cash equivalents:



	Three Months Ended				Six Months Ended
(in thousands)	July 27, 2014		July 28, 2013		July 27, 2014		July 28, 2013
Interest income	$	12	$	91	$	20	$	191

The Company has investments in two privately held companies. The Company accounts for these equity investments under the cost method of accounting since it does not have the ability to exercise significant influence over the investees. These equity investment interests are included in “Other assets” within the condensed consolidated balance sheet as of July 27, 2014.



(in thousands)	Equity Investment
Balance at January 26, 2014	$	5,000
Additions	3,264
Balance at July 27, 2014	$	8,264