Fair Value Measurements

6 Months Ended

Jul. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 6.  Fair Value Measurements

Our financial instruments consist of cash and cash equivalents, marketable securities, trade receivables and payables.  The carrying values of cash and cash equivalents, marketable securities, trade receivables and trade payables approximate current fair value due to the short-term nature of the instruments. 

Marketable securities are classified as available-for-sale and generally consist of municipal bonds, asset-backed securities, corporate bonds, commercial paper, certificates of deposit, and U.S Treasury securities.  As of July 30, 2011, our holdings consisted of $265.5 million of securities with maturity dates less than one year and $182.7 million with maturity dates over one year and less than or equal to two years. 

We consider all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classify these securities as short-term investments within current assets on the consolidated balance sheets.  Marketable securities are carried at market value, with the unrealized holding gains and losses, net of income taxes, reflected as a separate component of stockholders' equity until realized.  For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.  Entities are required to use a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date.  The three levels are defined as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 – Unadjusted quoted prices in active markets for similar assets or liabilities, or;

Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or; Inputs other than quoted prices that are observable for the asset or liability

Level 3 –Unobservable inputs for the asset or liability.

We measure certain financial assets at fair value on a recurring basis, including our marketable securities, which are classified as available-for-sale securities, certain cash equivalents, specifically our money market accounts, and assets held in our non-qualified deferred compensation plan.  The money market funds are valued based on quoted market prices in active markets.  Our marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as yield curves) except for certain U.S. treasury holdings which are valued based on quoted market prices in active markets.  The investments in our non-qualified deferred compensation plan are valued using quoted market prices and are included in other assets on our consolidated balance sheets. 

From time to time, we measure certain assets at fair value on a non-recurring basis, specifically long-lived assets evaluated for impairment.  We estimate the fair value of our long-lived assets using company-specific assumptions which would fall within Level 3 of the fair value hierarchy. 

During the quarter ended July 30, 2011, we did not make significant transfers between Level 1 and Level 2 financial assets. Furthermore, as of July 30, 2011, January 29, 2011 and July 31, 2010, we did not have any Level 3 financial assets.  We conduct reviews on a quarterly basis to verify pricing, assess liquidity, and determine if significant inputs have changed that would impact the fair value hierarchy disclosure.

In accordance with the provisions of the guidance, we categorized our financial assets based on the priority of the inputs to the valuation technique for the instruments, as follows (amounts in thousands):

		Fair Value Measurements at Reporting Date Using
Current Assets	Balance as of July 30, 2011	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs          (Level 2)		Significant Unobservable Inputs               (Level 3)
Cash equivalents:
Money market accounts	$         9,895	$              9,895	$                   –		$               –
Marketable securities:
Municipal securities	136,826	–	136,826		–
U.S. government securities	100,719	52,890	47,829		–
Corporate bonds	162,914	–	162,914		–
Asset-backed securities	616	–	616		–
Commercial paper	45,064	–	45,064		–
Certificates of deposit	2,072	–	2,072		–
Non Current Assets
Deferred compensation plan	4,256	4,256	–		–
Total	$     462,362	$         67,041	$        395,321		$              –
Current Assets	Balance as of January 29, 2011
Cash equivalents:
Money market accounts	$         5,397	$                5,397	$                   –	$               –
Marketable securities:
Variable rate demand notes	319,220	–	319,220	–
Municipal securities	151,159	–	151,159	–
U.S. government securities	58,554	58,554	–	–
Corporate bonds	2,055	–	2,055	–
Asset-backed securities	3,031	–	3,031	–
Non Current Assets
Deferred compensation plan	4,143	4,143	–	–
Total	$     543,559	$              68,094	$        475,465	$               –
Current Assets	Balance as of July 31, 2010
Cash equivalents:
Money market accounts	$         1,467	$              1,467	$                   –	$               –
Marketable securities:
Variable rate demand notes	230,728	–	230,728	–
Municipal securities	158,557	–	158,557	–
U.S. government securities	59,130	59,130	–	–
Corporate bonds	12,453	–	12,453	–
Asset-backed securities	8,961	–	8,961	–
Non Current Assets
Deferred compensation plan	3,815	3,815	–	–
Total	$     475,111	$     64,412	$       410,699	$               –