Notes to Consolidated Financial Statements
We account for investments in marketable securities at market prices, with the unrealized gain or loss, less deferred income taxes, shown as a separate component of stockholders' equity. We base realized gains and losses on specific identification of the security sold. At December 28, 2007, and December 29, 2006, available-for-sale marketable securities consisted of the following:
Of our available-for sale debt obligations at December 28, 2007, $169.6 million have contractual maturities of less than 12 months, $769.2 million have contractual maturities of greater than one year up to five years, and $44.2 million have contractual maturities greater than five years.
Gross unrealized gains related to our fixed-income securities were caused by interest rate fluctuations. Gross unrealized losses related to fixed-income securities were primarily due to changes in market conditions that caused spreads to widen for fixed-income securities. We review investments held with unrealized losses to determine if the loss is other-than-temporary. We evaluated near-term prospects of the security in relation to the severity and duration and our intent and ability to hold the security for a period of time sufficient to allow for an anticipated recovery. Based on our review, we determined that it was not reasonable to assume that some of our preferred stocks would recover to fair value in the near-term due to the severity and duration of the impairment. We recognized a $5.2 million other-than-temporary impairment as of December 28, 2007. For all other investments we determined that our ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value was reasonable and do not consider these investments to be other-than-temporarily impaired at December 28, 2007. No other-than-temporary impairments were recorded for the years ended December 29, 2006, and December 30, 2005.
Investments in marketable securities with unrealized losses at
December 28, 2007, and December 29, 2006, were as follows:
The following table presents gross realized gains and losses related to the fixed income investments:
As a result of the AFC acquisition, we acquired 10.6 million shares of Cisco common stock, shown as Other marketable securities in Current Assets. AFC owned this stock as a result of its investment in privately held Cerent Corporation, which was acquired by Cisco in 1999. In 2000, AFC entered into two three-year hedge contracts, pledging all of the Cisco stock to secure the obligations under the contracts. When the hedge contracts matured in 2003, AFC entered into stock loan agreements with a lender, borrowing 10.6 million shares of Cisco stock to settle the hedge contracts on the Cisco stock. The aggregate amount of the fair values of those stock loans are reflected as a current liability on our balance sheets as of December 28, 2007, and December 29, 2006. The values of both the asset and liability move in tandem with each other since each is based on the number of shares we hold at the current stock price. At December 28, 2007, Other marketable securities and Stock loan was $291.0 million at a market price of $27.56 per share and $288.6 million at a market price of $27.33 per share at December 29, 2006. The fees for 2007 associated with the stock loan agreement were $2.1 million.
In addition to the above investments, we maintain investments in start-up technology companies and partnerships that invest in start-up technology companies. We recorded these investments in Other Assets. These investments totaled $12.5 million ($11.0 million recorded at cost and $1.5 million recorded at fair value) at December 28, 2007, and $17.8 million ($10.3 million recorded at cost and $7.5 million recorded at fair value) at December 29, 2006.
We review each investment in our portfolio quarterly, including historical and projected financial performance, expected cash needs and recent funding events. We recognize other-than-temporary impairments if the market value of the investment is below its cost basis for an extended period of time or if the issuer has experienced significant financial declines or difficulties in raising capital to continue operations. Other-than-temporary impairments were $0.5 million for the year ended December 28, 2007, and are included in Other expense, net in the Consolidated Statements of Income.
Other-than-temporary impairments were $7.0 million for the year ended December 29, 2006. During 2006, we recorded a net gain of $5.5 million to Other Comprehensive Income on available-for-sale securities as the investment was converted from preferred to public common shares. The investment had an aggregate value of $7.5 million. Other-than-temporary impairments were $4.8 million for the year ended December 30, 2005, which included a loss of $0.5 million from currency translation adjustments related to the sale of a foreign investment. In 2005, we recorded $4.0 million in income from a long-term investment because the underlying company was purchased by a publicly traded entity.