Adaptec 2009 Annual Report Download - page 76

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investment has been in a loss position and the Company’s intent and ability to hold the investment for a period of
time sufficient to allow for any anticipated recovery of market value. As of December 27, 2009, the Company
determined that the unrealized losses are temporary in nature and recorded them as a component of accumulated
other comprehensive income (loss).
$23.2 million of the investments held at December 27, 2009 relate to shares of the Reserve International
Liquidity Fund, Ltd. (the “International Fund”) and the Reserve Primary Fund (the “Primary Fund”, together the
“Reserve Funds”) for which the Company has outstanding redemption orders. The Reserve Funds were
AAA-rated money market funds that announced redemption delays and suspended trading in September 2008
during the severe disruption in financial markets. The Reserve Funds are in the process of liquidating their
portfolio of investments, which included securities of Lehman Brothers Holdings, Inc. (“Lehman Brothers”) that
was downgraded and has filed for Chapter 11 bankruptcy protection. The Primary Fund has received a United
States Securities and Exchange Commission order providing that the SEC will supervise the distribution of assets
from the Primary Fund. The redemptions from the International Fund are subject to pending litigation that could
cause further delay in any redemption of the Company’s investments. In January 2010, the Company received a
partial distribution from the Reserve Primary Fund in the amount of $4.3 million.
The Company assessed the fair value of its money market funds, including by consideration of Level 2 and
Level 3 inputs (see Note 3. Fair Value Measurements) for the Reserve Funds and their underlying securities.
Based on this assessment, the Company recorded an impairment of the Reserve Funds of $11.8 million during the
third quarter of 2008, incorporating the Reserve Funds’ valuation at zero for debt securities of Lehman Brothers
held, and a net asset value of $0.97 per share as communicated by the Primary Fund.
In 2008, the Company reclassified its investment in shares of the Reserve Funds from Level 1 to Level 3 of
the fair value hierarchy due to the inherent subjectivity and significant judgment related to the fair value of the
shares of the Reserve Funds and their underlying securities. Accordingly, the Company changed the valuation
method from a market approach to an income approach. In addition, due to the status of the Reserve Funds, the
Company reclassified a portion of these shares from cash and cash equivalents to short-term investments and
long-term investment securities, based on the maturity dates of the underlying securities in the Reserve Funds.
As of December 27, 2009, the original underlying securities held by the Reserve Funds had matured, and
with the exception of Lehman Brothers’ securities, the balances were held by the Reserve Funds in the form of
overnight agency notes. Changes in market conditions and the method and timing of the liquidation process of
the Reserve Funds could result in further adjustments to the fair value and classification of these investments, and
these changes could be material.
NOTE 7. INVESTMENTS AND OTHER ASSETS
The components of other investments and assets are as follows:
(in thousands)
December 27,
2009
As adjusted-Note 1
December 28,
2008
As adjusted-Note 1
Investments in private entities ..................................... $ 2,000 $2,000
Deferred debt issue costs (Note 9. Long-Term Debt) ................... 572 774
Other assets ................................................... 7,603 738
$10,175 $3,512
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