Seagate 2009 Annual Report Download - page 108

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Level 1 assets consist of money market funds for which quoted prices are available in an active market.
The Company classifies items in Level 2 if the financial asset or liability is valued using observable inputs. The Company uses observable
inputs including quoted prices in active markets for similar assets or liabilities. Level 2 assets include: agency bonds, corporate bonds,
commercial paper, municipal bonds, and U.S. Treasuries. These debt investments are priced using observable inputs and valuation models which
vary by asset class. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents and marketable
securities. For the cash equivalents and marketable securities in the Company's portfolio, multiple pricing sources are generally available. The
pricing service uses inputs from multiple industry standard data providers or other third party sources and various methodologies, such as
weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the
pricing service against other independent sources and, as of July 2, 2010, has not found it necessary to make any adjustments to the prices
obtained. The Company's derivative financial instruments are also classified within Level 2. The Company's derivative financial instruments
consist of foreign currency forward exchange contracts and a total return swap. The Company recognizes derivative financial instruments in its
consolidated financial statements at fair value in accordance with ASC 815. The Company determines the fair value of these instruments by
considering the estimated amount it would pay or receive to terminate these agreements at the reporting date.
The Company's Level 3 assets consist of auction rate securities with a par value of approximately $19 million, all of which are
collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in the fiscal quarter ended March 28,
2008, these securities failed to settle at auction and have continued to fail through July 2, 2010. Since there is no active market for these
securities, the Company valued them using a discounted cash flow model. The valuation model is based on the income approach and reflects
both observable and significant unobservable inputs. Since the Company continues to earn interest on its auction rate securities at the maximum
contractual rate, there have been no payment defaults with respect to such securities, and they are all collateralized, the Company expects to
recover the entire amortized cost basis of these auction rate securities. The Company does not intend to sell these securities and has concluded it
is not more likely than not that the Company will be required to
101
Fair Value Measurements at Reporting Date Using
(Dollars in millions)
Quoted
Prices in
Active
Markets for
Identical
Instruments
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) Total Balance
Assets:
Cash and cash equivalents
$
914
$
342
$
—
$
1,256
Short
-
term investments
—
114
—
114
Restricted cash and investments
464
6
—
470
Other current assets
—
1
—
1
Other assets, net
—
—
18
18
Total Assets
$
1,378
$
463
$
18
$
1,859
Liabilities:
Accrued expenses
$
—
$
(
1
)
$
—
$
(
1
)
Total Liabilities
$
—
$
(
1
)
$
—
$
(
1
)