Quarterly report pursuant to Section 13 or 15(d)

Marketable Securities

v2.4.0.8
Marketable Securities
 9 Months Ended
Jun. 29, 2014
Marketable Securities [Abstract]  
Note 10 - Marketable Securities
Note 10 — Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
June 29,
2014
 
September 29,
2013
 
June 29,
2014
 
September 29,
2013
Trading:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
317

 
$
241

 
$
47

 
$
49

Corporate bonds and notes
195

 
269

 
380

 
256

Mortgage- and asset-backed securities
—

 
—

 
215

 
104

Total trading
512

 
510

 
642

 
409

Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
872

 
721

 
390

 
71

Corporate bonds and notes
6,553

 
4,533

 
7,687

 
6,812

Mortgage- and asset-backed securities
860

 
745

 
200

 
328

Auction rate securities
—

 
—

 
83

 
83

Common and preferred stock
342

 
8

 
1,664

 
2,351

Equity funds
160

 
—

 
521

 
960

Debt funds
910

 
2,307

 
2,589

 
2,889

Total available-for-sale
9,697

 
8,314

 
13,134

 
13,494

Fair value option:
 
 
 
 
 
 
 
Debt fund
—

 
—

 
787

 
537

Total marketable securities
$
10,209

 
$
8,824

 
$
14,563

 
$
14,440


The Company holds an investment in a debt fund for which the Company elected the fair value option because the Company is able to redeem its shares at net asset value, which is determined daily. The investment would have otherwise been recorded using the equity method. The debt fund has no single maturity date. At June 29, 2014, the Company had an effective ownership interest in the debt fund of 27%. Changes in fair value associated with this investment are recognized in net investment income. During the three and nine months ended June 29, 2014, net increases in fair value associated with this investment were $12 million and $30 million, respectively. During the three months ended June 30, 2013, the net decrease in fair value associated with this investment was $4 million. During the nine months ended June 30, 2013, the net increase in fair value associated with this investment was $14 million.
The Company classifies certain portfolios of debt securities that utilize derivative instruments to acquire or reduce foreign exchange, interest rate and/or equity, prepayment and credit risks as trading. Net gains recognized on debt securities classified as trading held at June 29, 2014 were $7 million and $8 million for the three and nine months ended June 29, 2014, respectively. Net losses recognized on debt securities classified as trading held at June 30, 2013 were $21 million and $36 million for the three and nine months ended June 30, 2013, respectively.
At June 29, 2014, the contractual maturities of available-for-sale debt securities were as follows (in millions):
Years to Maturity
 
 
 
 
Less Than
One Year
 
One to
Five Years
 
Five to
Ten Years
 
Greater Than
Ten Years
 
No Single
Maturity
Date
 
Total
$
2,993

 
$
10,255

 
$
1,594

 
$
660

 
$
4,642

 
$
20,144


Debt securities with no single maturity date included debt funds, mortgage- and asset-backed securities and auction rate securities.
The Company recorded realized gains and losses on sales of available-for-sale securities as follows (in millions):
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains
For the three months ended
 
 
 
 
 
June 29, 2014
$
267

 
$
(8
)
 
$
259

June 30, 2013
52

 
(5
)
 
47

 
 
 
 
 
 
For the nine months ended
 
 
 
 
 
June 29, 2014
$
610

 
$
(16
)
 
$
594

June 30, 2013
204

 
(14
)
 
190


Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
June 29, 2014
 
 
 
 
 
 
 
Equity securities
$
2,000

 
$
692

 
$
(5
)
 
$
2,687

Debt securities (including debt funds)
19,741

 
423

 
(20
)
 
20,144

 
$
21,741

 
$
1,115

 
$
(25
)
 
$
22,831

September 29, 2013
 
 
 
 
 
 
 
Equity securities
$
2,570

 
$
793

 
$
(44
)
 
$
3,319

Debt securities (including debt funds)
18,255

 
396

 
(162
)
 
18,489

 
$
20,825

 
$
1,189

 
$
(206
)
 
$
21,808


The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that are classified as available-for-sale and have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):
 
June 29, 2014
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Corporate bonds and notes
$
2,033

 
$
(5
)
 
$
96

 
$
(2
)
Auction rate securities
—

 
—

 
83

 
(1
)
Debt funds
50

 
(1
)
 
394

 
(11
)
Equity funds
30

 
—

 
115

 
(5
)
 
$
2,113

 
$
(6
)
 
$
688

 
$
(19
)
 
September 29, 2013
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Treasury securities and government-related securities
$
42

 
$
(1
)
 
$
—

 
$
—

Corporate bonds and notes
2,084

 
(31
)
 
24

 
(1
)
Mortgage- and asset-backed securities
367

 
(5
)
 
24

 
—

Auction rate securities
—

 
—

 
83

 
(1
)
Common and preferred stock
291

 
(41
)
 
—

 
—

Debt funds
2,776

 
(123
)
 
4

 
—

Equity funds
82

 
(3
)
 
—

 
—

 
$
5,642

 
$
(204
)
 
$
135

 
$
(2
)

At June 29, 2014, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common and preferred stock and for equity and debt funds with unrealized losses, the Company has the ability and the intent to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities with unrealized losses, the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, such securities before recovery or maturity.
The following table shows the activity for the credit loss portion of other-than-temporary impairments on debt securities held by the Company (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 29,
2014
 
June 30,
2013
 
June 29,
2014
 
June 30,
2013
Beginning balance of credit losses
$
8

 
$
8

 
$
4

 
$
31

Reduction in credit losses related to securities the Company intends to sell
—

 
—

 
—

 
(6
)
Credit losses recognized on securities not previously impaired
—

 
—

 
5

 
1

Additional credit losses recognized on securities previously impaired
—

 
—

 
—

 
1

Reductions in credit losses related to securities sold
(3
)
 
(3
)
 
(4
)
 
(21
)
Accretion of credit losses due to an increase in cash flows expected to be collected
—

 
—

 
—

 
(1
)
Ending balance of credit losses
$
5

 
$
5

 
$
5

 
$
5