Quarterly report pursuant to Section 13 or 15(d)

Marketable Securities

v2.4.0.6
Marketable Securities
 3 Months Ended
Dec. 25, 2011
Notes to Financial Statements [Abstract]  
Note 11 - Marketable Securities
Note 11 — Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
December 25,
2011
 
September 25,
2011
 
December 25,
2011
 
September 25,
2011
Trading:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
230

 
$
—

 
$
330

 
$
—

Corporate bonds and notes
266

 
—

 
91

 
—

Mortgage- and asset-backed securities
—

 
—

 
35

 
—

Non-investment-grade debt securities
—

 
—

 
54

 
—

Total trading
496

 
—

 
510

 
—

Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
573

 
516

 
30

 
6

Corporate bonds and notes
3,503

 
3,665

 
2,460

 
2,353

Mortgage- and asset-backed securities
527

 
587

 
132

 
91

Auction rate securities
—

 
—

 
122

 
124

Non-investment-grade debt securities
20

 
19

 
4,005

 
3,653

Common and preferred stock
130

 
76

 
1,776

 
1,713

Equity mutual and exchange-traded funds
—

 
—

 
922

 
845

Debt mutual funds
1,327

 
1,327

 
—

 
—

Total available-for-sale
6,080

 
6,190

 
9,447

 
8,785

Fair value option:
 
 
 
 
 
 
 
Debt mutual fund
—

 
—

 
481

 
476

Total marketable securities
$
6,576

 
$
6,190

 
$
10,438

 
$
9,261


The Company holds an investment in a debt mutual fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. The debt mutual fund has no single maturity date. At December 25, 2011, the Company had an effective ownership interest in the debt mutual fund of 21%. Increases in fair value associated with this investment of $5 million were recognized in net investment income during each of the three months ended December 25, 2011 and December 26, 2010. The Company believes that recording the investment at fair value and reporting the investment as a marketable security is preferable to applying the equity method because the Company is able to redeem its shares at net asset value, which is determined daily.
The Company classifies portfolios of debt securities that involve the purchase or sale of derivative instruments to acquire or reduce foreign exchange and/or equity and credit risk as trading. Net losses recognized on debt securities classified as trading still held at December 25, 2011 were $2 million for the three months ended December 25, 2011. The Company did not hold any securities classified as trading at September 25, 2011.
At December 25, 2011, 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
$
799

 
$
4,878

 
$
2,716

 
$
1,034

 
$
3,272

 
$
12,699

Securities with no single maturity date included debt mutual funds, non-investment-grade debt securities, 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
 
 
 
 
 
December 25, 2011
$
36

 
$
(2
)
 
$
34

December 26, 2010
128

 
(5
)
 
123

Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
December 25, 2011
 
 
 
 
 
 
 
Equity securities
$
2,428

 
$
443

 
$
(43
)
 
$
2,828

Debt securities
12,500

 
322

 
(123
)
 
12,699

 
$
14,928

 
$
765

 
$
(166
)
 
$
15,527

September 25, 2011
 
 
 
 
 
 
 
Equity securities
$
2,426

 
$
278

 
$
(70
)
 
$
2,634

Debt securities
12,179

 
294

 
(132
)
 
12,341

 
$
14,605

 
$
572

 
$
(202
)
 
$
14,975


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):
 
December 25, 2011
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Treasury securities and government-related securities
$
419

 
$
(2
)
 
$
4

 
$
—

Corporate bonds and notes
1,930

 
(44
)
 
58

 
(5
)
Auction rate securities
3

 
—

 
119

 
(3
)
Non-investment-grade debt securities
1,396

 
(60
)
 
32

 
(4
)
Common and preferred stock
313

 
(27
)
 
4

 
—

Equity mutual and exchange-traded funds
153

 
(16
)
 
—

 
—

Debt mutual funds
1,320

 
(5
)
 
1

 
—

 
$
5,534

 
$
(154
)
 
$
218

 
$
(12
)

 
September 25, 2011
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
Corporate bonds and notes
$
1,862

 
$
(41
)
 
$
41

 
$
—

Auction rate securities
3

 
—

 
121

 
(2
)
Non-investment-grade debt securities
1,867

 
(86
)
 
19

 
(3
)
Common and preferred stock
750

 
(70
)
 
4

 
—

 
$
4,482

 
$
(197
)
 
$
185

 
$
(5
)

At December 25, 2011, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common and preferred stock 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
 
December 25,
2011
 
December 26,
2010
Beginning balance of credit losses
$
46

 
$
109

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

 
(11
)
Additional credit losses recognized on securities previously impaired
1

 
—

Reductions in credit losses related to securities sold
(1
)
 
(7
)
Accretion of credit losses due to an increase in cash flows expected to be collected
—

 
(2
)
Ending balance of credit losses
$
46

 
$
89