Investments

Short-term Investments

At May 5, 2013, February 3, 2013, and April 29, 2012, our short-term investments consisted of municipal bonds with various maturities, representing funds available for current operations. These short-term investments are classified as available-for-sale and are carried at fair value using quoted prices in active markets for identical assets or liabilities (Level 1). Accrued interest was immaterial at May 5, 2013, February 3, 2013, and April 29, 2012. The amortized cost basis at May 5, 2013, February 3, 2013, and April 29, 2012, was $7.3 million, $9.1 million, and $22.0 million, respectively. Unrealized gains and losses are included in other comprehensive income in the Condensed Consolidated Statements of Income and Comprehensive Income.

Investments in Negotiable Certificates of Deposit

At May 5, 2013, February 3, 2013, and April 29, 2012, we had investments in negotiable certificates of deposit, or “NCDs,” with various maturities. These investments are classified as held-to-maturity and are carried at their amortized cost basis.

The amortized cost basis of our investments in NCDs was classified in the Condensed Consolidated Balance Sheets as follows (in thousands):



	May 5, 2013		February 3, 2013		April 29, 2012
Prepaid expenses and other current assets	$	1,646	$	2,571	$	11,889
Noncurrent assets	—		240		1,660

The aggregate fair value of our investments in NCDs was $1.6 million, $2.8 million, and $13.6 million at May 5, 2013, February 3, 2013, and April 29, 2012, respectively. The fair value is determined using pricing models which use inputs based on observable market data (Level 2). The inputs of the pricing models are issuer spreads and reported trades. We had no unrecognized gains or losses for the thirteen weeks ended May 5, 2013. Unrecognized gains for the thirteen weeks ended April 29, 2012, were immaterial.

Equity Investment in Banfield

We have an investment in Banfield which is accounted for using the equity method of accounting. As of May 5, 2013, February 3, 2013, and April 29, 2012, our investment represented 21.4% of the voting common stock and 21.0% of the combined voting and non-voting stock. Our investment includes goodwill of $15.9 million. The goodwill is calculated as the excess of the purchase price for each step of the acquisition of our ownership interest in Banfield relative to that step’s portion of Banfield’s net assets at the respective acquisition date.

Banfield’s financial data is summarized as follows (in thousands):



	May 5, 2013		February 3, 2013		April 29, 2012
Current assets	$	467,478	$	429,787	$	401,541
Noncurrent assets	153,478		141,209		142,239
Current liabilities	527,151		388,729		295,006
Noncurrent liabilities	27,001		16,508		74,764



	Thirteen Weeks Ended
	May 5, 2013		April 29, 2012
Net sales	$	222,129	$	194,278
Income from operations	29,616		21,321
Net income	17,199		12,543

We recognized license fees and reimbursements for specific operating expenses from Banfield of $9.6 million and $9.3 million during the thirteen weeks ended May 5, 2013, and April 29, 2012, respectively, in other revenue in the Condensed Consolidated Statements of Income and Comprehensive Income. The related costs are included in cost of other revenue in the Condensed Consolidated Statements of Income and Comprehensive Income. Receivables from Banfield totaled $3.2 million, $3.2 million, and $3.1 million at May 5, 2013, February 3, 2013, and April 29, 2012, respectively, and were included in receivables, net in the Condensed Consolidated Balance Sheets.

Our master operating agreement with Banfield also includes a provision for the sharing of profits on the sale of therapeutic pet foods sold in all stores with an operating Banfield hospital. The net sales and gross profit on the sale of therapeutic pet food are not material to our condensed consolidated financial statements.