4. Balance Sheet Components

The Company’s cash balances are held in numerous locations throughout the world, with the majority in the United States. As of September 28, 2014, the Company had cash, cash equivalents, and short-term investments of $309.4 million held within the United States and $17.4 million held outside of the United States. As of December 29, 2013, the Company has cash, cash equivalents, and short term investments of $298.3 million held within the United States and $13.2 million held outside the United States.

All securities other than the FDIC insured certificates of deposit were designated as available-for-sale. FDIC insured certificates of deposit are held to maturity. Gross unrealized gains and losses on cash equivalents and short term investments were not material as of September 28, 2014 and December 29, 2013. Gross realized gains and losses on cash equivalents and short-term investments were not material for the three months and nine months ended September 28, 2014 and September 29, 2013.

Sale of Sunnyvale property and new headquarters lease

On January 23, 2014, the Company sold its property in Sunnyvale, California, consisting of 24.5 acres of land with approximately 471,000 square feet of buildings that include its headquarters building and submicron development center, a Pacific Gas & Electric transmission facility and a warehouse building, for net consideration of $58.9 million. The Company concurrently leased back approximately 170,000 square feet of the headquarters building on a month-to-month basis with the Company having the option to continue the lease for up to 24 months; thereafter either party can terminate the lease. The first six months of the lease are rent free. For accounting purposes, the rents relating to the rent-free period have been netted against the sale proceeds and represent prepaid rent. The Company’s rent-free use of this building constitutes continuing involvement by the Company as lessee, and recognition of the sale of the property and the related gain is deferred until the lease period ends.

Due to the Company’s continuing involvement under the lease, the cash proceeds net of third-party costs were recorded under the financing method as a short term financing obligation, in accordance with the authoritative guidance on leases and sale of real estate. Interest is imputed on the financing obligation until such time as the sale can be recognized. The property continues to remain on the Company’s condensed consolidated balance sheet and the buildings are being depreciated over their remaining useful life. After the rent-free period, beginning in the third quarter of fiscal 2014, a portion of the lease payments is recorded as a reduction to the financing obligation and the remainder is recognized as interest expense. As of September 28, 2014, $59.8 million was recorded in accrued liabilities and other as a financing obligation. The Company expects to recognize a gain of approximately $38.1 million on the sale of Sunnyvale property in the fourth quarter of fiscal 2014 when the lease ends. It will be recorded within interest income and other, net in the Consolidated Financial Statements.

On May 22, 2014, the Company entered into a new headquarters lease for renting office space in San Jose, California. The lease term is for a period of 12 years, with two options to extend for periods of five years each after the initial lease term. The initial lease term will commence on January 1, 2015 and expire on December 31, 2026.