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Fair Value of Financial Instruments | 6 Months Ended
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Jun. 29, 2013
Fair Value of Financial Instruments |
Fair Value of Financial Instruments | 5. Fair Value of Financial Instruments The fair values of the Company’s financial instruments are recorded using a hierarchal disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The three levels are described below: Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 - Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 - Inputs are unobservable for the asset or liability and are developed based on the best information available in the circumstances, which might include the Company’s own data. The following summarizes the valuation of the Company’s financial instruments (in thousands). The tables do not include either cash on hand or assets and liabilities that are measured at historical cost or any basis other than fair value.
|  | Fair Value Measurements at June 29, 2013 Using |  |  |
Description |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total |
Assets: |  |  |  |  |  |  |  |  |
Cash Equivalents: |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 119,064 |  | $ | — |  | $ | — |  | $ | 119,064 |
Commercial paper |  | — |  | 1,000 |  | — |  | 1,000 |
Certificates of deposit |  | — |  | 5,550 |  | — |  | 5,550 |
Total cash equivalents |  | $ | 119,064 |  | $ | 6,550 |  | $ | — |  | $ | 125,614 |
Short-term Investments: |  |  |  |  |  |  |  |  |
Municipal bonds |  | $ | — |  | $ | 79,355 |  | $ | — |  | $ | 79,355 |
Variable-rate demand notes |  | — |  | 56,007 |  | — |  | 56,007 |
Corporate bonds |  | — |  | 13,077 |  | — |  | 13,077 |
Certificates of deposit |  | — |  | 1,858 |  | — |  | 1,858 |
International government bonds |  | — |  | 1,126 |  | — |  | 1,126 |
Total short-term investments |  | $ | — |  | $ | 151,423 |  | $ | — |  | $ | 151,423 |
Long-term Investments: |  |  |  |  |  |  |  |  |
Auction rate securities |  | $ | — |  | $ | — |  | $ | 10,197 |  | $ | 10,197 |
Total long-term investments |  | $ | — |  | $ | — |  | $ | 10,197 |  | $ | 10,197 |
Other assets, net: |  |  |  |  |  |  |  |  |
Derivative instruments |  | $ | — |  | $ | 808 |  | $ | — |  | $ | 808 |
Total |  | $ | — |  | $ | 808 |  | $ | — |  | $ | 808 |
Total |  | $ | 119,064 |  | $ | 158,781 |  | $ | 10,197 |  | $ | 288,042 |
|  | Fair Value Measurements at December 29, 2012 Using |  |  |
Description |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total |
Assets: |  |  |  |  |  |  |  |  |
Cash Equivalents: |  |  |  |  |  |  |  |  |
U.S. Treasury bills |  | $ | 25,050 |  | $ | — |  | $ | — |  | $ | 25,050 |
Money market funds |  | 22,686 |  | — |  | — |  | 22,686 |
Municipal bonds |  | — |  | 1,000 |  | — |  | 1,000 |
Total cash equivalents |  | $ | 47,736 |  | $ | 1,000 |  | $ | — |  | $ | 48,736 |
Short-term Investments: |  |  |  |  |  |  |  |  |
Corporate bonds |  | $ | — |  | $ | 59,351 |  | $ | — |  | $ | 59,351 |
Municipal bonds |  | — |  | 45,689 |  | — |  | 45,689 |
Variable-rate demand notes |  | — |  | 41,785 |  | — |  | 41,785 |
Asset-backed securities |  | — |  | 15,069 |  | — |  | 15,069 |
U.S. government bonds |  | 12,663 |  | — |  | — |  | 12,663 |
International government bonds |  | — |  | 2,008 |  | — |  | 2,008 |
Total short-term investments |  | $ | 12,663 |  | $ | 163,902 |  | $ | — |  | $ | 176,565 |
Long-term Investments: |  |  |  |  |  |  |  |  |
Auction rate securities |  | $ | — |  | $ | — |  | $ | 11,369 |  | $ | 11,369 |
Total long-term investments |  | $ | — |  | $ | — |  | $ | 11,369 |  | $ | 11,369 |
Total |  | $ | 60,399 |  | $ | 164,902 |  | $ | 11,369 |  | $ | 236,670 |
Liabilities: |  |  |  |  |  |  |  |  |
Derivative instruments |  | $ | — |  | $ | 658 |  | $ | — |  | $ | 658 |
Contingent consideration |  | — |  | — |  | 2,750 |  | 2,750 |
Total |  | $ | — |  | $ | 658 |  | $ | 2,750 |  | $ | 3,408 |
The Company’s cash equivalents and short-term investments that are classified as Level 1 are valued using quoted prices and other relevant information generated by market transactions involving identical assets. Cash equivalents and short-term investments classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Investments classified as Level 3 are valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities. The Company’s derivative instruments are valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include quoted interest swap rates and market observable data of similar instruments. The Company’s contingent consideration is valued using a probability weighted discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for outcomes if milestone goals are achieved, the probability of achieving each outcome and discount rates. The following summarizes quantitative information about Level 3 fair value measurements. Auction rate securities
Fair Value at June 29, 2013 (000s) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average |
$ | 10,197 |  | Discounted cash flow |  | Estimated yield |  | 1.09 | %
|  |  |  | Expected holding period |  | 10 years |
|  |  |  | Estimated discount rate |  | 3.71 | %
The Company has followed an established internal control procedure used in valuing auction rate securities. The procedure involves several layers of the Company’s finance management in the analysis of valuation techniques and evaluation of unobservable inputs commonly used by market participants to price similar instruments, and which have been demonstrated to provide reasonable estimates of prices obtained in actual market transactions. Outputs from the valuation process are assessed against various market sources when they are available, including marketplace quotes, recent trades of similar illiquid securities, benchmark indices and independent pricing services. The technique and unobservable input parameters may be recalibrated periodically to achieve an appropriate estimation of the fair value of the securities. Significant changes in any of the unobservable inputs used in the fair value measurement of auction rate securities in isolation could result in a significantly lower or higher fair value measurement. An increase in expected yield would result in a higher fair value measurement, whereas an increase in expected holding period or estimated discount rate would result in a lower fair value measurement. Generally, a change in the assumptions used for expected holding period is accompanied by a directionally similar change in the assumptions used for estimated yield and discount rate. The following summarizes the activity in Level 3 financial instruments for the three and six months ended June 29, 2013 (in thousands): Assets
Auction Rate Securities |  | Three Months Ended |  | Six Months Ended |
Beginning balance |  | $ | 11,189 |  | $ | 11,369 |
Settlements |  | (25 | ) | (100 | )
Losses included in other comprehensive income |  | (967 | ) | (1,072 | )
Balance at June 29, 2013 |  | $ | 10,197 |  | $ | 10,197 |
Liabilities
Contingent Consideration (1) |  | Three Months Ended |  | Six Months Ended |
Beginning balance |  | $ | — |  | $ | 2,750 |
Gain recognized in earnings (2) |  | — |  | (2,750 | )
Balance at June 29, 2013 |  | $ | — |  | $ | — |
(1) In connection with the acquisition of Ember, the Company recorded contingent consideration based upon the expected achievement of a milestone goal. Changes to the fair value of contingent consideration due to changes in assumptions used in preparing the discounted cash flow model are recorded in selling, general and administrative expenses in the Consolidated Statement of Income. (2) The Company reduced the estimated fair value of contingent consideration because the milestone goal was not achieved. Fair values of other financial instruments The fair value of the Company’s Term Loan Facility approximates its carrying values due to the variable interest rate feature of this instrument. The Company’s other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13537-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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