XML 20 R9.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Fair Value of Financial Instruments | 9 Months Ended
--- | ---
Oct. 01, 2016
Fair Value of Financial Instruments |
Fair Value of Financial Instruments | 3. Fair Value of Financial Instruments The fair values of the Company’s financial instruments are recorded using a hierarchical 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 October 1, 2016 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 |  | $ | 36,200 |  | $ | — |  | $ | — |  | $ | 36,200 |
Certificates of deposit |  | — |  | 2,956 |  | — |  | 2,956 |
Municipal bonds |  | — |  | 301 |  | — |  | 301 |
Total cash equivalents |  | $ | 36,200 |  | $ | 3,257 |  | $ | — |  | $ | 39,457 |
Short-term investments: |  |  |  |  |  |  |  |  |
Municipal bonds |  | $ | — |  | $ | 60,682 |  | $ | — |  | $ | 60,682 |
Corporate bonds |  | — |  | 22,306 |  | — |  | 22,306 |
Variable-rate demand notes |  | — |  | 15,324 |  | — |  | 15,324 |
U.S. government bonds |  | 14,392 |  | — |  | — |  | 14,392 |
Asset-backed securities |  | — |  | 10,961 |  | — |  | 10,961 |
Commercial paper |  | — |  | 6,466 |  | — |  | 6,466 |
International government bonds |  | — |  | 1,008 |  | — |  | 1,008 |
Total short-term investments |  | $ | 14,392 |  | $ | 116,747 |  | $ | — |  | $ | 131,139 |
Long-term investments: |  |  |  |  |  |  |  |  |
Auction rate securities |  | $ | — |  | $ | — |  | $ | 6,980 |  | $ | 6,980 |
Total long-term investments |  | $ | — |  | $ | — |  | $ | 6,980 |  | $ | 6,980 |
Other assets, net: |  |  |  |  |  |  |  |  |
Derivative instruments |  | $ | — |  | $ | 72 |  | $ | — |  | $ | 72 |
Total |  | $ | — |  | $ | 72 |  | $ | — |  | $ | 72 |
Total |  | $ | 50,592 |  | $ | 120,076 |  | $ | 6,980 |  | $ | 177,648 |
|  | Fair Value Measurements at January 2, 2016 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 |  | $ | 37,721 |  | $ | — |  | $ | — |  | $ | 37,721 |
Commercial paper |  | — |  | 11,272 |  | — |  | 11,272 |
Certificates of deposit |  | — |  | 2,845 |  | — |  | 2,845 |
U.S. government agency |  | — |  | 1,599 |  | — |  | 1,599 |
Municipal bonds |  | — |  | 1,577 |  | — |  | 1,577 |
Total cash equivalents |  | $ | 37,721 |  | $ | 17,293 |  | $ | — |  | $ | 55,014 |
Short-term investments: |  |  |  |  |  |  |  |  |
Municipal bonds |  | $ | — |  | $ | 93,516 |  | $ | — |  | $ | 93,516 |
Commercial paper |  | — |  | 11,176 |  | — |  | 11,176 |
Variable-rate demand notes |  | — |  | 8,995 |  | — |  | 8,995 |
Certificates of deposit |  | — |  | 8,000 |  | — |  | 8,000 |
U.S. government agency |  | — |  | 3,998 |  | — |  | 3,998 |
International government bonds |  | — |  | 2,220 |  | — |  | 2,220 |
Corporate bonds |  | — |  | 996 |  | — |  | 996 |
Total short-term investments |  | $ | — |  | $ | 128,901 |  | $ | — |  | $ | 128,901 |
Long-term investments: |  |  |  |  |  |  |  |  |
Auction rate securities |  | $ | — |  | $ | — |  | $ | 7,126 |  | $ | 7,126 |
Total long-term investments |  | $ | — |  | $ | — |  | $ | 7,126 |  | $ | 7,126 |
Other assets, net: |  |  |  |  |  |  |  |  |
Derivative instruments |  | $ | — |  | $ | 92 |  | $ | — |  | $ | 92 |
Total |  | $ | — |  | $ | 92 |  | $ | — |  | $ | 92 |
Total |  | $ | 37,721 |  | $ | 146,286 |  | $ | 7,126 |  | $ | 191,133 |
Liabilities: |  |  |  |  |  |  |  |  |
Accrued expenses: |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | — |  | $ | — |  | $ | 4,749 |  | $ | 4,749 |
Other non-current liabilities: |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | — |  | $ | — |  | $ | 9,324 |  | $ | 9,324 |
Total |  | $ | — |  | $ | — |  | $ | 14,073 |  | $ | 14,073 |
Valuation methodology The Company’s cash equivalents and short-term investments that are 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 discounted cash flow models. The assumptions used in preparing the valuation models include quoted interest swap rates, foreign exchange rates, forward and spot prices for currencies, and market observable data of similar instruments. The Company’s contingent consideration is valued using a Monte Carlo simulation model or a probability weighted discounted cash flow model. The assumptions used in preparing the Monte Carlo simulation model include estimates for revenue growth rates, revenue volatility, contractual terms and discount rates. 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. Available-for-sale investments The Company’s investments typically have original maturities greater than ninety days as of the date of purchase. Investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at October 1, 2016 (in thousands):
|  | Cost |  | Fair Value |
Due in one year or less |  | $ | 99,623 |  | $ | 99,620 |
Due after one year through ten years |  | 58,238 |  | 58,251 |
Due after ten years |  | 20,725 |  | 19,705 |
|  | $ | 178,586 |  | $ | 177,576 |
The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):
|  | Less Than 12 Months |  | 12 Months or Greater |  | Total |
As of October 1, 2016 |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |
Municipal bonds |  | $ | 42,653 |  | $ | (39 | ) | $ | — |  | $ | — |  | $ | 42,653 |  | $ | (39 | )
Corporate bonds |  | 9,368 |  | (16 | ) | — |  | — |  | 9,368 |  | (16 | )
Auction rate securities |  | — |  | — |  | 6,980 |  | (1,020 | ) | 6,980 |  | (1,020 | )
U.S. government bonds |  | 5,307 |  | (2 | ) | — |  | — |  | 5,307 |  | (2 | )
|  | $ | 57,328 |  | $ | (57 | ) | $ | 6,980 |  | $ | (1,020 | ) | $ | 64,308 |  | $ | (1,077 | )
|  | Less Than 12 Months |  | 12 Months or Greater |  | Total |
As of January 2, 2016 |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |
Municipal bonds |  | $ | 29,271 |  | $ | (30 | ) | $ | 1,198 |  | $ | (2 | ) | $ | 30,469 |  | $ | (32 | )
Auction rate securities |  | — |  | — |  | 7,126 |  | (874 | ) | 7,126 |  | (874 | )
International government bonds |  | 2,220 |  | (7 | ) | — |  | — |  | 2,220 |  | (7 | )
Corporate bonds |  | 996 |  | (3 | ) | — |  | — |  | 996 |  | (3 | )
|  | $ | 32,487 |  | $ | (40 | ) | $ | 8,324 |  | $ | (876 | ) | $ | 40,811 |  | $ | (916 | )
The gross unrealized losses as of October 1, 2016 and January 2, 2016 were due primarily to the illiquidity of the Company’s auction-rate securities and, to a lesser extent, to changes in market interest rates. The Company’s auction-rate securities have been illiquid since 2008 when auctions for the securities failed because sell orders exceeded buy orders. These securities have contractual maturity dates ranging from 2033 to 2046 at October 1, 2016. The Company is unable to predict if these funds will become available before their maturity dates. The Company does not expect to need access to the capital represented by any of its auction-rate securities prior to their maturities. The Company does not intend to sell, and believes it is not more likely than not that it will be required to sell, its auction-rate securities before their anticipated recovery in market value or final settlement at the underlying par value. The Company believes that the credit ratings and credit support of the security issuers indicate that they have the ability to settle the securities at par value. As such, the Company has determined that no other-than-temporary impairment losses existed as of October 1, 2016. At October 1, 2016 and January 2, 2016, there were no material unrealized gains associated with the Company’s available-for-sale investments. Level 3 fair value measurements The following summarizes quantitative information about Level 3 fair value measurements. Auction rate securities
Fair Value at October 1, 2016 (000s) |  | Valuation Technique |  | Unobservable Input |  | Weighted Average |
$ | 6,980 |  | Discounted cash flow |  | Estimated yield |  | 1.12% |
|  |  |  | Expected holding period |  | 10 years |
|  |  |  | Estimated discount rate |  | 2.74% |
The Company has followed an established internal control procedure used in valuing auction rate securities. The procedure involves 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. Contingent consideration The Company has followed an established internal control procedure used in valuing contingent consideration. The valuation of contingent consideration for the Energy Micro acquisition was based on a Monte Carlo simulation model. The fair value of this valuation was estimated on a quarterly basis through a collaborative effort by the Company’s sales, marketing and finance departments. The following summarizes the activity in Level 3 financial instruments for the three and nine months ended October 1, 2016 (in thousands): Assets
Auction Rate Securities |  | Three Months Ended |  | Nine Months Ended |
Beginning balance |  | $ | 6,921 |  | $ | 7,126 |
Gain (loss) included in other comprehensive income (loss) |  | 59 |  | (146 | )
Balance at October 1, 2016 |  | $ | 6,980 |  | $ | 6,980 |
Liabilities
Contingent Consideration (1) |  | Nine Months Ended |
Beginning balance |  | $ | 14,073 |
Settlements (2) |  | (11,375 | )
Gain recognized in earnings (3) |  | (2,698 | )
Balance at October 1, 2016 |  | $ | — |
(1) In connection with the acquisition of Energy Micro, the Company recorded contingent consideration based upon the expected achievement of certain milestone goals. Changes to the fair value of contingent consideration due to changes in assumptions used in preparing the valuation model were recorded in selling, general and administrative expenses in the Consolidated Statement of Income. (2) On March 11, 2016, the Company entered into an agreement which settled the total amount of contingent consideration related to the Energy Micro acquisition (including all amounts for fiscal 2015 through 2018). See Note 6, Acquisitions, for additional information. (3) The gain recognized in earnings was due to the settlement of the Energy Micro contingent consideration. This gain was offset in part by a charge of approximately $2.7 million recorded in the nine months ended October 1, 2016 for a portion of the contingent consideration accounted for as post-combination compensation expense. Fair values of other financial instruments The Company’s debt under the Credit Facilities bears interest at the Eurodollar rate plus an applicable margin. The Credit Facilities are recorded at cost, but are measured at fair value for disclosure purposes. Fair value is estimated based on Level 2 inputs, using a discounted cash flow analysis of future principal payments and projected interest based on current market rates. As of October 1, 2016 and January 2, 2016, the fair value of the Company’s debt under the Credit Facilities was approximately $72.2 million and $77.5 million, respectively. 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.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 2: 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 3: 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 4: 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=73719730&loc=d3e13537-108611 Reference 5: 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=73719730&loc=d3e13504-108611 Reference 6: 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=73719730&loc=d3e13433-108611 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration