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Fair Value and Derivative Instruments
 6 Months Ended
Jun. 27, 2020
Fair Value Disclosures [Abstract]  
Fair Value and Derivative Instruments Fair Value and Derivative Instruments
Whenever possible, the fair values of our financial assets and liabilities are determined using quoted market prices of identical securities or quoted market prices of similar securities from active markets. The three levels of inputs that may be used to measure fair value are as follows:
•Level 1 valuations are obtained from real-time quotes for transactions in active exchange markets involving identical securities;
•Level 2 valuations utilize significant observable inputs, such as quoted prices for similar assets or liabilities, quoted prices near the reporting date in markets that are less active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
•Level 3 valuations utilize unobservable inputs to the valuation methodology and include our own data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

We did not have any transfers of assets or liabilities measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 during the three and six months ended June 27, 2020 or the year ended December 28, 2019.

The carrying values of Cash, Accounts receivable, net, Restricted cash, Prepaid expenses and other current assets, Accounts payable, Accrued liabilities, and Current portion of term loans, net of unamortized issuance costs, approximate fair value due to their short maturities.

No changes were made to our valuation techniques during the first six months of fiscal 2020.
Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands): 
June 27, 2020Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$96,474  $—  $—  $96,474  
Marketable securities:
 U.S. treasuries33,279  —  —  33,279  
 Certificates of deposit—  3,157  —  3,157  
 U.S. agency securities—  2,643  —  2,643  
 Corporate bonds—  19,949  —  19,949  
 Commercial paper—  2,149  —  2,149  
33,279  27,898  —  61,177  
Foreign exchange derivative contracts—  153  —  153  
Total assets$129,753  $28,051  $—  $157,804  
Liabilities:
Interest rate swap derivative contracts$—  $(256) $—  $(256) 
Contingent consideration—  —  (2,862) (2,862) 
Total liabilities$—  $(256) $(2,862) $(3,118) 

December 28, 2019Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$17,056  $—  $—  $17,056  
Marketable securities:
U.S. treasuries10,468  —  —  10,468  
Certificates of deposit—  3,590  —  3,590  
U.S. agency securities—  24,430  —  24,430  
Corporate bonds—  33,928  —  33,928  
Commercial paper—  3,911  —  3,911  
10,468  65,859  —  76,327  
Foreign exchange derivative contracts—  41  —  41  
Interest rate swap derivative contracts—  26  —  26  
Total assets$27,524  $65,926  $—  $93,450  
Liabilities:
Foreign exchange derivative contracts$—  $(240) $—  $(240) 
Contingent consideration—  —  (5,364) (5,364) 
Total liabilities$—  $(240) $(5,364) $(5,604) 
 
Cash Equivalents
The fair value of our cash equivalents is determined based on quoted market prices for similar or identical securities.

Marketable Securities
We classify our marketable securities as available-for-sale and value them utilizing a market approach. Our investments are priced by pricing vendors who provide observable inputs for their pricing without applying significant judgment. Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors or when a broker price is more reflective of fair value. Our broker-priced investments are categorized as Level 2 investments because fair value is based on similar assets without applying significant judgments. In addition, all investments have a sufficient trading volume to demonstrate that the fair value is appropriate.
Unrealized gains and losses were immaterial and were recorded as a component of Accumulated other comprehensive income in our Condensed Consolidated Balance Sheets. We did not have any other-than-temporary unrealized gains or losses at either period end included in these financial statements.

Contingent Consideration
Contingent consideration, arising from the acquisition of FRT, is a cash amount equal to 1.5x EBIT as defined in the purchase agreement, up to a maximum of €10.3 million, payable subject to the performance of the acquired business in calendar 2020. We estimated the fair value of contingent consideration using a probability weighted approach. Key assumptions in determining the fair value of contingent consideration include estimating EBIT levels that are likely to be achieved during the performance period and discounting at an appropriate discount rate. Contingent consideration as of June 27, 2020 was estimated to be $2.9 million, a net decrease of $2.5 million from $5.4 million as of December 28, 2019. The net decrease was as a result of a $1.2 million increase in the estimated contingent consideration upon acquisition and as part of purchase accounting that was adjusted in the first fiscal quarter of 2020, offset by a $3.7 million decrease in the estimated contingent consideration from subsequent remeasurement of the liability.

Interest Rate Swaps
The fair value of our interest rate swap contracts is determined at the end of each reporting period based on valuation models that use interest rate yield curves as inputs. For accounting purposes, our interest rate swap contracts qualify for, and are designated as, cash flow hedges. The cash flows associated with the interest rate swaps are reported in Net cash provided by operating activities in our Condensed Consolidated Statements of Cash Flows and the fair value of the interest rate swap contracts are recorded within Accrued liabilities and Other liabilities in our Condensed Consolidated Balance Sheets.

The impact of the interest rate swaps on our Condensed Consolidated Statements of Income was as follows (in thousands):
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion)
Three Months Ended June 27, 2020$(174) Interest expense$(10) Interest expense$—  
Three Months Ended June 29, 2019$(62) Interest expense$175  Interest expense$—  
Six Months Ended June 27, 2020$(270) Interest expense$12  Interest expense$—  
Six Months Ended June 29, 2019$(90) Interest expense$383  Interest expense$—  

Foreign Exchange Derivative Contracts
We operate and sell our products in various global markets. As a result, we are exposed to changes in foreign currency exchange rates. We utilize foreign currency forward contracts to hedge against future movements in foreign exchange rates that affect certain existing foreign currency denominated assets and liabilities and forecasted foreign currency revenue and expense transactions. Under this program, our strategy is to have increases or decreases in our foreign currency exposures mitigated by gains or losses on the foreign currency forward contracts in order to mitigate the risks and volatility associated with foreign currency transaction gains or losses.

We do not use derivative financial instruments for speculative or trading purposes. For accounting purposes, certain of our foreign currency forward contracts are not designated as hedging instruments and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded within Other expense, net in our Condensed Consolidated Statement of Income for both realized and unrealized gains and losses. Certain of our foreign currency forward contracts are designated as cash flow hedges, and, accordingly, we record the fair value of these contracts as of the end of our reporting period in our Condensed Consolidated Balance Sheets with changes in fair value recorded as a component of Accumulated other comprehensive loss and reclassified into earnings in the same period in which the hedged transaction affects earnings, and in the same line item on the Condensed Consolidated Statements of Income as the impact of the hedge transaction. At June 27, 2020, we expect to reclassify $0.2 million of the amount accumulated in Other comprehensive loss to earnings during the next 12 months, due to the recognition in earnings of the hedged forecasted transactions.

The fair value of our foreign exchange derivative contracts was determined based on current foreign currency exchange rates and forward points. All of our foreign exchange derivative contracts outstanding at June 27, 2020 will mature by the second quarter of fiscal 2021.
The following table provides information about our foreign currency forward contracts outstanding as of June 27, 2020 (in thousands):
CurrencyContract PositionContract Amount
(Local Currency)
Contract Amount
(U.S. Dollars)
Euro DollarBuy(1,897) $(1,996) 
Japanese YenSell1,475,099  13,766  
Korean WonBuy(2,613,516) (2,182) 
Total USD notional amount of outstanding foreign exchange contracts$9,588  

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy as they are valued using pricing models that utilize observable market inputs.

The impact of foreign exchange derivative contracts not designated as cash flow hedges on our Condensed Consolidated Statements of Income was as follows (in thousands):
Amount of Gain (Loss) Recognized on Derivatives
Three Months EndedSix Months Ended
Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized on DerivativesJune 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Foreign exchange forward contractsOther expense, net$234  $587  $349  $273  

The impact of foreign exchange derivative contracts designated as cash flow hedges on our Condensed Consolidated Statements of Income was as follows (in thousands):
Amount of Loss Recognized in Accumulated OCI on Derivative Location of Loss Reclassified from Accumulated OCI into Income Amount of Loss Reclassified from Accumulated OCI into Income
Three Months Ended June 27, 2020$52  Cost of revenues$139  
Research and development17  
Selling, general and administrative35  
$191  
Three Months Ended June 29, 2019$213  Cost of revenues$139  
Research and development12  
Selling, general and administrative32  
$183  
Six Months Ended June 27, 2020$126  Cost of revenues$258  
Research and development35  
Selling, general and administrative79  
$372  
Six Months Ended June 29, 2019$213  Cost of revenues$171  
Research and development19  
Selling, general and administrative51  
$241  
Assets and Liabilities Measured at Fair Value on a Non-Recurring BasisWe measure and report our non-financial assets such as Property, plant and equipment, Goodwill and Intangible assets at fair value on a non-recurring basis if we determine these assets to be impaired or in the period when we make a business acquisition. Other than as discussed in Note 4, Acquisition, there were no assets or liabilities measured at fair value on a nonrecurring basis during the three and six months ended June 27, 2020 or June 29, 2019.