Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 28, 2013

Fair Value of Financial Instruments

Financial assets and liabilities measured at fair value on a recurring basis

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 September 28, 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	$	61,025	$	—	$	—	$	61,025
Commercial paper	—		9,349		—		9,349
Certificates of deposit	—		6,565		—		6,565
Total cash equivalents	$	61,025	$	15,914	$	—	$	76,939
Short-term Investments:
Municipal bonds	$	—	$	93,523	$	—	$	93,523
Variable-rate demand notes	—		33,225		—		33,225
Corporate bonds	—		19,901		—		19,901
Commercial paper	—		6,795		—		6,795
Asset-backed securities	—		413		—		413
Total short-term investments	$	—	$	153,857	$	—	$	153,857
Long-term Investments:
Auction rate securities	$	—	$	—	$	10,671	$	10,671
Total long-term investments	$	—	$	—	$	10,671	$	10,671
Other assets, net:
Derivative instruments	$	—	$	383	$	—	$	383
Total	$	—	$	383	$	—	$	383
Total	$	61,025	$	170,154	$	10,671	$	241,850
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	14,303	$	14,303
Total	$	—	$	—	$	14,303	$	14,303

	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

Summary of quantitative information about level 3 asset fair value measurements

Fair Value at September 28, 2013 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	10,671	Discounted cash flow	Estimated yield	1.12%
			Expected holding period	10 years
			Estimated discount rate	3.77%

Summary of quantitative information about level 3 liability fair value measurements

Fair Value at September 28, 2013 (000s)		Valuation Technique	Unobservable Input	Range
$	14,303	Monte Carlo simulation	Expected revenue growth rate	23.0% – 49.1%
			Expected revenue volatility	20.0%
			Expected term	1.3 – 5.3 years
			Estimated discount rate	0.0% – 1.4%

Summary of activity in Level 3 financial instruments

The following summarizes the activity in Level 3 financial instruments for the three and nine months ended September 28, 2013 (in thousands):

Assets

Auction Rate Securities	Three Months Ended		Nine Months Ended
Beginning balance	$	10,197	$	11,369
Settlements	—		(100		)
Gain (loss) included in other comprehensive income	474		(598		)
Balance at September 28, 2013	$	10,671	$	10,671

Liabilities

Contingent Consideration (1)	Three Months Ended		Nine Months Ended
Beginning balance	$	—	$	2,750
Issues	13,964		13,964
Loss (gain) recognized in earnings	339		(2,411		)(2)
Balance at September 28, 2013	$	14,303	$	14,303
Net loss for the year included in earnings attributable to contingent consideration still held at the end of the period:	$	339	$	339

(1) In connection with the acquisition of Energy Micro and Ember, 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 are recorded in selling, general and administrative expenses in the Consolidated Statement of Income.

(2) The Company reduced the estimated fair value of the Ember contingent consideration because the milestone goal was not achieved.