Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 29, 2014

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 March 29, 2014 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	$	85,070	$	—	$	—	$	85,070
Certificates of deposit	—		6,121		—		6,121
Total cash equivalents	$	85,070	$	6,121	$	—	$	91,191
Short-term Investments:
Municipal bonds	$	—	$	134,192	$	—	$	134,192
Variable-rate demand notes	—		35,840		—		35,840
Corporate bonds	—		23,825		—		23,825
Asset-backed securities	—		908		—		908
Total short-term investments	$	—	$	194,765	$	—	$	194,765
Long-term Investments:
Auction rate securities	$	—	$	—	$	10,997	$	10,997
Total long-term investments	$	—	$	—	$	10,997	$	10,997
Other assets, net:
Derivative instruments	$	—	$	514	$	—	$	514
Total	$	—	$	514	$	—	$	514
Total	$	85,070	$	201,400	$	10,997	$	297,467
Liabilities:
Accrued expenses:
Contingent consideration	$	—	$	—	$	3,754	$	3,754
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	9,502	$	9,502
Total	$	—	$	—	$	13,256	$	13,256

	Fair Value Measurements at December 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	$	39,538	$	—	$	—	$	39,538
Certificates of deposit	—		7,768		—		7,768
Commercial paper	—		2,499		—		2,499
Municipal bonds	—		451		—		451
Total cash equivalents	$	39,538	$	10,718	$	—	$	50,256
Short-term Investments:
Municipal bonds	$	—	$	119,460	$	—	$	119,460
Variable-rate demand notes	—		38,025		—		38,025
Corporate bonds	—		17,844		—		17,844
Commercial paper	—		3,748		—		3,748
Asset-backed securities	—		516		—		516
Total short-term investments	$	—	$	179,593	$	—	$	179,593
Long-term Investments:
Auction rate securities	$	—	$	—	$	10,632	$	10,632
Total long-term investments	$	—	$	—	$	10,632	$	10,632
Other assets, net:
Derivative instruments	$	—	$	513	$	—	$	513
Total	$	—	$	513	$	—	$	513
Total	$	39,538	$	190,824	$	10,632	$	240,994
Liabilities:
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	12,919	$	12,919
Total	$	—	$	—	$	12,919	$	12,919

Summary of quantitative information about level 3 asset fair value measurements

Auction rate securities

Fair Value at March 29, 2014 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	10,997	Discounted cash flow	Estimated yield	1.19%
			Expected holding period	10 years
			Estimated discount rate	3.72%

Summary of quantitative information about level 3 liability fair value measurements

Contingent consideration

Fair Value at March 29, 2014 (000s)		Valuation Technique	Unobservable Input	Range
$	13,256	Monte Carlo simulation	Expected revenue growth rate	26.2% – 44.4%
			Expected revenue volatility	20.0%
			Expected term	0.8 – 4.8 years
			Estimated discount rate	0.1% – 1.5%

Summary of activity in Level 3 financial instruments

The following summarizes the activity in Level 3 financial instruments for the three months ended March 29, 2014 (in thousands):

Assets

Auction Rate Securities	Three Months Ended
Beginning balance	$	10,632
Gain included in other comprehensive income	365
Balance at March 29, 2014	$	10,997

Liabilities

Contingent Consideration (1)	Three Months Ended
Beginning balance	$	12,919
Loss recognized in earnings (2)	337
Balance at March 29, 2014	$	13,256
Net loss for the period included in earnings attributable to contingent consideration held at the end of the period:	$	337

(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 are recorded in selling, general and administrative expenses in the Consolidated Statement of Income.

(2) The Company increased the estimated fair value of contingent consideration because the Company now expects a higher level of earn-out achievement.