Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 27, 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):

	Fair Value Measurements at September 27, 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	$	28,036	$	—	$	—	$	28,036
Commercial paper	—		14,147		—		14,147
Certificates of deposit	—		5,331		—		5,331
Municipal bonds	—		907		—		907
Total cash equivalents	$	28,036	$	20,385	$	—	$	48,421
Short-term Investments:
Municipal bonds	$	—	$	143,449	$	—	$	143,449
Corporate bonds	—		36,014		—		36,014
Variable-rate demand notes	—		15,755		—		15,755
Commercial paper	—		11,439		—		11,439
Asset-backed securities	—		5,687		—		5,687
International government bonds	—		2,528		—		2,528
Certificates of deposit	—		850		—		850
U.S. government bond	650		—		—		650
U.S. government agency	—		601		—		601
Total short-term investments	$	650	$	216,323	$	—	$	216,973
Long-term Investments:
Auction rate securities	$	—	$	—	$	11,505	$	11,505
Total long-term investments	$	—	$	—	$	11,505	$	11,505
Other assets, net:
Derivative instruments	$	—	$	507	$	—	$	507
Total	$	—	$	507	$	—	$	507
Total	$	28,686	$	237,215	$	11,505	$	277,406
Liabilities:
Accrued expenses:
Contingent consideration	$	—	$	—	$	6,279	$	6,279
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	11,680	$	11,680
Total	$	—	$	—	$	17,959	$	17,959

	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

Fair Value at September 27, 2014 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	11,505	Discounted cash flow	Estimated yield	1.15%
			Expected holding period	10 years
			Estimated discount rate	3.50%

Summary of quantitative information about level 3 liability fair value measurements

Fair Value at September 27, 2014 (000s)		Valuation Technique	Unobservable Input	Range
$	17,959	Monte Carlo simulation	Expected revenue growth rate	35.6% – 69.1%
			Expected revenue volatility	20.0%
			Expected term	0.3 years – 4.3 years
			Estimated discount rate	0.1% – 1.8%

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 27, 2014 (in thousands):

Assets

Auction Rate Securities	Three Months Ended		Nine Months Ended
Beginning balance	$	10,993	$	10,632
Gain included in other comprehensive income	512		873
Balance at September 27, 2014	$	11,505	$	11,505

Liabilities

Contingent Consideration (1)	Three Months Ended			Nine Months Ended
Beginning balance	$	11,955		$	12,919
Loss recognized in earnings (2)	6,004			5,040
Balance at September 27, 2014	$	17,959		$	17,959
Net loss for the period included in earnings attributable to contingent consideration held at the end of the period:	$	(6,004	)	$	(5,040	)

(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.