Fair Value of Financial Instruments (Tables)

3 Months Ended

Apr. 04, 2015

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 April 4, 2015 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	$	58,808	$	—	$	—	$	58,808
Certificates of deposit	—		5,148		—		5,148
Municipal bonds	—		452		—		452
Total cash equivalents	$	58,808	$	5,600	$	—	$	64,408
Short-term Investments:
Municipal bonds	$	—	$	122,917	$	—	$	122,917
Corporate bonds	—		10,117		—		10,117
Variable-rate demand notes	—		8,615		—		8,615
Commercial paper	—		4,898		—		4,898
International government bonds	—		2,248		—		2,248
Total short-term investments	$	—	$	148,795	$	—	$	148,795
Long-term Investments:
Auction rate securities	$	—	$	—	$	7,401	$	7,401
Total long-term investments	$	—	$	—	$	7,401	$	7,401
Total	$	58,808	$	154,395	$	7,401	$	220,604
Liabilities:
Accrued expenses:
Contingent consideration	$	—	$	—	$	3,225	$	3,225
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	11,579	$	11,579
Derivative instruments	—		165		—		165
	$	—	$	165	$	11,579	$	11,744
Total	$	—	$	165	$	14,804	$	14,969

	Fair Value Measurements at January 3, 2015 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	$	71,415	$	—	$	—	$	71,415
Certificates of deposit	—		7,739		—		7,739
Commercial paper	—		5,348		—		5,348
Municipal bonds	—		1,757		—		1,757
U.S. government agency	—		1,202		—		1,202
Corporate bonds	—		1,101		—		1,101
U.S. government bonds	1,000		—		—		1,000
Total cash equivalents	$	72,415	$	17,147	$	—	$	89,562
Short-term Investments:
Municipal bonds	$	—	$	129,152	$	—	$	129,152
Corporate bonds	—		33,033		—		33,033
Variable-rate demand notes	—		12,915		—		12,915
Commercial paper	—		8,995		—		8,995
Asset-backed securities	—		5,377		—		5,377
International government bonds	—		2,516		—		2,516
U.S. government bond	650		—		—		650
U.S. government agency	—		601		—		601
Certificates of deposit	—		250		—		250
Total short-term investments	$	650	$	192,839	$	—	$	193,489
Long-term Investments:
Auction rate securities	$	—	$	—	$	7,419	$	7,419
Total long-term investments	$	—	$	—	$	7,419	$	7,419
Other assets, net:
Derivative instruments	$	—	$	331	$	—	$	331
Total	$	—	$	331	$	—	$	331
Total	$	73,065	$	210,317	$	7,419	$	290,801
Liabilities:
Accrued expenses:
Contingent consideration	$	—	$	—	$	4,288	$	4,288
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	14,150	$	14,150
Total	$	—	$	—	$	18,438	$	18,438

Summary of quantitative information about level 3 asset fair value measurements

Fair Value at April 4, 2015 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	7,401	Discounted cash flow	Estimated yield	0.97	%
			Expected holding period	10 years
			Estimated discount rate	2.96	%

Summary of quantitative information about level 3 liability fair value measurements

Fair Value at April 4, 2015 (000s)		Valuation Technique	Unobservable Input	Range
$	14,804	Monte Carlo simulation	Expected revenue growth rate	35.6% — 69.1%
			Expected revenue volatility	20.0%
			Expected term	0.8 years — 3.8 years
			Estimated discount rate	0.23% — 1.58%

Summary of activity in Level 3 financial instruments

The following summarizes the activity in Level 3 financial instruments for the three months ended April 4, 2015 (in thousands):

Assets

Auction Rate Securities	Three Months Ended
Beginning balance	$	7,419
Loss included in other comprehensive income (loss)	(18		)
Balance at April 4, 2015	$	7,401

Liabilities

Contingent Consideration (1)	Three Months Ended
Beginning balance	$	18,438
Settlements	(4,464		)
Loss recognized in earnings (2)	830
Balance at April 4, 2015	$	14,804
Net loss for the period included in earnings attributable to contingent consideration held at the end of the period:	$	(830	)

(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) Changes to the estimated fair value of contingent consideration were primarily due to revisions to the Company’s expectations of earn-out achievement.