Fair Value of Financial Instruments (Tables)

3 Months Ended

Apr. 02, 2016

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 April 2, 2016 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	$	40,720	$	—	$	—	$	40,720
Municipal bonds	—		5,724		—		5,724
Certificates of deposit	—		2,849		—		2,849
Commercial paper	—		1,200		—		1,200
Total cash equivalents	$	40,720	$	9,773	$	—	$	50,493
Short-term investments:
Municipal bonds	$	—	$	85,709	$	—	$	85,709
Variable-rate demand notes	—		18,395		—		18,395
Corporate bonds	—		8,003		—		8,003
U.S. government bonds	6,009		—		—		6,009
Asset-backed securities	—		3,998		—		3,998
Commercial paper	—		2,489		—		2,489
International government bonds	—		2,221		—		2,221
Total short-term investments	$	6,009	$	120,815	$	—	$	126,824
Long-term investments:
Auction rate securities	$	—	$	—	$	6,845	$	6,845
Total long-term investments	$	—	$	—	$	6,845	$	6,845
Total	$	46,729	$	130,588	$	6,845	$	184,162
Liabilities:
Other non-current liabilities:
Derivative instruments	$	—	$	129	$	—	$	129
Total	$	—	$	129	$	—	$	129

	Fair Value Measurements at January 2, 2016 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	$	37,721	$	—	$	—	$	37,721
Commercial paper	—		11,272		—		11,272
Certificates of deposit	—		2,845		—		2,845
U.S. government agency	—		1,599		—		1,599
Municipal bonds	—		1,577		—		1,577
Total cash equivalents	$	37,721	$	17,293	$	—	$	55,014
Short-term investments:
Municipal bonds	$	—	$	93,516	$	—	$	93,516
Commercial paper	—		11,176		—		11,176
Variable-rate demand notes	—		8,995		—		8,995
Certificates of deposit	—		8,000		—		8,000
U.S. government agency	—		3,998		—		3,998
International government bonds	—		2,220		—		2,220
Corporate bonds	—		996		—		996
Total short-term investments	$	—	$	128,901	$	—	$	128,901
Long-term investments:
Auction rate securities	$	—	$	—	$	7,126	$	7,126
Total long-term investments	$	—	$	—	$	7,126	$	7,126
Other assets, net:
Derivative instruments	$	—	$	92	$	—	$	92
Total	$	—	$	92	$	—	$	92
Total	$	37,721	$	146,286	$	7,126	$	191,133
Liabilities:
Accrued expenses:
Contingent consideration	$	—	$	—	$	4,749	$	4,749
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	9,324	$	9,324
Total	$	—	$	—	$	14,073	$	14,073

Summary of quantitative information about level 3 asset fair value measurements

The following summarizes quantitative information about Level 3 fair value measurements.

Auction rate securities

Fair Value at April 2, 2016 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	6,845	Discounted cash flow	Estimated yield	1.09%
			Expected holding period	10 years
			Estimated discount rate	3.27%

Summary of activity in Level 3 financial instruments

The following summarizes the activity in Level 3 financial instruments for the three months ended April 2, 2016 (in thousands):

Assets

Auction Rate Securities	Three Months Ended
Beginning balance	$	7,126
Loss included in other comprehensive loss	(281		)
Balance at April 2, 2016	$	6,845

Liabilities

Contingent Consideration (1)	Three Months Ended
Beginning balance	$	14,073
Settlements (2)	(11,375		)
Gain recognized in earnings (3)	(2,698		)
Balance at April 2, 2016	$	—

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

(2) On March 11, 2016, the Company entered into an agreement which settled the total amount of contingent consideration related to the Energy Micro acquisition (including all amounts for fiscal 2015 through 2018). See Note 7, Acquisitions, for additional information.

(3) The gain recognized in earnings was due to the settlement of the Energy Micro contingent consideration. This gain was offset in part by a charge of approximately $2.7 million recorded in the three months ended April 2, 2016 for a portion of the contingent consideration accounted for as post-combination compensation expense.