Fair Value of Financial Instruments (Tables)

6 Months Ended

Jul. 01, 2017

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 July 1, 2017 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	$	78,006	$	—	$	—	$	78,006
Corporate debt securities	—		31,827		—		31,827
Government debt securities	—		1,496		—		1,496
Total cash equivalents	$	78,006	$	33,323	$	—	$	111,329
Short-term investments:
Government debt securities	$	60,769	$	215,086	$	—	$	275,855
Corporate debt securities	—		175,259		—		175,259
Total short-term investments	$	60,769	$	390,345	$	—	$	451,114
Long-term investments:
Auction rate securities	$	—	$	—	$	5,379	$	5,379
Total long-term investments	$	—	$	—	$	5,379	$	5,379
Total	$	138,775	$	423,668	$	5,379	$	567,822
Liabilities:
Other non-current liabilities:
Contingent consideration	$	—	$	—	$	3,993	$	3,993
Total	$	—	$	—	$	3,993	$	3,993

	Fair Value Measurements at December 31, 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	$	69,432	$	—	$	—	$	69,432
Corporate debt securities	—		7,153		—		7,153
Government debt securities	—		3,904		—		3,904
Total cash equivalents	$	69,432	$	11,057	$	—	$	80,489
Short-term investments:
Government debt securities	$	12,416	$	97,103	$	—	$	109,519
Corporate debt securities	—		44,442		—		44,442
Total short-term investments	$	12,416	$	141,545	$	—	$	153,961
Long-term investments:
Auction rate securities	$	—	$	—	$	5,196	$	5,196
Total long-term investments	$	—	$	—	$	5,196	$	5,196
Other assets, net:
Derivative instruments	$	—	$	1,808	$	—	$	1,808
Total	$	—	$	1,808	$	—	$	1,808
Total	$	81,848	$	154,410	$	5,196	$	241,454

Summarization of contractual underlying maturities of available-for-sale investments

The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at July 1, 2017 (in thousands):

	Cost		Fair Value
Due in one year or less	$	293,156	$	293,132
Due after one year through ten years	179,050		179,051
Due after ten years	96,260		95,639
	$	568,466	$	567,822

Schedule of available-for-sale investments in continuous unrealized loss position by length of time

The available-for-sale investments that were in a continuous unrealized loss position, aggregated by length of time that individual securities have been in a continuous loss position, were as follows (in thousands):

	Less Than 12 Months					12 Months or Greater					Total
As of July 1, 2017	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	110,741	$	(97	)	$	—	$	—		$	110,741	$	(97	)
Corporate debt securities	84,486		(124		)	—		—			84,486		(124		)
Auction rate securities	—		—			5,379		(621		)	5,379		(621		)
	$	195,227	$	(221	)	$	5,379	$	(621	)	$	200,606	$	(842	)

	Less Than 12 Months					12 Months or Greater					Total
As of December 31, 2016	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Government debt securities	$	79,743	$	(156	)	$	—	$	—		$	79,743	$	(156	)
Corporate debt securities	21,737		(132		)	—		—			21,737		(132		)
Auction rate securities	—		—			5,196		(804		)	5,196		(804		)
	$	101,480	$	(288	)	$	5,196	$	(804	)	$	106,676	$	(1,092	)

Summary of quantitative information about level 3 asset fair value measurements

Auction rate securities

Fair Value at July 1, 2017 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	5,379	Discounted cash flow	Estimated yield	0.88%
			Expected holding period	10 years
			Estimated discount rate	3.29%

Contingent consideration

Fair Value at July 1, 2017 (000s)		Valuation Technique	Unobservable Input	Weighted Average
$	3,993	Discounted cash flow	Expected term	6 months
			Estimated discount rate	12.0%

Summary of activity in Level 3 financial instruments

The following summarizes the activity in Level 3 financial instruments for the three and six months ended July 1, 2017 (in thousands):

Assets

Auction Rate Securities	Three Months Ended		Six Months Ended
Beginning balance	$	5,257	$	5,196
Gain included in other comprehensive income (loss)	122		183
Balance at July 1, 2017	$	5,379	$	5,379

Liabilities

Contingent Consideration (1)	Three Months Ended			Six Months Ended
Beginning balance	$	3,829		$	—
Issues	—			3,829
Loss recognized in earnings	164			164
Balance at July 1, 2017	$	3,993		$	3,993
Net loss for the period included in earnings attributable to contingent consideration held at the end of the period:	$	(164	)	$	(164	)

(1) In connection with the acquisition of Zentri, the Company recorded contingent consideration based upon the expected achievement of a milestone goal. 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.