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Fair Value of Financial Instruments

12 Months Ended

Dec. 30, 2023

Fair Value of Financial Instruments

Fair Value of Financial Instruments

5. Fair Value of Financial Instruments

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 December 30, 2023 Using
		Quoted Prices in			Significant Other
		Active Markets for			Observable
		Identical Assets			Inputs
Description		(Level 1)			(Level 2)			Total
Cash equivalents:
Money market funds		$	137,195		$	—		$	137,195
Total cash equivalents		$	137,195		$	—		$	137,195

Short-term investments:
Corporate debt securities		$	—		$	130,047		$	130,047
Government debt securities			—			81,673			81,673
Total short-term investments		$	—		$	211,720		$	211,720

Total		$	137,195		$	211,720		$	348,915

5. Fair Value of Financial Instruments (Continued)


		Fair Value Measurements
		at December 31, 2022 Using
		Quoted Prices in			Significant Other
		Active Markets for			Observable
		Identical Assets			Inputs
Description		(Level 1)			(Level 2)			Total
Cash equivalents:
Money market funds		$	310,969		$	—		$	310,969
Corporate debt securities			—			3,249			3,249
Total cash equivalents		$	310,969		$	3,249		$	314,218

Short-term investments:
Corporate debt securities		$	—		$	501,014		$	501,014
Government debt securities			—			191,010			191,010
Total short-term investments		$	—		$	692,024		$	692,024

Total		$	310,969		$	695,273		$	1,006,242

Valuation methodology

The Company’s cash equivalents and short-term investments that are classified as Level 2 are valued using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments in active markets; quoted prices in less active markets; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Investments classified as Level 3 are valued using a discounted cash flow model. The assumptions used in preparing the discounted cash flow model include estimates for interest rates, amount of cash flows, expected holding periods of the securities and a discount to reflect the Company’s inability to liquidate the securities. The Company’s foreign currency derivative instruments are valued using discounted cash flow models. The assumptions used in preparing the valuation models include foreign exchange rates, forward and spot prices for currencies and market observable data of similar instruments.

Contractual maturities of investments

The Company’s available-for-sale investments are reported at fair value, with unrealized gains and losses, net of tax, recorded as a component of accumulated other comprehensive loss in the Consolidated Balance Sheet. The following summarizes the contractual underlying maturities of the Company’s available-for-sale investments at December 30, 2023 (in thousands):


					Fair
		Cost			Value
Due in one year or less		$	155,431		$	154,349
Due after one year through five years			57,518			57,371
		$	212,949		$	211,720

Unrealized Gains and Losses

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
					Gross						Gross						Gross
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
As of December 30, 2023		Value			Losses			Value			Losses			Value			Losses
Corporate debt securities		$	12,449		$	(13)		$	95,760		$	(867)		$	108,209		$	(880)
Government debt securities			28,255			(115)			31,122			(440)			59,377			(555)
		$	40,704		$	(128)		$	126,882		$	(1,307)		$	167,586		$	(1,435)

5. Fair Value of Financial Instruments (Continued)


		Less Than 12 Months						12 Months or Greater						Total
					Gross						Gross						Gross
		Fair			Unrealized			Fair			Unrealized			Fair			Unrealized
As of December 31, 2022		Value			Losses			Value			Losses			Value			Losses
Corporate debt securities		$	307,085		$	(5,297)		$	185,467		$	(4,090)		$	492,552		$	(9,387)
Government debt securities			76,651			(626)			100,209			(3,541)			176,860			(4,167)
		$	383,736		$	(5,923)		$	285,676		$	(7,631)		$	669,412		$	(13,554)

The gross unrealized losses as of December 30, 2023 and December 31, 2022 were due primarily to changes in market interest rates.

The Company records an allowance for credit loss when a decline in investment market value is due to credit-related factors. When evaluating an investment for impairment, the Company reviews factors such as the severity of the impairment, changes in underlying credit ratings, forecasted recovery, the Company’s intent to sell or the likelihood that it would be required to sell the investment before its anticipated recovery in market value and the probability that the scheduled cash payments will continue to be made. As of December 30, 2023, there were no material declines in the market value of available-for-sale investments due to credit-related factors.

At December 30, 2023 and December 31, 2022, there were no material unrealized gains associated with the Company’s available-for-sale investments.

Level 3 fair value measurements

The following summarizes the activity in Level 3 financial instruments for the year ended December 31, 2022 (in thousands):

Assets


			December 31,
Auction Rate Securities			2022
Beginning balance			$	4,980
Sales ⁽¹⁾				(6,000)
Loss recognized in earnings				300
Gain (loss) included in other comprehensive income (loss)				720
Ending balance			$	—

(1)

On May 31, 2022, the Company sold its prior remaining holding of auction-rate securities for $5.7 million.

Fair values of other financial instruments

Prior to its conversion or redemption in June 2023, the Company’s debt was recorded at cost, but measured at fair value for disclosure purposes. The fair value of the Company’s 2025 Notes was determined using observable market prices. The notes were traded in less active markets and were therefore classified as a Level 2 fair value measurement. As of December 31, 2022, the fair value of the notes was $671.9 million. No notes were outstanding as of December 30, 2023.

The Company’s other financial instruments, including cash, accounts receivable and accounts payable, are recorded at amounts that approximate their fair values due to their short maturities.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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