Fair Value Measurements

6 Months Ended

Jul. 01, 2011

Fair Value Measurements

4. Fair Value Measurements

The Company applies the guidance in ASC 820, which defines fair value, establishes a framework for measuring fair value, and specifies disclosures about fair value measurements. Fair value is defined as the price that would be received for an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs.

ASC 820 establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the third is considered unobservable:

• Level 1. Quoted prices for identical assets or liabilities in active markets which the Company can access.

• Level 2. Observable inputs other than those described in Level 1.

• Level 3. Unobservable inputs.

The fair values of cash, accounts receivable, income taxes receivable, accounts payable, income taxes payable, accrued compensation and benefits, and other accrued expenses, approximate their carrying values because of their short-term nature. Cash equivalents, primarily money market accounts, represent the only asset the Company measures at fair value on a recurring basis. Cash equivalents of $5.7 million and $7.8 million as of July 1, 2011 and December 31, 2010, respectively, are classified as Level 1 in the fair value hierarchy because they are valued at quoted prices in active markets.

The Company conducted nonrecurring fair value measurements for the annual impairment tests for goodwill and intangible assets as of the beginning of the second quarter of 2011 and 2010, and determined that goodwill and intangible assets were not impaired.

See Note 7 to Consolidated Financial Statements for discussion of the estimated fair value of the Company’s debt instruments.