Fair Value

6 Months Ended

Jun. 25, 2011

Fair Value

Fair Value

5. Fair Value

        We hold cash equivalents, investments and certain other assets that are carried at fair value. We generally determine fair value using a market approach based on quoted prices of identical instruments when available. When market quotes of identical instruments are not readily accessible or available, we determine fair value based on quoted market prices of similar instruments.

        The valuation hierarchy for disclosure of the inputs used to measure fair value prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from or corroborated by observable market data through correlation. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

        On September 14, 2010, we entered into a fair market value hedge contract with a bank. The terms of this contract are for the bank to deliver 62,637 Canadian dollars, currently valued at $63,445, to us on August 25, 2011, and for us to deliver 46,940 Euro, currently valued at $66,537, to our bank on the same date. We have recorded a liability on our balance sheet of $3,092, based on current foreign exchange rates, to represent the amount that would be owed to the bank if the hedge were to be settled as of June 25, 2011. The hedge was terminated on June 28, 2011, and was settled for approximately $4,008.

        During the second quarter of 2011, we received life insurance proceeds of $9,500 related to a former officer. We recognized a tax exempt gain of $7,710 representing the difference between the life insurance proceeds and the cash surrender value.

        Based upon financial projections, during the second quarter of 2011, we adjusted the fair value of the contingent consideration attributable to the acquisition of the Systems Pathology Company, LLC (SPC) to $4,311.

        Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at June 25, 2011 using
	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Assets at Fair Value
Time deposits	$	—	$	11,780	$	—	$	11,780
Auction rate securities		—		—		11,239		11,239
Fair value of life policies		—		17,384		—		17,384
Total assets	$	—	$	29,164	$	11,239	$	40,403
Contingent consideration		—		—		4,311		4,311
Hedge contract		—		3,092		—		3,092
Total liabilities	$	—	$	3,092	$	4,311	$	7,403

	Fair Value Measurements at December 25, 2010 using
	Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Assets at Fair Value
Time deposits	$	—	$	9,834	$	—	$	9,834
Auction rate securities		—		—		11,377		11,377
Fair value of life policies		—		25,609		—		25,609
Hedge contract		—		419		—		419
Total assets	$	—	$	35,862	$	11,377	$	47,239
Contingent consideration		—		—		5,365		5,365
Total liabilities	$	—	$	—	$	5,365	$	5,365

        Descriptions of the valuation methodologies used for assets and liabilities measured at fair value are as follows:

• •

  Time deposits—Valued at their ending balances, as reported by the financial institutions that hold our securities, which approximates fair value. These valuations are reviewed by management.

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  Auction rate securities—Valued at fair value by management in part utilizing an independent valuation reviewed by management which used pricing models and discounted cash flow methodologies incorporating assumptions that reflect the assumptions a marketplace participant would use at June 25, 2011.

  •

  Life policies—Valued at cash surrender value.

   

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  Contingent consideration—Consists of payments based on certain agreed upon revenue and technical milestones valued using the income approach. Key assumptions included a discount rate of 18% and probability adjustments ranging from 5% to 70%.

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  Hedge contract—Valued at fair value by management; valuations were based on calculations using foreign exchange rates at the financial statement date.

        The table below presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 25, 2011 and June 26, 2010.

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Six months ended
Auction rate securities		June 25, 2011			June 26, 2010
Beginning balance		$	11,377		$	16,212
Transfers in and/or out of Level 3			—			—
Total gains or losses (realized/unrealized):
	Included in earnings (other expenses)		(1	)		—
	Included in other comprehensive income		(137	)		333
Purchases, issuances and settlements			—			—
Ending balance		$	11,239		$	16,545

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Six months ended
Contingent consideration		June 25, 2011			June 26, 2010
Beginning balance		$	5,365		$	9,300
Transfers in and/or out of Level 3			—			—
Total gains or losses (realized/unrealized):
	Included in (earnings) other expenses		(1,054	)		400
	Included in other comprehensive income		—			—
Purchases, issuances and settlements			—			—
Ending balance		$	4,311		$	9,700