Fair Value Measurements and Disclosures

6 Months Ended

Jun. 29, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements and Disclosures

Fair Value Measurements and Disclosures

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in ASC 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Such unobservable inputs include an estimated discount rate used in the Company's discounted present value analysis of future cash flows, which reflects the Company's estimate of debt with similar terms in the current credit markets. As there is currently minimal activity in such markets, the actual rate could be materially different.

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands):

	June 29, 2013								December 29, 2012
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	486	$	—	$	—	$	486	$	109	$	—	$	—	$	109
Commercial paper	—		—		—		—		—		2,600		—		2,600
Municipal securities	—		2,001		—		2,001		—		—		—		—
Total cash equivalents	486		2,001		—		2,487		109		2,600		—		2,709
Marketable securities:
U.S. Treasury securities and U.S. Government agency securities	20,100		—		—		20,100		20,568		—		—		20,568
Commercial paper, corporate debt securities, and municipal securities	—		27,062		—		27,062		—		26,425		—		26,425
Total marketable securities	20,100		27,062		—		47,162		20,568		26,425		—		46,993
Total (1)	$	20,586	$	29,063	$	—	$	49,649	$	20,677	$	29,025	$	—	$	49,702
Liabilities:
Contingent consideration payable	$	—	$	—	$	3,246	$	3,246	$	—	$	—	$	2,462	$	2,462

(1) Excludes $36.7 million and $60.2 million held in operating accounts as of June 29, 2013, and December 29, 2012, respectively.

The fair values of the marketable securities that are classified as Level 1 in the table above were derived from quoted market prices for identical assets or liabilities that the Company has the ability to access. The fair value of marketable securities that are classified as Level 2 in the table above were derived from the following: non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques, with all significant inputs derived from or corroborated by observable market data. There were no transfers of instruments between Level 1, Level 2 and Level 3 during the financial periods presented.

Refer to Note 11 "Line of Credit and Debt Obligations" for the carrying value and fair value of the Company's debt obligations.

Changes in Level 3 liabilities
Fair value at December 29, 2012	$	2,462
Payments made to Zygo Corporation	(216		)
Change in fair value included in earnings	1,000
Fair Value at June 29, 2013	$	3,246

As of June 29, 2013, the Company had liabilities of $3.2 million resulting from the acquisition of certain assets from Zygo Corporation (“Zygo”) which are measured at fair value on a recurring basis, with changes in fair value recorded in other income or expenses. Of the $3.2 million of Zygo liabilities at June 29, 2013, $1.5 million was a current liability and $1.7 million was a long-term liability. In the second quarter ended June 29, 2013, the Company revised its forecast for the number of units it expects to purchase from Zygo in future periods, and recorded a related increase in the fair value of the Zygo liabilities associated with the revised forecast. As of December 29, 2012, the liabilities totaled $2.5 million of which $0.7 million was a current liability and $1.8 million was a long-term liability.

The fair values of these liabilities were determined using level 3 inputs using a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included estimates for discount rate, timing and the amount of cash flows.