Fair Value of Financial Instruments

6 Months Ended

Jun. 29, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments (in thousands):

	Fair value measurements as of June 29, 2013										Fair value measurements as of  December 29, 2012
	Total			Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3
Short-term marketable securities	$	74,948		$	74,948	$	—		$	—	$	64,865		$	64,865	$	—		$	—
Long-term marketable securities	4,717			—		—			4,717		4,717			—		—			4,717
Foreign currency forward exchange contracts	(17		)	—		(17		)	—		(5		)	—		(5		)	—
Total fair value of financial instruments	$	79,648		$	74,948	$	(17	)	$	4,717	$	69,577		$	64,865	$	(5	)	$	4,717

We invest in various financial instruments including corporate and government bonds and notes, commercial paper and auction rate securities. In addition, we enter into foreign currency forward exchange contracts to mitigate our foreign currency exchange rate exposure. We carry these instruments at their fair value in accordance with ASC 820. The framework under the provisions of ASC 820 establishes three levels of inputs that may be used to measure fair value. Each level of input has different levels of subjectivity and difficulty involved in determining fair value.

Level 1instruments generally represent quoted prices for identical assets or liabilities in active markets. Therefore, determining fair value for Level 1 instruments generally does not require significant management judgment, and the estimation is not difficult. Our Level 1 instruments consist of federal agency, corporate notes and bonds, and commercial paper that are traded in active markets and are classified as Short-term marketable securities on our Condensed Consolidated Balance Sheet.

Level 2instruments include inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices for identical instruments in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 instruments include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Our auction rate securities are classified as Level 3 instruments. Management uses a combination of the market and income approach to derive the fair value of auction rate securities, which include third party valuation results, investment broker provided market information and available information on the credit quality of the underlying collateral. As a result, the determination of fair value for Level 3 instruments requires significant management judgment and subjectivity. Our Level 3 instruments are classified as Long-term marketable securities on our Condensed Consolidated Balance Sheet and are entirely made up of auction rate securities that consist of student loan asset-backed notes. Such loans are insured by the federal government or guaranteed by the FFELP. Fair value measurement may be sensitive to various unobservable inputs such as the ability of students to repay their loans, or change in the provision of government guarantees policy toward guaranteeing loan repayment. If students are unable to pay back their loans or the government changes its policy, our investments may be further impaired.

There were no transfers between Levels 1 and 2 during the first six months ended fiscal 2013 or 2012. There were no transfers into or out of Level 3 during the first six months ended fiscal 2013 or 2012.

During the six months ended June 29, 2013 and June 30, 2012, the following changes occurred in ourLevel 3 instruments (in thousands):

	Six Months Ended
	June 29, 2013		June 30, 2012
Beginning fair value of Long-term marketable securities	$	4,717	$	6,946
Fair value of securities sold or redeemed	—		(2,285		)
Ending fair value of Long-term marketable securities	$	4,717	$	4,661

In accordance with ASC 320, “Investments-Debt and Equity Securities,” we recorded an unrealized gain of less than $0.1 million during the six months ended June 29, 2013 and an unrealized gain of less than $0.1 million during the six months ended June 30, 2012, on certain Short-term marketable securities (Level 1 instruments), which has been recorded in Accumulated other comprehensive loss. Future fluctuations in fair value related to these instruments that the Company deems to be temporary, including any recoveries of previous write-downs, would be recorded to Accumulated other comprehensive loss. If we were to determine in the future that any further decline in fair value is other-than-temporary, we would record an impairment charge, which could have a materially detrimental impact on our operating results. If we were to liquidate our position in these securities, it is likely that the amount of any future realized gain or loss would be different from the unrealized gain or loss reported in Accumulated other comprehensive loss or the previously reported other-than-temporary impairment charge.