Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 3 Fair Value Measurements

Financial assets and liabilities are to be measured using inputs from three levels of the fair value hierarchy. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Zebra uses a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels:

Level 1:	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. (i.e. U.S. Treasuries and money market funds)
Level 2:	Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3:	Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in the assessment of fair value. Included in our investment portfolio at December 31, 2011, is an auction rate security which is classified as available for sale and is reflected at fair value. Due to events in credit markets, however, the auction event for the instrument held by Zebra is failed. Therefore, the fair value of this security is estimated utilizing broker quotations, discounted cash flow analysis or other types of valuation adjustment methodologies at December 31, 2011. These analyses consider, among other items, the collateral underlying the security instruments, the creditworthiness of the counterparty, the timing of expected future cash flows, estimates of the next time the security is expected to have a successful auction, and Zebra's intent and ability to hold such securities until credit markets improve. The security was also compared, when possible, to other securities with similar characteristics.

In June 2010, one of the four auction rate securities held at the end of 2009 was called by the issuer and redeemed at par value. Zebra received proceeds in the amount of $1,650,000 and adjusted other comprehensive income by $200,000.

In May 2011, one of the three remaining auction rate securities held at the end of 2010 was converted to actively traded securities in the amount of $2,550,000. The remaining $450,000 carrying value of this security was sold during the second quarter at a loss of $36,000. Of the two auction rate security instruments still owned as of October 1, 2011, Zebra determined in 2008 that one security was other than temporarily impaired and recorded a decline of $4,374,000 in 2008. We further reduced the remaining carrying value of $326,000 to zero in the third quarter of 2011. That security was later sold in the fourth quarter of 2011 for $107,000.

The decline in the market value of the remaining auction rate security is considered temporary and has been recorded in accumulated other comprehensive income (loss) on Zebra's balance sheet. Since Zebra has the intent and ability to hold this auction rate security until it is sold at auction, redeemed at carrying value or reach maturity, we have classified it as a long-term investment on the balance sheet.

Financial assets and liabilities carried at fair value as of December 31, 2011, are classified below (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
U.S. government and agency securities	$	25,540	$	25,307	$	0	$	50,847
Obligations of government-sponsored enterprises (1)		0		16,612		0		16,612
State and municipal bonds		0		142,873		0		142,873
Corporate securities		0		77,321		2,588		79,909
Other investments		0		36		0		36
Investments subtotal		25,540		262,149		2,588		290,277
Forward contracts (2)		2,626		6,584		0		9,210
Money market investments related to the deferred compensation plan	3,199		0		0		3,199
Total assets at fair value	$	31,365	$	268,733	$	2,588	$	302,686
Liabilities:
Liabilities related to the deferred compensation plan	$	3,199	$	0	$	0	$	3,199
Total liabilities at fair value	$	3,199	$	0	$	0	$	3,199

Financial assets and liabilities carried at fair value as of December 31, 2010, are classified below (in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
U.S. government and agency securities	$	11,203	$	10,115	$	0	$	21,318
Obligations of government-sponsored enterprises (1)		0		5,785		0		5,785
State and municipal bonds		0		131,626		2,683		134,309
Corporate securities		0		46,683		2,914		49,597
Other investments		0		36		0		36
Investments subtotal		11,203		194,245		5,597		211,045
Forward contracts (2)		1,569		1,706		0		3,275
Money market investments related to the deferred compensation plan		3,427		0		0		3,427
Total assets at fair value	$	16,199	$	195,951	$	5,597	$	217,747
Liabilities:
Liabilities related to the deferred compensation plan	$	3,427	$	0	$	0	$	3,427
Total liabilities at fair value	$	3,427	$	0	$	0	$	3,427

1) Includes investments in notes issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Federal Farm Credit Banks and the Federal Home Loan Bank.

2)

The fair value of forward contracts are calculated as follows:

a. Fair value of forward collar contract associated with forecasted sales hedges are calculated using the midpoint of ask and bid rates for similar contracts.

b. Fair value of regular forward contracts associated with forecasted sales hedges are calculated using the period-end exchange rate adjusted for the discount rate (3 month LIBOR rate).

c. Fair value of balance sheet hedges are calculated at the period end exchange rate adjusted for current forward points unless the hedge has been traded but not settled at period end. If this is the case, the fair value is calculated at the rate at which the hedge is being settled.

The following table presents Zebra's activity for assets measured at fair value on a recurring basis using significant unobservable inputs, Level 3 as defined in ASC 820 for the years ended December 31 (in thousands):

	Year Ended
	December 31, 2011			December 31, 2010
Balance at beginning of the year	$	5,597		$	7,047
Transfers to Level 3		0			0
Total losses (realized or unrealized):
Included in earnings		(255	)		0
Included in other comprehensive income (loss)		317			200
Purchases and settlements (net)		(3,071	)		(1,650	)
Balance at end of period	$	2,588		$	5,597
Total gains (losses) for the period included in earnings attributable to the change in unrealized losses relating to assets still held at end of period	$	0		$	0

As of December 31, 2011 and December 31, 2010, there were no other Level 3 unrealized losses that Zebra believes to be other-than-temporary. No realized gains or losses were recorded for the years ended December 31, 2010 and 2009.

The following is a summary of short-term and long-term investments at December 31, 2011 and December 31, 2010 (in thousands):

	As of December 31, 2011
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government and agency securities		$	50,738	$	115	$	(6	)	$	50,847
Obligations of government-sponsored enterprises			16,581		32		(1	)		16,612
State and municipal bonds			142,586		330		(43	)		142,873
Corporate securities			81,132		164		(1,387	)		79,909
Other investments			36		0		0			36
Total investments		$	291,073	$	641	$	(1,437	)	$	290,277

	As of December 31, 2010
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government and agency securities	$	21,226	$	98	$	(6	)	$	21,318
Obligations of government-sponsored enterprises		5,731		54		0			5,785
State and municipal bonds		134,370		402		(463	)		134,309
Corporate securities		49,884		199		(486	)		49,597
Other investments		36		0		0			36
Total investments	$	211,247	$	753	$	(955	)	$	211,045

The maturity dates of investments as of December 31, 2011 are as follows (in thousands):

	As of December 31, 2011
	Amortized Cost		Estimated Fair Value
Less than 1 year	$	182,982	$	182,398
1 to 5 years		106,777		106,560
6 to 10 years		1,314		1,319
Thereafter		0		0
Total	$	291,073	$	290,277

The carrying value for Zebra's financial instruments classified as current assets (other than short-term investments) and current liabilities approximate fair value due to short maturities.