Fair Value Measurements

3 Months Ended

Mar. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 2 – 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 March 31, 2012, 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 March 31, 2012. 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.

The decline in the market value of our auction rate security discussed above 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 reaches maturity, we have classified it as a long-term investment on the balance sheet.

Financial assets and liabilities carried at fair value as of March 31, 2012, are classified below (in thousands):

	Level 1			Level 2		Level 3		Total
Assets:
U.S. government and agency securities	$	32,486		$	24,343	$	0	$	56,829
Obligations of government-sponsored enterprises (1)		0			14,944		0		14,944
State and municipal bonds		0			141,085		0		141,085
Corporate securities		0			104,819		2,588		107,407
Other investments		0			36		0		36
Investments subtotal		32,486			285,227		2,588		320,301
Forward contracts (2)		(1,853	)		2,175		0		322
Money market investments related to the deferred compensation plan		3,181			0		0		3,181
Total assets at fair value	$	33,814		$	287,402	$	2,588	$	323,804
Liabilities:
Liabilities related to the deferred compensation plan	$	3,181		$	0	$	0	$	3,181
Total liabilities at fair value	$	3,181		$	0	$	0	$	3,181

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

(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, for the following periods (in thousands):

	Three Months Ended
	March 31, 2012		April 2, 2011
Balance at beginning of the year	$	2,588	$	5,597
Transfers to Level 3		0		0
Total losses (realized or unrealized):
Included in earnings		0		0
Included in other comprehensive income (loss)		0		0
Purchases and settlements (net)		0		0
Balance at end of period	$	2,588	$	5,597
Total gains and (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

The following is a summary of short-term and long-term investments (in thousands):

	As of March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. government and agency securities	$	56,766	$	84	$	(21	)	$	56,829
Obligations of government-sponsored enterprises		14,918		26		0			14,944
State and municipal bonds		140,820		306		(41	)		141,085
Corporate securities		107,692		507		(792	)		107,407
Other investments		36		0		0			36
Total investments	$	320,232	$	923	$	(854	)	$	320,301

	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

The maturity dates of investments are as follows (in thousands):

	As of March 31, 2012
	Amortized Cost		Estimated Fair Value
Less than 1 year	$	175,240	$	175,169
1 to 5 years		144,992		145,132
6 to 10 years		0		0
Thereafter		0		0
Total	$	320,232	$	320,301

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 their short maturities.