Fair Value Measurements and Fair Value of Financial Instruments

12 Months Ended

Jan. 03, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements and Fair Value of Financial Instruments

11.    Fair Value Measurements and Fair Value of Financial Instruments

Fair value measurement is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy is established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

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

• Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

• Level 3—Unobservable inputs based on the Company's own assumptions.

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:

	Fair Value as of January 3, 2015
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds and time deposits	$	9,264	$	—	$	—	$	9,264
Forward currency-exchange contracts	$	—	$	775	$	—	$	775
Banker's acceptance drafts (a)	$	—	$	6,334	$	—	$	6,334
Liabilities:
Forward currency-exchange contracts	$	—	$	12	$	—	$	12
Interest rate swap agreement	$	—	$	377	$	—	$	377
Contingent consideration (b)	$	—	$	—	$	1,133	$	1,133

	Fair Value as of December 28, 2013
(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds and time deposits	$	17,090	$	—	$	—	$	17,090
Forward currency-exchange contracts	$	—	$	97	$	—	$	97
Banker's acceptance drafts (a)	$	—	$	10,765	$	—	$	10,765
Liabilities:
Forward currency-exchange contracts	$	—	$	23	$	—	$	23
Interest rate swap agreement	$	—	$	773	$	—	$	773

(a) Included in accounts receivable in the accompanying consolidated balance sheet.

(b) Included in other current liabilities in the accompanying consolidated balance sheet.

The Company uses the market approach technique to value its financial assets and liabilities, and there were no changes in valuation techniques during 2014. The Company's financial assets and liabilities carried at fair value comprise cash equivalents, banker's acceptance drafts, and derivative instruments used to hedge the Company's foreign currency and interest rate risks. The Company's cash equivalents are comprised of money market funds and bank deposits which are highly liquid and easily tradable. These investments are valued using inputs observable in active markets for identical securities. The carrying value of banker's acceptance drafts approximates their fair value due to the short-term nature of the negotiable instrument. The fair value of the Company's interest rate swap agreement is based on LIBOR yield curves at the reporting date. The fair values of the Company's forward currency-exchange contracts are based on quoted forward foreign exchange rates at the reporting date. The forward currency-exchange contracts and interest rate swap agreement are hedges of either recorded assets or liabilities or anticipated transactions. Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the table above. The Company recorded contingent consideration as part of its acquisition of a European manufacturer on December 30, 2013. The fair value of the contingent consideration is based on the present value of the estimated future cash flows. Changes to the fair value of contingent consideration are recorded in selling, general, and administrative expense.

The following table provides a rollforward of the fair value, as determined by Level 3 inputs, of the contingent consideration:

	2014
(In thousands)
Balance at beginning of period	$	—
Acquisition	1,205
Current period expense	80
Currency translation	(152		)
Balance at end of period	$	1,133

The carrying value and fair value of the Company's debt obligations are as follows:

	2014				2013
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt obligations	$	25,250	$	25,250	$	38,010	$	38,010

The carrying value of long-term debt obligations approximates fair value as the obligations bear variable rates of interest, which adjust quarterly based on prevailing market rates.