Note 8 - Fair Value of Assets and Liabilities

9 Months Ended

Sep. 28, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

8. Fair Value of Assets and Liabilities

In determining fair value, the company uses various valuation approaches within the fair value measurement framework. Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.

Applicable accounting literature establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Applicable accounting literature defines levels within the hierarchy based on the reliability of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets;

Level 2—Valuations based on quoted prices for similar assets or liabilities or identical assets or liabilities in less active markets, such as dealer or broker markets; and

Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable, such as pricing models, discounted cash flow models and similar techniques not based on market, exchange, dealer or broker-traded transactions.

Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy.

Investment in Polytronics

The company holds an investment in the equity securities of Polytronics as described in Note 5. Equity securities listed on a national market or exchange are valued at the last sales price. Such securities are classified within Level 1 of the valuation hierarchy.

Investment in Shocking Technologies, Inc.

The company held an investment in an unconsolidated affiliate, Shocking, as described in Note 6, for which the valuation model that was used to determine the fair value at December 29, 2012, was a discounted cash flow model to value equity and then an option pricing method to allocate the equity value to the various classes of stock in the capital structure, including Series C and common shares held by the company. Significant unobservable inputs used included an expected two years until liquidity event, a volatility of 35% and a risk free rate of 0.44%. The investment was categorized as Level 3.

There were no changes during the quarter ended September 28, 2013 to the company’s valuation techniques used to measure asset and liability fair values on a recurring basis.

The following table presents assets and liabilities measured at fair value by classification within the fair value hierarchy as of September 28, 2013 (in thousands):

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total
Investment in Polytronics	$	11,136	$	—	$	—	$	11,136
Total	$	11,136	$	—	$	—	$	11,136

The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 29, 2012 (in thousands):

	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total
Investment in Polytronics	$	10,327	$	—	$	—	$	10,327
Investment in unconsolidated affiliate		—		—		8,666		8,666
Total	$	10,327	$	—	$	8,666	$	18,993

The company’s other financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and debt. The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and debt approximate their fair values. The company’s debt fair value approximates book value at September 28, 2013 and December 29, 2012, respectively, as the variable interest rates fluctuate along with market interest rates.