FAIR VALUE AND MARKETABLE SECURITIES

9 Months Ended

Oct. 01, 2011

FAIR VALUE AND MARKETABLE SECURITIES

FAIR VALUE AND MARKETABLE SECURITIES

4. FAIR VALUE AND MARKETABLE SECURITIES

FAIR VALUE OF FINANCIAL INSTRUMENTS

 Fair value is defined as 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 (exit price). Inputs used to measure fair value are classified in the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3	Unobservable inputs for the asset or liability

 The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table presents a summary of fair value information for available-for-sale securities as at December 31, 2010 and October 1, 2011:

					Fair Value Measurements at Reporting Date Using
Security Type	Amortized Cost Basis (1)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Former-auction corporate debt security (2)	$	1,624	$	2,960	$	2,960	$	-	$	-
Auction Rate Securities
Corporate Debt (2)		726		1,199		-		-		1,199
Preferred Equity		2,404		3,110		-		-		3,110
State and Municipal Debt (2)		1,419		1,695		-		-		1,695
Total at December 31, 2010	$	6,173	$	8,964	$	2,960	$	-	$	6,004
Fixed Income Securities (3)	$	37,781	$	37,714	$	37,714	$	-	$	-
U.S. Government Agency debt securities (3)		10,165		10,155		10,155		-		-
Former-auction corporate debt security (2)		1,667		2,850		2,850		-		-
Auction Rate Securities
Corporate Debt (2)		753		1,309		-		-		1,309
Preferred Equity		2,404		3,245		-		2,482		763
State and Municipal Debt (2)		1,415		1,735		-		1,735		-
Total at October 1, 2011	$	54,185	$	57,008	$	50,719	$	4,217	$	2,072

(1)   Difference between amortized cost basis and fair value represents gross unrealized gain or loss.

(2)   Available for sale debt securities with contractual maturities in excess of 10 years.

(3)   Available for sale debt securities with contractual maturities of 2 years or less.

 The fair value of each of the following instruments approximates their carrying value because of the short maturity of these instruments: cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities.

AUCTION RATE SECURITIES AND FORMER-AUCTION CORPORATE DEBT SECURITY

 Auction rate securities (ARS) are generally long-term financial instruments that provided liquidity through a Dutch auction process that resets the applicable interest rate at pre-determined calendar intervals, generally every 28 days. The mechanism generally allowed existing investors to rollover their holdings while continuing to own their respective securities or liquidating their holdings by selling their securities at par value. The Company generally invested in these securities for short periods of time as part of its cash management program. During the second half of 2007 and the first quarter of 2008, auction rate corporate, state and municipal debt, and preferred securities failed to auction due to sell orders exceeding buy orders and trading continues to be constrained. The funds associated with the failed auctions will not be accessible until a successful auction occurs, a suitable buyer is found outside of the auction process or an issuer redeems its security.

 At October 1, 2011, ARS market information in certain cases was insufficient to determine the fair value of the Company's investments in ARS. Given the complexity of ARS investments, the Company obtained the assistance of an independent valuation firm to assist management in assessing the fair value of its ARS portfolio. The third party valuations developed to estimate the ARS fair value were determined using a combination of two calculations (1) a discounted cash flow model, where the expected cash flows of the ARS are discounted to the present using a yield that incorporates compensation for illiquidity, and (2) a market comparables method, where the ARS are valued based on indications, from the secondary market, of what discounts buyers demand when purchasing similar ARS. The valuations include numerous assumptions such as assessments of the underlying structure of each security, expected cash flows, discount rates, credit ratings, workout periods, and overall capital market liquidity.

 During 2008, a corporate debt ARS position with a face value of $4,000 was exchanged for the underlying 30 year notes due 2037 (former-auction corporate debt security). At October 1, 2011, the Company values this security on a Level 1 basis, with a fair value of $2,850. Interest income of $44 and $136 was recognized to accrete the amortized cost basis of the Company's existing and former-auction debt securities during the three and nine month periods ended October 1, 2011, respectively. In 2010, interest accretion of $392 was recorded in the fourth quarter.

 The Company considers it more likely than not that it will sell its existing and former-auction debt securities prior to a recovery in valuation.

 For the three and nine months ended October 1, 2011, the table below provides a reconciliation of the beginning and ending balances for each type of security valued using a Level 3 valuation.

($ in 000's)	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Nine months ended October 1, 2011
	State & Municipal Security (a)			Corporate Debt Security (b)			Preferred Equity Securities (c)			Total
Balance at January 1, 2011	$	1,695		$	1,199		$	3,110		$	6,004
Total gains or losses realized/unrealized
Included in earnings (loss)
- quarter ended April 2, 2011		53			9			-			62
- quarter ended July 2, 2011		22			9			-			31
- quarter ended October 1, 2011		-			9			-			9
Included in other comprehensive income(loss)
- quarter ended April 2, 2011		(22	)		84			97			159
- quarter ended July 2, 2011		54			187			216			457
- quarter ended October 1, 2011		-			(188	)		(95	)		(283	)
Purchases, redemptions, and settlements:
Purchases		-			-			-			-
Redemptions
- quarter ended April 2, 2011		(100	)		-			-			(100	)
- quarter ended July 2, 2011		-			-			-			-
- quarter ended October 1, 2011		-			-			-			-
Settlements		-			-			-			-
Transfers in and/or out of Level 3 (d)
- quarter ended April 2, 2011		-			-			-			-
- quarter ended July 2, 2011		(1,702	)		-			(2,565	)		(4,267	)
- quarter ended October 1, 2011		-			-			-			-
Balance at October 1, 2011	$	-		$	1,309		$	763		$	2,072
Amount of total gains or losses for the period included in earnings(loss) attributable to the change in unrealized gains or losses relating to Level 3 assets still held at the reporting date
- as of April 2, 2011		23			9			-			32
- as of July 2, 2011		-			9			-			9
- as of October 1, 2011		-			9			-			9
Level 3 securities held at October 1, 2011:
Face value		-		$	2,500		$	3,125		$	5,625
Financial ratings		-			A		A2 & NR
Weighted average interest rate (*)		-			2.0	%		1.9	%		2.0	%
Maturity date		-			2036			N/A

* Interest rates are reset every one to three months based on a premium to AA Commercial Paper, LIBOR or Treasury Bill rates.

(a) Security represents an interest in pooled student loans that are guaranteed by the Federal Family Education Loan Program.

(b) Security issued by a publicly-held insurance company trust, which holds investments in  U.S. Government obligations, highly rated commercial paper and money market funds and other investments approved by two credit rating agencies. The trust is funded by life insurance residuals. If the residuals are insufficient, the security becomes an obligation of the publicly-held insurance company.

(c) Preferred securities issued by i) diversified closed-end management investment company and ii) subsidiaries of two publicly-held debt default insurers.  The investment company is governed by the Investment Company Act of 1940 with regard to operating standards, antifraud rules, diversification requirements and an asset coverage requirement for asset backing of 200% of the par value of the preferred stock issued.  One of the debt default insurers no longer pays interest and the security has been written to zero.

(d) In the second quarter of 2011, the Company transferred its state and municipal debt security and closed-end preferred security from Level 3 to Level 2 after having assessed external valuations and observing sustained trading in similar securities.

 For the three and nine month period ended October 2, 2010, the table below provides a reconciliation of the beginning and ending balances for each type of security valued using a Level 3 valuation.

($ in 000's)	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Nine months ended October 2, 2010
	State & Municipal Security (a)			Corporate Debt Security (b)			Preferred Equity Securities (c)			Total
Balance at January 1, 2010	$	1,805		$	1,106		$	3,703		$	6,614
Total gains or losses realized/unrealized
Included in earnings (loss)
- quarter ended April 3, 2010		38			-			-			38
- quarter ended July 3, 2010		38			-			265			303
- quarter ended October 2, 2010		38			-			-			38
Included in other comprehensive income(loss)
- quarter ended April 3, 2010		37			23			42			102
- quarter ended July 3, 2010		23			(11	)		(122	)		(110	)
- quarter ended October 2, 2010		108			(22	)		(35	)		51
Purchases, redemptions, and settlements:
Purchases		-			-			-			-
Redemptions
- quarter ended April 3, 2010		(100	)		-			-			(100	)
- quarter ended July 3, 2010		(100	)		-			(875	)		(975	)
- quarter ended October 2, 2010		(100	)		-			-			(100	)
Settlements		-			-			-			-
Transfers in and/or out of Level 3		-			-			-			-
Balance at October 2, 2010	$	1,787		$	1,096		$	2,978		$	5,861