NOTE 4. FAIR VALUE

We define fair value as the estimated price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. We apply the following fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values:


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

Level 2 –		Inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices of identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets), or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 –		Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most marketable securities and money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The contingent obligation related to the make-whole premium on our convertible notes was valued using a valuation model which estimates the value based on the probability and timing of conversion. We have classified the contingent obligation within Level 3 of the fair value hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are shown in the table below by their corresponding balance sheet caption and consisted of the following types of instruments at September 28, 2013:


	Fair Value Measurement at Reporting Date Using
	Quoted Prices		Significant
	in Active		Other		Significant
	Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
	(Thousands)
Assets:
Cash and cash equivalents: ⁽¹⁾
Money market funds	$	1,214	$	—	$	—	$	1,214
Short-term investments:
Equity securities		170		—		—		170

Total assets measured at fair value	$	1,384	$	—	$	—	$	1,384

Liabilities:
Other non-current liabilities:
Contingent obligation for make-whole premium	$	—	$	—	$	699	$	699

Total liabilities measured at fair value	$	—	$	—	$	699	$	699

(1)	Excludes $90.8 million in cash held in our bank accounts at September 28, 2013.

The following table provides details regarding the changes in assets and liabilities classified within Level 3 from June 29, 2013 to September 28, 2013:


	Accrued Expenses
	and Other Liabilities
	(Thousands)
Balance at June 29, 2013	$	99
Current period adjustments to the contingent obligation for make-whole premium		600

Balance at September 28, 2013	$	699