Fair Value Measurements and Other-Than-Temporary Impairments

Fair Value Measurements

Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the 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 the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Valuation techniques used by the Company are based upon observable and unobservable inputs. Observable or market inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about market participant assumptions based on the best information available. Observable inputs are the preferred source of values. These two types of inputs create the following fair value hierarchy:



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

Level 2	–	Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3	–	Prices or valuations that require management inputs that are both significant to the fair value measurement and unobservable.

The Company measures its cash equivalents, foreign currency exchange forward contracts and debt securities at fair value and classifies its securities in accordance with the fair value hierarchy. The Company’s money market funds and U.S. treasuries are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities.

The Company classifies its certificates of deposit, commercial paper, corporate bonds and foreign currency exchange forward contracts within Level 2 of the fair value hierarchy as follows:

Certificates of Deposit

The Company reviews market pricing and other observable market inputs for the same or similar securities obtained from a number of industry standard data providers. In the event that a transaction is observed for the same or similar security in the marketplace, the price on that transaction reflects the market price and fair value on that day. In the absence of any observable market transactions for a particular security, the fair market value at period end would be equal to the par value. These inputs represent quoted prices for similar assets or these inputs have been derived from observable market data.

Commercial Paper

The Company reviews market pricing and other observable market inputs for the same or similar securities obtained from a number of industry standard data providers. In the event that a transaction is observed for the same or similar security in the marketplace, the price on that transaction reflects the market price and fair value on that day and then follows a revised accretion schedule to determine the fair market value at period end. In the absence of any observable market transactions for a particular security, the fair market value at period end is derived by accreting from the last observable market price. These inputs represent quoted prices for similar assets or these inputs have been derived from observable market data accreted mathematically to par.

Corporate Bonds

The Company reviews trading activity and pricing for each of the corporate bond securities in its portfolio as of the measurement date and determines if pricing data of sufficient frequency and volume in an active market exists in order to support Level 1 classification of these securities. If sufficient quoted pricing for identical securities is not available, the Company obtains market pricing and other observable market inputs for similar securities from a number of industry standard data providers. In instances where multiple prices exist for similar securities, these prices are used as inputs into a distribution-curve to determine the fair market value at period end.

Foreign Currency Exchange Forward Contracts

As discussed in Note 5, "Derivative Instruments," to the Notes to Condensed Consolidated Financial Statements, the Company mainly holds non-speculative foreign exchange forward contracts to hedge certain foreign currency exchange exposures. The Company estimates the fair values of derivatives based on quoted market prices or pricing models using current market rates. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit risk, foreign exchange rates, and forward and spot prices for currencies.

The following tables represent the Company’s fair value hierarchy for its assets and liabilities measured at fair value on a recurring basis (in thousands):



	As of September 27, 2014								As of December 28, 2013
	Fair Value Measured Using								Fair Value Measured Using
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market funds	$	15,369	$	—	$	—	$	15,369	$	51,749	$	—	$	—	$	51,749
Certificates of deposit	—		3,460		—		3,460		—		3,840		—		3,840
Commercial paper	—		83,838		—		83,838		—		85,860		—		85,860
Corporate bonds	—		202,804		—		202,804		—		150,595		—		150,595
U.S. treasuries	8,833		—		—		8,833		4,804		—		—		4,804
Foreign currency exchange forward contracts	—		—		—		—		—		29		—		29
Total assets	$	24,202	$	290,102	$	—	$	314,304	$	56,553	$	240,324	$	—	$	296,877
Liabilities
Foreign currency exchange forward contracts	$	—	$	32	$	—	$	32	$	—	$	26	$	—	$	26

During the three and nine months ended September 27, 2014, there were no transfers of assets or liabilities between Level 1 and Level 2.

Investments at fair value were as follows (in thousands):



	September 27, 2014
	Adjusted Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Money market funds	$	15,369	$	—	$	—		$	15,369
Certificates of deposit	3,460		—		—			3,460
Commercial paper	83,838		2		(2		)	83,838
Corporate bonds	202,959		19		(174		)	202,804
U.S. treasuries	8,829		5		(1		)	8,833
Total available-for-sale investments	$	314,455	$	26	$	(177	)	$	314,304



	December 28, 2013
	Adjusted Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Money market funds	$	51,749	$	—	$	—		$	51,749
Certificates of deposit	3,840		—		—			3,840
Commercial paper	85,870		2		(12		)	85,860
Corporate bonds	150,711		27		(143		)	150,595
U.S. treasuries	4,802		2		—			4,804
Total available-for-sale investments	$	296,972	$	31	$	(155	)	$	296,848

As of September 27, 2014, the Company’s available-for-sale investments have a contractual maturity term of no more than 18 months. Net realized gains (losses) on short-term and long-term investments for the three and nine months ended September 27, 2014 were insignificant in both periods. Net realized gains (losses) on short-term and long-term investments were zero and $0.2 million for the three and nine months ended September 28, 2013, respectively. The specific identification method is used to account for gains and losses on available-for-sale investments.

As of September 27, 2014 and December 28, 2013, the Company held $59.2 million and $64.6 million of cash in banks, respectively.

Other-Than-Temporary Impairments

As a result of the Company’s disposal of $3.1 million of its remaining auction rate securities (par value) during the first quarter of 2013, it recorded an approximately $0.2 million gain, which was recognized as other gain (loss), net, in the Company’s condensed consolidated statements of operations.

A roll-forward of amortized cost, cumulative other-than-temporary impairments ("OTTI") recognized in earnings and accumulated other comprehensive loss for the nine months ended September 28, 2013 were as follows (in thousands):



	Amortized Cost			Cumulative OTTI in Earnings			Unrealized Gain			OTTI Loss in Accumulated Other Comprehensive Loss			Accumulated Other Comprehensive Income (Loss)
Balance at December 29, 2012	$	2,707		$	(394	)	$	784		$	(618	)	$	166
Call on investments	(87		)	13			(25		)	20			(5		)
Investments sold	(2,620		)	381			(759		)	598			(161		)
Balance at September 28, 2013	$	—		$	—		$	—		$	—		$	—