Fair Value Measurements

9 Months Ended

Sep. 28, 2013

3. Fair Value Measurements

The Company records its financial assets and liabilities at fair value. The inputs used in the valuation methodologies in measuring fair value are defined in the fair value hierarchy as follows:

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

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; 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 that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash, Cash Equivalent and Investments

The components of the Company’s cash, cash equivalents and investments are as follows (in thousands):

			Fair Value Measured Using
	As of September 28, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Cash and cash equivalents:
Money market funds	$	63,553	$	63,553	$		—	$		—
Corporate debt securities		1,003		—			1,003			—
Total cash equivalents		64,556	$	63,553	$		1,003	$		—
Cash		501
Total cash and cash equivalents	$	65,057
Short-term investments:
Corporate debt securities	$	32,336	$	—	$		32,336	$		—
U.S. agency debt securities		5,010		—			5,010			—
U.S. government securities		3,001		3,001			—			—
Total short-term investments	$	40,347	$	3,001	$		37,346	$		—


			Fair Value Measured Using
	As of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Cash and cash equivalents:
Money market funds	$	11,615	$	11,615	$		—	$		—
Cash	$	7,060
Total cash equivalents	$	18,675

The Company considers all highly liquid investments with an original maturity or remaining maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist of money market funds and highly-liquid corporate debt securities. The Company holds money market funds that invest primarily in high-quality short-term money-market instruments, and these funds are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Money market funds and U.S. government securities have been classified as Level 1 because these securities are valued based upon quoted prices in active markets. The Company’s Level 2 assets are priced using quoted market prices for similar instruments or non-binding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets. The Company’s policy is to recognize transfers among Level 1, Level 2 and Level 3 classifications as of the actual date of the events or change in circumstances that caused the transfers. The transfers between Level 1 and 2 during the three months ended September 28, 2013 pertained to the purchases of corporate debt securities and U.S. agency debt securities.

The carrying value of the Company’s accounts receivable, accounts payable and accrued and other current liabilities approximates fair value due to their short maturities.

Financial instruments measured at amortized costs, gross unrealized gain, gross unrealized loss and fair value by significant investment categories are summarized as follows (in thousands):

	As of September 28, 2013
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and cash equivalents:
Money market funds	$	63,553	$	—	$	—		$	63,553
Corporate debt securities		1,004		—		(1	)		1,003
Cash		501		—		—			501
Total cash and cash equivalents	$	65,058	$	—	$	(1	)	$	65,057
Short-term investments:
Corporate debt securities	$	32,339	$	16	$	(19	)	$	32,336
U.S. agency debt securities		5,007		3		—			5,010
U.S. government securities		2,995		6		—			3,001
Total short-term investments	$	40,341	$	25	$	(19	)	$	40,347

The Company did not sell any marketable securities in the three and nine months ended September 28, 2013 and the gross realized gains or losses were zero in the periods.

The contractual maturity date of the short-term investments was as follows (in thousands):

	As of
	September 28, 2013		December 31, 2012
Due within one year	$	11,031	$	—
Due between one and five years		29,316		—
Total short-term investments	$	40,347	$	—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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