Fair Value Measurements

9 Months Ended

Sep. 27, 2014

NOTE 4. Fair Value Measurements

ASC Topic 820 specifies a hierarchy of valuation techniques which requires an entity to maximize the use of observable inputs that may be used to measure fair value. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Inputs are based on quoted market prices for identical assets and liabilities in active markets at the measurement date.

Level 2: Inputs include similar quoted prices for similar assets or liabilities; 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: Pricing inputs include significant inputs that are generally not observable in the marketplace. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The Company’s valuation techniques used to measure the fair value of money market funds and other financial instruments were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data.

In the third quarter of 2014, the Company reviewed and evaluated the observable market pricing data and volume of trading activity used in determining Level 1 and Level 2 assets and classified $15.5 million of investments as Level 2 that were reported as Level 1 at December 28, 2013. We also classified $0.3 million of investments as Level 1 that were reported as Level 2 at December 28, 2013. The Company’s derivative instruments are classified as Level 2 as of September 27, 2014, as they are not actively traded and are valued using pricing models that use observable market inputs. There were no Level 3 assets or liabilities at September 27, 2014.

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

Financial assets measured on a recurring basis as at September 27, 2014 and December 28, 2013, are summarized below:


	Fair value,
	September 27, 2014
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	12,166	$	—
Corporate bonds and notes		74,853		22,120
United States (“US”) treasury and government agency notes		37,888		887
Foreign government and agency notes		—		2,540
US state and municipal securities		—		231
Total assets	$	124,907	$	25,778

	Fair value,
	December 28, 2013
(in thousands)	Level 1		Level 2
Assets:
Money market funds	$	14,629	$	—
Corporate bonds and notes		79,653		3,166
US treasury and government agency notes		28,985		—
Foreign government and agency notes		2,048		—
US state and municipal securities		433		—
Total assets	$	125,748	$	3,166

These assets are included in Cash and cash equivalents, Short-term investments, and Long-term investment securities. See Note 7. Investment Securities.

Financial liabilities measured on a recurring basis are summarized below:


	Fair value,
	September 27, 2014
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	870

	Fair value,
	December 28, 2013
(in thousands)	Level 2
Current liabilities:
Forward currency contracts	$	612

These are included in Accrued liabilities.

There were no assets or liabilities measured and recorded at fair value on a non-recurring basis as of September 27, 2014.

- 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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