Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.3.0.814
Fair Value Measurements
3 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value Measurements
NOTE 2 – FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities are measured and recorded at fair value, except for certain equity investments in privately-held companies. These equity investments are generally accounted for under the cost method of accounting and are periodically assessed for other-than-temporary impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. The Company’s non-financial assets, such as goodwill, intangible assets, and land, property and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred.
Fair Value of Financial Instruments. KLA-Tencor has evaluated the estimated fair value of financial instruments using available market information and valuations as provided by third-party sources. The use of different market assumptions and/or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of the Company’s cash equivalents, accounts receivable, accounts payable and other current liabilities approximate their carrying amounts due to the relatively short maturity of these items.
Fair Value Hierarchy. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1
  
Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.
 
 
 
Level 2
  
Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
 
 
 
Level 3
  
Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company’s financial instruments were classified within Level 1 or Level 2 of the fair value hierarchy as of September 30, 2015, because they were valued using quoted market prices, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency. As of September 30, 2015, the types of instruments valued based on quoted market prices in active markets included money market funds, U.S. Treasury securities, certain sovereign securities and certain U.S. Government agency securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
As of September 30, 2015, the types of instruments valued based on other observable inputs included corporate debt securities, municipal securities and sovereign securities. The market inputs used to value these instruments generally consist of market yields, reported trades and broker/dealer quotes. Such instruments are generally classified within Level 2 of the fair value hierarchy.
The principal market in which the Company executes its foreign currency contracts is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large financial institutions. The Company’s foreign currency contracts’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis, as of the date indicated below, were presented on the Company’s Condensed Consolidated Balance Sheet as follows:
As of September 30, 2015 (In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
U.S. Government agency securities
$
19,824

 
$
19,824

 
$

Corporate debt securities
9,997

 

 
9,997

Money market and other
512,891

 
512,891

 

Marketable securities:
 
 
 
 
 
U.S. Treasury securities
254,526

 
254,526

 

U.S. Government agency securities
460,329

 
460,329

 

Municipal securities
11,681

 

 
11,681

Corporate debt securities
730,162

 

 
730,162

Sovereign securities
42,103

 
8,962

 
33,141

Total cash equivalents and marketable securities(1)
2,041,513

 
1,256,532

 
784,981

Other current assets:
 
 
 
 
 
Derivative assets
1,182

 

 
1,182

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan
157,904

 
88,448

 
69,456

Total financial assets(1)
$
2,200,599

 
$
1,344,980

 
$
855,619

Liabilities
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(5,512
)
 
$

 
$
(5,512
)
Total financial liabilities
$
(5,512
)
 
$

 
$
(5,512
)
________________
(1) Excludes cash of $196.8 million held in operating accounts and time deposits of $31.1 million as of September 30, 2015.

Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis, as of the date indicated below, were presented on the Company’s Condensed Consolidated Balance Sheet as follows:  
As of June 30, 2015 (In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
U.S. Government agency securities
$
7,500

 
$
7,500

 
$

Corporate debt securities
13,099

 

 
13,099

Money market and other
611,385

 
611,385

 

Marketable securities:
 
 
 
 
 
U.S. Treasury securities
275,555

 
275,555

 

U.S. Government agency securities
564,768

 
556,019

 
8,749

Municipal securities
31,816

 

 
31,816

Corporate debt securities
612,862

 

 
612,862

Sovereign securities
57,093

 
8,976

 
48,117

Total cash equivalents and marketable securities(1)
2,174,078

 
1,459,435

 
714,643

Other current assets:
 
 
 
 
 
Derivative assets
3,064

 

 
3,064

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan
165,655

 
91,203

 
74,452

Total financial assets(1)
$
2,342,797

 
$
1,550,638

 
$
792,159

Liabilities
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(3,106
)
 
$

 
$
(3,106
)
Total financial liabilities
$
(3,106
)
 
$

 
$
(3,106
)
________________
(1) Excludes cash of $183.1 million held in operating accounts and time deposits of $29.9 million as of June 30, 2015.
There were no transfers in and out of Level 1 and Level 2 fair value measurements during the three months ended September 30, 2015. The Company did not have significant assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of September 30, 2015 or June 30, 2015.