Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.7.0.1
Fair Value Measurements
9 Months Ended
Mar. 31, 2017
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 assets and 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 March 31, 2017, because they were valued using quoted market prices, broker/dealer quotes or alternative pricing sources with observable levels of price transparency. As of March 31, 2017, the types of instruments valued based on quoted market prices in active markets included money market funds, U.S. Treasury securities, certain U.S. Government agency securities and certain sovereign securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
As of March 31, 2017, the types of instruments valued based on other observable inputs included corporate debt securities, certain U.S. Government agency securities and certain 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 generally 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 March 31, 2017 (In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Corporate debt securities
$
21,789

 
$

 
$
21,789

Money market funds and other
432,229

 
432,229

 

Sovereign securities
17,314

 

 
17,314

U.S. Treasury securities
64,771

 
64,771

 

U.S. Government agency securities
44,969

 

 
44,969

Marketable securities:
 
 
 
 
 
Corporate debt securities
1,013,403

 

 
1,013,403

Sovereign securities
55,354

 
993

 
54,361

U.S. Treasury securities
306,075

 
306,075

 

U.S. Government agency securities
368,478

 
345,234

 
23,244

Total cash equivalents and marketable securities(1)
2,324,382

 
1,149,302

 
1,175,080

Other current assets:
 
 
 
 
 
Derivative assets
6,520

 

 
6,520

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan
178,073

 
134,254

 
43,819

Total financial assets(1)
$
2,508,975

 
$
1,283,556

 
$
1,225,419

Liabilities
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(1,894
)
 
$

 
$
(1,894
)
Total financial liabilities
$
(1,894
)
 
$

 
$
(1,894
)
________________
(1) Excludes cash of $344.0 million held in operating accounts and time deposits of $35.2 million as of March 31, 2017.

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, 2016 (In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Corporate debt securities
$
20,569

 
$

 
$
20,569

Money market funds and other
626,156

 
626,156

 

U.S. Treasury securities
68,748

 
68,748

 

Marketable securities:
 
 
 
 
 
Corporate debt securities
657,905

 

 
657,905

Municipal securities
5,016

 

 
5,016

Sovereign securities
41,257

 
6,426

 
34,831

U.S. Treasury securities
258,754

 
258,754

 

U.S. Government agency securities
405,705

 
385,731

 
19,974

Total cash equivalents and marketable securities(1)
2,084,110

 
1,345,815

 
738,295

Other current assets:
 
 
 
 
 
Derivative assets
1,095

 

 
1,095

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan
162,160

 
106,149

 
56,011

Total financial assets(1)
$
2,247,365

 
$
1,451,964

 
$
795,401

Liabilities
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(11,647
)
 
$

 
$
(11,647
)
Total financial liabilities
$
(11,647
)
 
$

 
$
(11,647
)
________________
(1) Excludes cash of $330.1 million held in operating accounts and time deposits of $77.1 million as of June 30, 2016.
There were no transfers between Level 1 and Level 2 fair value measurements during the nine months ended March 31, 2017. The Company did not have any assets or liabilities measured at fair value on a recurring basis within Level 3 fair value measurements as of March 31, 2017 or June 30, 2016.