Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.8
Fair Value Measurements
 3 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities are measured and recorded at fair value, except for 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.
All of the Company’s financial instruments were classified within Level 1 or Level 2 of the fair value hierarchy as of September 30, 2013, 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, 2013, the types of instruments valued based on quoted market prices in active markets included money market funds, U.S. Treasury securities, equity securities and certain U.S. Government agency securities and sovereign securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
As of September 30, 2013, the types of instruments valued based on other observable inputs included corporate debt securities, municipal securities and certain U.S. Government agency 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 commercial banks. 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, 2013 (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
$
27,600

 
$
—

 
$
27,600

Money market and other
685,074

 
685,074

 
—

Marketable securities:
 
 
 
 
 
U.S. Treasury securities
147,236

 
147,236

 
—

U.S. Government agency securities
684,749

 
672,502

 
12,247

Municipal securities
104,533

 
—

 
104,533

Corporate debt securities
1,070,336

 
—

 
1,070,336

Sovereign securities
33,202

 
8,498

 
24,704

Equity securities
2,128

 
2,128

 
—

Total cash equivalents and marketable securities(1)
2,754,858

 
1,515,438

 
1,239,420

Other current assets:
 
 
 
 
 
Derivative assets
1,185

 
—

 
1,185

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan
147,926

 
102,112

 
45,814

Total financial assets(1)
$
2,903,969

 
$
1,617,550

 
$
1,286,419

Liabilities
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(1,445
)
 
$
—

 
$
(1,445
)
Executive Deferred Savings Plan
(148,282
)
 
(102,280
)
 
(46,002
)
Total financial liabilities
$
(149,727
)
 
$
(102,280
)
 
$
(47,447
)
________________
(1) Excludes cash of $176.3 million held in operating accounts and time deposits of $20.7 million as of September 30, 2013.

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, 2013 (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
$
3,800

 
$
—

 
$
3,800

Money market and other
817,608

 
817,608

 
—

Marketable securities:
 
 
 
 
 
U.S. Treasury securities
93,787

 
93,787

 
—

U.S. Government agency securities
598,031

 
598,031

 
—

Municipal securities
103,455

 
—

 
103,455

Corporate debt securities
1,099,525

 
—

 
1,099,525

Sovereign securities
33,805

 
13,559

 
20,246

Total cash equivalents and marketable securities(1)
2,750,011

 
1,522,985

 
1,227,026

Other current assets:
 
 
 
 
 
Derivative assets
4,016

 
—

 
4,016

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan
136,461

 
96,180

 
40,281

Total financial assets(1)
$
2,890,488

 
$
1,619,165

 
$
1,271,323

Liabilities
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(2,173
)
 
$
—

 
$
(2,173
)
Executive Deferred Savings Plan
(137,849
)
 
(97,570
)
 
(40,279
)
Total financial liabilities
$
(140,022
)
 
$
(97,570
)
 
$
(42,452
)
________________
(1) Excludes cash of $125.5 million held in operating accounts and time deposits of $43.4 million as of June 30, 2013.
There were no transfers in and out of Level 1 and Level 2 fair value measurements during the three months ended September 30, 2013. 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 September 30, 2013 or June 30, 2013.