Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.3.0.15
Fair Value Measurements
 3 Months Ended
Sep. 30, 2011
Fair Value Measurements [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 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, 2011, because they were valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include money market funds and certain U.S. Government agency securities, U.S. Treasury securities and sovereign securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.
The types of instruments valued based on other observable inputs include commercial paper, corporate debt securities, municipal securities and certain U.S. Government agency securities, U.S. Treasury 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.
The types of instruments valued based on unobservable inputs included the auction rate securities that were held by the Company as of and prior to June 30, 2010. Such instruments were classified within Level 3 of the fair value hierarchy. The Company estimated the fair value of these auction rate securities using a discounted cash flow model incorporating assumptions that market participants would use in their estimates of fair value. Some of these assumptions included estimates for interest rates, timing and amount of cash flows and expected holding periods of the auction rate securities.
Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheet as of September 30, 2011 as follows:
(In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
Money market and other
$
578,442

 
$
578,442

 
$
—

Marketable securities:
 
 
 
 
 
U.S. Treasury securities
71,186

 
65,387

 
5,799

U.S. Government agency securities
344,132

 
342,734

 
1,398

Municipal securities
40,338

 
—

 
40,338

Corporate debt securities
831,721

 
—

 
831,721

Sovereign securities
32,411

 
13,385

 
19,026

Total cash equivalents and marketable securities(1)
1,898,230

 
999,948

 
898,282

Other current assets:
 
 
 
 
 
Derivative assets
845

 
—

 
845

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan:
 
 
 
 
 
Money market and other
4,967

 
4,967

 
—

Mutual funds
110,923

 
85,709

 
25,214

Executive Deferred Savings Plan total
115,890

 
90,676

 
25,214

Total financial assets(1)
$
2,014,965

 
$
1,090,624

 
$
924,341

Other current liabilities:
 
 
 
 
 
Derivative liabilities
$
(6,054
)
 
$
—

 
$
(6,054
)
Total financial liabilities
$
(6,054
)
 
$
—

 
$
(6,054
)
________________
(1) Excludes cash of $156.8 million held in operating accounts and time deposits of $45.1 million as of September 30, 2011.

Financial assets (excluding cash held in operating accounts and time deposits) and liabilities measured at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheet as of June 30, 2011 as follows:  
(In thousands)
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Assets
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
U.S. Treasury securities
$
4,400

 
$
—

 
$
4,400

U.S. Government agency securities
6,010

 
6,010

 
—

Corporate debt securities
21,982

 
—

 
21,982

Money market and other
481,770

 
481,770

 
—

Marketable securities:
 
 
 
 
 
U.S. Treasury securities
54,496

 
52,396

 
2,100

U.S. Government agency securities
314,173

 
314,173

 
—

Municipal securities
38,957

 
—

 
38,957

Corporate debt securities
853,403

 
—

 
853,403

Sovereign securities
32,086

 
14,696

 
17,390

Total cash equivalents and marketable securities(1)
1,807,277

 
869,045

 
938,232

Other current assets:
 
 
 
 
 
Derivative assets
1,970

 
—

 
1,970

Other non-current assets:
 
 
 
 
 
Executive Deferred Savings Plan:
 
 
 
 
 
Money market and other
1,806

 
1,806

 
—

Mutual funds
126,227

 
95,971

 
30,256

Executive Deferred Savings Plan total
128,033

 
97,777

 
30,256

Total financial assets(1)
$
1,937,280

 
$
966,822

 
$
970,458

Other current assets:
 
 
 
 
 
Derivative liabilities
$
(2,127
)
 
$
—

 
$
(2,127
)
Total financial liabilities
$
(2,127
)
 
$
—

 
$
(2,127
)
________________
(1) Excludes cash of $165.9 million held in operating accounts and time deposits of $65.4 million as of June 30, 2011.
Changes in the Company’s Level 3 securities for the three months ended September 30, 2011 and 2010 were as follows:
 
Three months ended
September 30,
(In thousands)
2011
 
2010
Beginning aggregate fair value of Level 3 securities
$
—

 
$
16,825

Net settlements
—

 
(16,825
)
Ending aggregate fair value of Level 3 securities
$
—

 
$
—


During the fiscal year ended June 30, 2010 (and in prior fiscal years), the Company’s investment portfolio included auction rate securities, which were investments with contractual maturities generally between 20 to 30 years. In February 2008, because sell orders exceeded buy orders, auctions failed for approximately $48.2 million in par value of municipal auction rate securities that were then held by the Company. By letter dated August 8, 2008, the Company received notification from UBS AG (“UBS”), in connection with a settlement entered into between UBS and certain regulatory agencies, offering to repurchase all of the Company’s auction rate security holdings at par value. The Company formally accepted the settlement offer and entered into a repurchase agreement with UBS on November 11, 2008. On June 30, 2010 UBS repurchased the Company's $16.8 million then-remaining auction rate securities at par value, and the repurchase was subsequently settled in July 2010.