MAXIM INTEGRATED PRODUCTS INC - 10-Q filing on 2016-01-22

Fair Value Measurements

6 Months Ended

Dec. 26, 2015

FAIR VALUE MEASUREMENTS

The FASB established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs that may be used to measure fair value are as follows:

Level 1 - Quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Company’s Level 1 assets consist of money market funds.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

The Company’s Level 2 assets and liabilities consist of U.S. treasury bills and foreign currency forward contracts that are valued using quoted market prices or are determined using a yield curve model based on current market rates. As a result, the Company has classified these investments as Level 2 in the fair value hierarchy.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company did not hold any Level 3 assets or liabilities as of December 26, 2015 and June 27, 2015.

Assets and liabilities measured at fair value on a recurring basis were as follows:



	As of December 26, 2015								As of June 27, 2015
	Fair Value Measurements Using						Total Balance		Fair Value Measurements Using						Total Balance
	Level 1		Level 2		Level 3		Total Balance		Level 1		Level 2		Level 3		Total Balance
	(in thousands)
Assets
Money market funds (1)	$	1,230,289	$	—	$	—	$	1,230,289	$	1,156,239	$	—	$	—	$	1,156,239
U.S. treasury bills (2)	—		124,955		—		124,955		—		75,154		—		75,154
Foreign currency forward contracts (3)	—		226		—		226		—		679		—		679
Total Assets	$	1,230,289	$	125,181	$	—	$	1,355,470	$	1,156,239	$	75,833	$	—	$	1,232,072

Liabilities
Foreign currency forward contracts (4)	$	—	$	674	$	—	$	674	$	—	$	613	$	—	$	613
Total Liabilities	$	—	$	674	$	—	$	674	$	—	$	613	$	—	$	613

(1) Included in Cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets.

(2) Included in Short-term investments in the accompanying Condensed Consolidated Balance Sheets.

(3) Included in Other current assets in the accompanying Condensed Consolidated Balance Sheets.

(4) Included in Accrued expenses in the accompanying Condensed Consolidated Balance Sheets.

The tables below present reconciliations for liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended December 26, 2015 and December 27, 2014:



Fair Value Measured and Recorded Using Significant Unobservable Inputs (Level 3)

	December 26, 2015		December 27, 2014
Contingent Consideration	(in thousands)
Beginning balance	$	—	$	3,215
Total gains or losses (realized and unrealized):
Included in earnings	—		384
Payments	—		(3,599		)
Ending balance	$	—	$	—

Changes in unrealized losses (gains) included in earnings related to liabilities still held as of period end	$	—	$	—

During the six months ended December 26, 2015 and December 27, 2014, there were no transfers in or out of Level 3 from other levels in the fair value hierarchy.

There were no assets or liabilities measured at fair value on a non-recurring basis as of December 26, 2015 and June 27, 2015 other than impairments of Long-Lived assets. For details, please refer to Note 14: “Impairment of long-lived assets”.