Fair Value Measurement

Fair value measurement is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing assets or liabilities. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact.

Fair Value Hierarchy

The three levels of inputs that may be used to measure fair value are as follows:

Level 1: Quoted market prices for identical assets or liabilities in active markets at the measure date.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of March 29, 2015:



	Fair Value at Reporting Date Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents and short-term investments:
U.S. government treasuries and agencies securities	$	135,945	$	—	$	—	$	135,945
Money market funds	55,578		—		—		55,578
Asset-backed securities	—		31,830		—		31,830
Corporate bonds	—		245,675		—		245,675
International government bonds	—		1,006		—		1,006
Corporate commercial paper	—		4,999		—		4,999
Bank deposits	—		16,915		—		16,915
Repurchase agreements	—		191		—		191
Municipal bonds	—		6,044		—		6,044
Total assets measured at fair value	$	191,523	$	306,660	$	—	$	498,183

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 30, 2014:



	Fair Value at Reporting Date Using
(in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Cash equivalents and short-term investments:
U.S. government treasuries and agencies securities	$	112,253	$	—	$	—	$	112,253
Money market funds	53,430		—		—		53,430
Asset-backed securities	—		22,332		—		22,332
Corporate bonds	—		199,806		—		199,806
International government bonds	—		3,014		—		3,014
Corporate commercial paper	—		6,246		—		6,246
Bank deposits	—		18,538		—		18,538
Repurchase agreements	—		46		—		46
Municipal bonds	—		9,210		—		9,210
Total assets measured at fair value	$	165,683	$	259,192	$	—	$	424,875
Liabilities:
Fair value of contingent consideration	—		—		2,140		2,140
Total liabilities measured at fair value	$	—	$	—	$	2,140	$	2,140

U.S. government treasuries and U.S. government agency securities as of March 29, 2015 and March 30, 2014 do not include any U.S. government guaranteed bank issued paper. Corporate bonds include bank-issued securities that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

The securities in Level 1 are highly liquid and actively traded in exchange markets or over-the-counter markets. Level 2 fixed income securities are priced using quoted market prices for similar instruments, non-binding market prices that are corroborated by observable market data.

In connection with the acquisitions of Fox Enterprises and Alvand Technologies (See "Note 3 - Business Combinations"), liabilities were recognized for the Company’s estimate of the fair value of contingent consideration on the acquisition dates based on probability-based forecasted revenues, gross profits and attainment of product development milestones. These fair value measurements are based on significant inputs not observed in the market and thus represent a Level 3 measurement, which reflect the Company’s own assumptions concerning future revenues, gross profit and product development milestones of the acquired businesses in measuring fair value. During the fiscal year 2014, the Company settled the contingent consideration with Fox and paid $3.3 million to the former shareholders of Fox. Also during the fiscal year 2014, the Company paid $1.8 million in contingent consideration for Alvand Technologies. The remaining estimated fair value of the contingent liability for Alvand Technologies as of March 30, 2014 was $2.1 million. During fiscal 2015, the Company paid $1.6 million and released the remaining contingent consideration of $0.5 million to discontinued operations, as the remaining future milestones were not achieved as a result of the sale of certain assets related to the Alvand portion of the HSC business.

The following table summarizes the change in the fair value of liabilities measured using significant unobservable inputs (Level 3) for fiscal 2015 and 2014:



(in thousands)	Estimated Fair Value
Balance as of March 31, 2013	$	6,695
Changes in fair value	575
Payment	(5,130		)
Balance as of March 30, 2014	2,140
Payment	(1,600		)
Release	(540		)
Balance as of March 29, 2015	$	—

Cash equivalents are highly liquid investments with original maturities of three months or less at the time of purchase. The Company maintains its cash and cash equivalents with reputable major financial institutions. Deposits with these banks may exceed the FDIC insurance limits or similar limits in foreign jurisdictions. These deposits typically may be redeemed upon demand and, therefore, bear minimal risk. While the Company monitors daily the cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be affected if one or more of the financial institutions with which the Company deposits fails or is subject to other adverse conditions in the financial markets. As of March 29, 2015, the Company has not experienced any losses in its operating accounts.

All of the Company’s available-for-sale investments are subject to a periodic impairment review. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. This determination requires significant judgment. For publicly traded investments, impairment is determined based upon the specific facts and circumstances present at the time, including a review of the closing price over the length of time, general market conditions and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for recovery. Although the Company believes its portfolio continues to be comprised of sound investments due to high credit ratings and government guarantees of the underlying investments, a further decline in the capital and financial markets would adversely impact the market values of its investments and their liquidity. The Company continually monitors the credit risk in its portfolio and future developments in the credit markets and makes appropriate changes to its investment policy as deemed necessary. The Company did not record any impairment charges related to its available-for-sale investments in fiscal 2015, 2014 and 2013.