Fair Value Measurements

3 Months Ended

Sep. 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.

None.

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



	As of September 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)	$	1,153,718	$	—	$	—	$	1,153,718	$	1,156,239	$	—	$	—	$	1,156,239
Certificates of Deposit (1)	—		70		—		70		—		—		—		—
U.S. treasury bills (2)	—		100,285		—		100,285		—		75,154		—		75,154
Foreign currency forward contracts (3)	—		382		—		382		—		679		—		679
Total Assets	$	1,153,718	$	100,737	$	—	$	1,254,455	$	1,156,239	$	75,833	$	—	$	1,232,072

Liabilities
Foreign currency forward contracts (4)	$	—	$	1,161	$	—	$	1,161	$	—	$	613	$	—	$	613
Total Liabilities	$	—	$	1,161	$	—	$	1,161	$	—	$	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 three months ended September 26, 2015 and September 27, 2014:



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

	September 26, 2015		September 27, 2014
Contingent Consideration	(in thousands)
Beginning balance	$	—	$	3,215
Total gains or losses (realized and unrealized):
Included in earnings	—		384
Payments	—		(2,599		)
Ending balance	$	—	$	1,000

Changes in unrealized losses (gains) included in earnings related to liabilities still held as of period end	$	—	$	384

The valuation of contingent consideration is based on a probability weighted earnout model which relies primarily on estimates of milestone achievements and discount rates applicable for the period of the expected payout. The most significant unobservable input used in the determination of estimated fair value of contingent consideration is the estimates of the likelihood of milestone achievements, which directly correlates to the fair value recognized in the Condensed Consolidated Balance Sheets.

The fair value of this liability is estimated quarterly by management based on inputs received from the Company’s engineering and finance personnel. The determination of the milestone achievement is performed by the Company’s business units and reviewed by the accounting department. Potential valuation adjustments are made as the progress toward achieving milestones becomes determinable, with the impact of such adjustments being recorded to Other operating expenses (income), net in our Condensed Consolidated Statements of Income.

During the three months ended September 26, 2015 and the year ended June 27, 2015, 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 September 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”.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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