Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Fair Value

v3.6.0.2
Note 5 - Fair Value
9 Months Ended
Jan. 01, 2017
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
NOTE
5.
FAIR VALUE
 
 Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on
three
levels of inputs, of which the
first
two
are considered observable and the last unobservable, that
may
be used to measure fair value as follows:
 
Level
1
– Quoted prices in active markets for identical assets or liabilities.
 
Level
2
– Inputs other than Level
1
that are observable, either directly or indirectly, such as 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 market data for substantially the full term of the assets or liabilities.
 
Level
3
– Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
 
Our cash and investment instruments are classified within Level
1
or Level
2
of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
 
There were no transfers between Level
1
and Level
2
during the
nine
months ended
January
1,
2017.
Exar had no assets or liabilities utilizing Level
3
inputs as of
January
1,
2017
or
March
27,
2016.
 
Our investment assets, measured at fair value on a recurring basis, consisted of the following as of the dates indicated below (in thousands):
 
 
 
January 1, 2017
 
       
 
 
Level 1
 
 
Level 2
 
 
Total
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
  $
65,114
    $
-
    $
65,114
 
U.S. government and agency securities
   
11,041
     
10,120
     
21,161
 
Corporate bonds and securities
   
-
     
96,993
     
96,993
 
State and local government securities
   
-
     
4,195
     
4,195
 
Certificates of deposit
   
-
     
3,272
     
3,272
 
Total investment assets
  $
76,155
    $
114,580
    $
190,735
 
 
 
 
 
March 27, 2016
 
       
 
 
Level 1
 
 
Level 2
 
 
Total
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
  $
4
    $
-
    $
4
 
Common shares of CounterPath
   
-
     
43
     
43
 
Total investment assets
  $
4
    $
43
    $
47
 
 
In
June
2016,
we donated the
93,000
common shares of CounterPath Corporation (“CounterPath”) received in the
first
quarter of fiscal year
2015
resulting from the dissolution of Skypoint Telecom Fund II (US), LP, in which we were a limited partner, and wrote off the related
$50,000
carrying value.
 
Our cash and cash equivalents as of the dates indicated below were as follows (in thousands):
 
 
 
January 1,
 
 
March 27,
 
 
 
2017
 
 
2016
 
Cash and cash equivalents
 
 
 
 
 
 
 
 
Cash in financial institutions
  $
36,909
    $
55,066
 
Money market funds
   
65,114
     
4
 
Total cash and cash equivalents
  $
102,023
    $
55,070
 
 
Our marketable securities include U.S. government and agency securities, state and local government securities, corporate bonds and securities, and certificates of deposit. We classify investments as available-for-sale at the time of purchase and re-evaluate such designation as of each balance sheet date. We amortize premiums and accrete discounts to interest income over the life of the investment. Our available-for-sale securities, which we intend to sell as necessary to meet our liquidity requirements, are classified as cash equivalents if the maturity date is
90
days or less from the date of purchase and as short-term marketable securities if the maturity date is greater than
90
days from the date of purchase.
 
All marketable securities are reported at fair value based on the estimated or quoted market prices as of each balance sheet date, with unrealized gains or losses, net of tax effect, recorded in the condensed consolidated statements of other comprehensive income except those unrealized losses that are deemed to be other than temporary which are reflected in the impairment charges on investments line item on the condensed consolidated statements of operations.
 
Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in interest income and other, net within the condensed consolidated statements of operations. During the
three
months and
nine
months ended
January
1,
2017
and
December
27,
2015,
there were no net realized gains (losses) on the sale of marketable securities.
 
The following table summarizes our investments in marketable securities as of
January
1,
2017
(in thousands):
 
 
 
January 1, 2017
 
 
 
Amortized
 
 
Unrealized Gross
 
 
Unrealized Gross
 
 
 
 
 
 
Cost
 
 
Gains
 
 
Losses
 
 
Fair Value
 
Money market funds
  $
65,114
    $
-
    $
-
    $
65,114
 
U.S. government and agency securities
   
21,161
     
13
     
(13
)    
21,161
 
Corporate bonds and securities
   
97,133
     
19
     
(159
)    
96,993
 
State and local government securities
   
4,196
     
1
     
(2
)    
4,195
 
Certificates of deposit
   
3,272
     
-
     
-
     
3,272
 
Total investments
  $
190,876
    $
33
    $
(174
)   $
190,735
 
 
We periodically review our investments in unrealized loss positions for other-than-temporary impairments. This evaluation includes, but is not limited to, significant quantitative and qualitative assessments and estimates regarding credit ratings, collateralized support, the length of time and significance of a security’s loss position, our intent not to sell the security, and whether it is more likely than not that we will not have to sell the security before recovery of its cost basis. For the
three
months and
nine
months ended
January
1,
2017,
no investments were identified with other-than-temporary declines in value. 
 
The amortized cost and estimated fair value of cash equivalents and marketable securities classified as available-for-sale by expected maturity as of
January
1,
2017
(in thousands):
 
 
 
January 1, 2017
 
 
 
Amortized Cost
 
 
Fair Value
 
Less than 1 year
  $
93,565
    $
93,519
 
Due in 1 to 5 years
   
97,311
     
97,216
 
Total
  $
190,876
    $
190,735
 
 
The following table summarizes the gross unrealized losses and fair values of our investments in an unrealized loss position as of
January
1,
2017,
aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):
 
 
 
January 1, 2017
 
 
 
Less than 12 months
 
 
Total
 
 
 
Fair Value
 
 
Gross Unrealized Losses
 
 
Fair Value
 
 
Gross Unrealized Losses
 
Corporate bonds and securities
  $
77,362
    $
(159
)   $
77,362
    $
(159
)
U.S. government and agency securities
   
15,379
     
(13
)    
15,379
     
(13
)
State and local government securities
   
1,471
     
(2
)    
1,471
     
(2
)
Total
  $
94,212
    $
(174
)   $
94,212
    $
(174
)