Financial Instruments

Cash and Cash Equivalents and Marketable Securities

Cash and financial instruments measured and recorded at fair value on a recurring basis as of March 28, 2015 and December 27, 2014 are summarized below:



	Total Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities
	(In millions)
March 28, 2015
Cash	$	402	$	402	$	—
Level 2^{(2) (3)}
Commercial paper	500		275		225
Corporate bonds	4		—		4
Total level 2	504		275		229
Total	$	906	$	677	$	229



	Total Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities
	(In millions)
December 27, 2014
Cash	$	391	$	391	$	—
Level 1^{(1) (2)}
Money market funds	4		4		—
Total level 1	4		4		—
Level 2^{(2) (3)}
Commercial paper	618		410		208
Corporate bonds	27		—		27
Total level 2	645		410		235
Total	$	1,040	$	805	$	235


⁽¹⁾	The Company’s Level 1 assets are valued using quoted prices for identical instruments in active markets.


⁽²⁾	The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the quarter ended March 28, 2015 or the year ended December 27, 2014.

⁽³⁾

The Company’s Level 2 short-term investments are valued using broker reports that utilize quoted market prices for identical or comparable instruments. Brokers gather observable inputs for all of the Company’s fixed income securities from a variety of industry data providers and other third-party sources. The Company’s Level 2 long-term investments were valued using broker reports that utilize a third-party professional pricing service that gathers information from multiple market sources and integrates relevant credit information, observed market movements and sector news into their pricing evaluation. The Company validated, on a sample basis, the derived prices provided by the brokers by comparing their assessment of the fair values of the Level 2 long-term investments against the fair values of the portfolio balances of another third-party professional’s pricing service, other than that utilized by the brokers, that use a similar technique as the brokers to derive pricing as described above.

Available-for-sale securities held by the Company as of March 28, 2015 and December 27, 2014 consisted of money market funds, commercial paper and corporate bonds. The amortized cost of available-for-sale securities approximates the fair value for all periods presented.

All contractual maturities of the Company’s available-for-sale marketable debt securities as of March 28, 2015 were within one year. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without call or prepayment penalties.

In addition to those amounts presented above, as of March 28, 2015 and December 27, 2014, the Company had approximately $10 million of available-for-sale investments in money market funds, used as collateral for leased buildings and letters of credit deposits, which were included in Other assets on the Company’s condensed consolidated balance sheets. These money market funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized costs are the same as the fair value for all periods presented. The Company is restricted from accessing these deposits.

Also in addition to those amounts presented above, as of March 28, 2015 and December 27, 2014, the Company had approximately $14 million and $16 million, respectively, of available-for-sale investments in mutual funds held in a Rabbi trust established for the Company's deferred compensation plan, which were also included in Other assets on the Company's condensed consolidated balance sheets. These mutual funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized cost approximates the fair value for all periods presented. The Company is restricted from accessing these investments.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis. The Company carries its financial instruments at fair value with the exception of its debt. Financial instruments that are not recorded at fair value are measured at fair value on a quarterly basis for disclosure purposes. The carrying amounts and estimated fair values of financial instruments not recorded at fair value are as follows:



	March 28, 2015				December 27, 2014
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)
Short-term debt (excluding capital leases)	$	230	$	230	$	172	$	173
Long-term debt (excluding capital leases)	$	2,025	$	1,906	$	2,025	$	1,858

The Company’s short-term and long-term debt are classified within Level 2. The fair value of the debt was estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of the Company’s accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing payment terms.

Hedging Transactions and Derivative Financial Instruments

Cash Flow Hedges

The following table shows the amount of gain (loss) included in accumulated other comprehensive income (loss), the amount of gain (loss) reclassified from accumulated other comprehensive income (loss) and included in earnings related to the foreign currency forward contracts designated as cash flow hedges and the amount of gain (loss) included in other income (expense), net, related to contracts not designated as hedging instruments, which was allocated in the condensed consolidated statements of operations:



	Three Months Ended
	March 28, 2015			March 29, 2014
	(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments
Other comprehensive loss	$	(7	)	$	(1	)
Cost of sales	(1		)	—
Research and development	(2		)	(1		)
Marketing, general and administrative	(1		)	(1		)
Contracts not designated as hedging instruments
Other expense, net	$	(1	)	$	(1	)

The Company’s foreign currency derivative contracts are classified within Level 2 because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

The following table shows the fair value amounts included in Prepaid expenses and other current assets should the foreign currency forward contracts be in a gain position or included in Accrued and other current liabilities should these contracts be in a loss position. As of March 28, 2015, the Company’s outstanding contracts were in a net loss position of $14 million. These amounts were recorded in the Company's condensed consolidated balance sheets as follows:



	March 28, 2015			December 27, 2014
	(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments	$	(13	)	$	(6	)
Contracts not designated as hedging instruments	$	(1	)	$	(1	)

For the foreign currency contracts designated as cash flow hedges, the ineffective portions of the hedging relationship and the amounts excluded from the assessment of hedge effectiveness were immaterial.

As of March 28, 2015 and December 27, 2014, the notional values of the Company’s outstanding foreign currency forward contracts were $240 million and $298 million, respectively. All the contracts mature within 12 months, and, upon maturity, the amounts recorded in Accumulated other comprehensive income (loss) are expected to be reclassified into earnings. The Company hedges its exposure to the variability in future cash flows for forecasted transactions over a maximum of 12 months.

Fair Value Hedges

The Company’s fair value hedge derivative contracts are classified within Level 2 because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets.

The following table shows the fair value amounts included in Other assets should the fair value hedge derivative contracts be in a gain position or included in Other long-term liabilities should these contracts be in a loss position. These amounts were recorded in the Company’s condensed consolidated balance sheets as follows:



	March 28, 2015		December 27, 2014
	(In millions)
Interest Rate Swap Contracts - gains (losses)
Contracts designated as fair value hedging instruments	$	3	$	3