FINANCIAL INSTRUMENTS

Short-term investments

Fair values were as follows:



	June 25, 2016								June 27, 2015
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value
	(in thousands)
Available-for-sale investments
U.S. treasury bills	$	124,950	$	489	$	—	$	125,439	$	75,022	$	132	$	—	$	75,154
Total available-for-sale investments	$	124,950	$	489	$	—	$	125,439	$	75,022	$	132	$	—	$	75,154

In the fiscal years ended June 25, 2016 and June 27, 2015, the Company did not recognize any impairment charges on short-term investments. The U.S. treasury bills have maturity dates between September 15, 2016 and July 15, 2018.

Derivative instruments and hedging activities

The Company incurs expenditures denominated in non-U.S. currencies, primarily the Philippine Peso and the Thai Baht associated with the Company's manufacturing activities in the Philippines and Thailand, respectively, and European Union Euro, South Korean Won, and Japanese Yen expenditures for sales offices and research and development activities undertaken outside of the U.S.

The Company has established a program that exclusively utilizes foreign currency forward contracts to offset the risks associated with the effects of certain foreign currency exposures. The Company does not use these foreign currency forward contracts for trading purposes.

Derivatives designated as cash flow hedging instruments

The Company designates certain forward contracts as hedging instruments pursuant to Accounting Standards Codification (“ASC”) No. 815-Derivatives and Hedging (“ASC 815”). As of June 25, 2016 and June 27, 2015, respectively, the notional amounts of the forward contracts the Company held to purchase international currencies were $68.0 million and $54.2 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $2.6 million and $3.7 million, respectively.

Derivatives not designated as hedging instruments

As of June 25, 2016 and June 27, 2015, respectively, the notional amounts of the forward contracts the Company held to purchase international currencies were $25.4 million and $31.1 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $24.6 million and $28.2 million, respectively. The fair values of outstanding foreign currency forward contracts and gain (loss) included in the Consolidated Statements of Income were not material for the fiscal years ended June 25, 2016 and June 27, 2015.

Outstanding debt obligations

The following table summarizes the Company's outstanding debt obligations:



	June 25, 2016			June 27, 2015
	(in thousands)
2.5% fixed rate notes due November 2018	$	500,000		$	500,000
3.375% fixed rate notes due March 2023	500,000			500,000
Short-term credit agreement	250,000			—
Notes denominated in Euro
Term fixed rate notes (2.0%) due on September 30, 2015	—			1,024
Total outstanding debt	1,250,000			1,001,024

Less: Current portion (included in “Current portion of debt”)	(249,717		)	(1,024		)
Less: Reduction for unamortized discount and debt issuance costs	(10,193		)	(12,313		)
Total long-term debt	$	990,090		$	987,687

Long-term debt

On November 21, 2013, the Company completed a public offering of $500 million aggregate principal amount of the Company’s 2.5% coupon senior unsecured and unsubordinated notes due in November 2018 (“2018 Notes”), with an effective interest rate of 2.6%. Interest on the 2018 Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2014. The net proceeds of this offering were approximately $494.5 million, after issuing at a discount and deducting paid expenses.

On March 18, 2013, the Company completed a public offering of $500 million aggregate principal amount of the Company's 3.375% senior unsecured and unsubordinated notes due in March 2023 (“2023 Notes”), with an effective interest rate of 3.5%. Interest on the 2023 Notes is payable semi-annually in arrears on March 15 and September 15 of each year. The net proceeds of this offering were approximately $490.0 million, after issuing at a discount and deducting paid expenses.

The debt indentures that govern the 2023 Notes and the 2018 Notes, respectively, include covenants that limit the Company's ability to grant liens on its facilities and to enter into sale and leaseback transactions, which could limit the Company's ability to secure additional debt funding in the future. In circumstances involving a change of control of the Company followed by a downgrade of the rating of the 2023 Notes or the 2018 Notes, the Company would be required to make an offer to repurchase the affected notes at a purchase price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest.

The Company accounts for all the notes above based on their amortized cost. The discount and expenses are being amortized to Interest and other income (expense), net in the Consolidated Statements of Income over the life of the notes. The interest expense is recorded in Interest and other income (expense), net in the Condensed Consolidated Statements of Income. Amortized discount and expenses, as well as interest expense associated with the notes was $29.4 million, $29.4 million and $24.7 million during the years ended June 25, 2016, June 27, 2015, and June 28, 2014, respectively.

The estimated fair value of the Company's long-term debt was approximately $1,027 million as of June 25, 2016. The estimated fair value of the debt is based primarily on observable market inputs and is a Level 2 measurement.

The Company recorded interest expense of $32.7 million, $32.5 million, and $27.0 million during the fiscal years ended June 25, 2016, June 27, 2015, and June 28, 2014, respectively.

Credit facilities

Revolving credit facility

The Company has access to a $350 million senior unsecured revolving credit facility with certain institutional lenders that expires on June 27, 2019. The facility fee is at a rate per annum that varies based on the Company's index debt rating and any advances under the credit agreement will accrue interest at a base rate plus a margin based on the Company's index debt rating. The credit agreement requires the Company to comply with certain covenants, including a requirement that the Company maintain a ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of not more than 3 to 1 and a minimum interest coverage ratio (EBITDA divided by interest expense) greater than 3.5 to 1. As of June 25, 2016, the Company had not borrowed any amounts from this credit facility and was in compliance with all debt covenants.

Short-term credit agreement

On June 23, 2016, a wholly-owned foreign subsidiary of the Company entered into a short-term credit agreement (the “Credit Agreement”) with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (the “Lender”), in order to facilitate the return of capital to the Company. The Credit Agreement provides for, among other things, the Lender making an unsecured term loan in an amount equal to $250.0 million and has a maturity date of June 22, 2017. The net proceeds of this credit agreement was approximately $249.7 million, after deducting paid issuance costs. The interest rate on the note is based on LIBOR plus a margin. The initial interest rate is 1.69% per annum and will be adjusted quarterly. The credit agreement requires the Company to comply with certain covenants, including a requirement that the Company maintain a ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) of not more than 3 to 1 and a minimum interest coverage ratio (EBITDA divided by interest expense) greater than 3.5 to 1. As of June 25, 2016, the Company was in compliance with all covenants. Fair value approximates the carrying value, given the short-term nature of the loan.

Other financial instruments

For the balance of the Company's financial instruments, cash equivalents, accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.