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Investments, Equity Method and Joint Ventures

9 Months Ended

Mar. 27, 2021

Equity Method Investments and Joint Ventures [Abstract]

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 corporate debt securities 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.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company's Level 3 assets and liabilities consist of acquisition-related contingent consideration liabilities.

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


	As of March 27, 2021								As of June 27, 2020
	Fair Value Measurements Using						Total		Fair Value Measurements Using						Total
	Level 1		Level 2		Level 3				Level 1		Level 2		Level 3
	(in thousands)
Assets
Cash and cash equivalents




Money market funds	$	10,622	$	—	$	—	$	10,622	$	61,814	$	—	$	—	$	61,814

Short-term investments


Corporate debt securities	—		—		—		—		—		35,536		—		35,536

Other current assets
Foreign currency forward contracts	—		406		—		406		—		1,151		—		1,151
Total assets	$	10,622	$	406	$	—	$	11,028	$	61,814	$	36,687	$	—	$	98,501

Liabilities
Accrued expenses
Foreign currency forward contracts	$	—	$	1,352	$	—	$	1,352	$	—	$	341	$	—	$	341
Contingent consideration	—		—		—		—		—		—		10,000		10,000
Other liabilities
Contingent consideration	—		—		10,000		10,000		—		—		4,165		4,165
Total Liabilities	$	—	$	1,352	$	10,000	$	11,352	$	—	$	341	$	14,165	$	14,506

During the nine months ended March 27, 2021 and the year ended June 27, 2020, 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 March 27, 2021 and June 27, 2020 other than impairments of long-lived assets.

As of March 27, 2021 and June 27, 2020, the fair value of private company investments amounted to $27.5 million and $20.6 million, respectively. The aggregate amount of unrealized gains (losses) recognized from these investments were $1.8 million and $(4.3) million, respectively, as of March 27, 2021 and June 27, 2020.

The Company recorded $0.1 million and $5.6 million of unrealized gains on private company investments during the three and nine months ended March 27, 2021, respectively. Unrealized gains (losses) on private company investments was $(0.4) million and $0.2 million during the three and nine months ended March 28, 2020, respectively. Unrealized gains (losses) on private company investments are recorded in Interest and other income (expense), net in the Company's Condensed Consolidated Statements of Income.

Financial Instruments [Text Block]

FINANCIAL INSTRUMENTS

Short-term investments

Fair values were as follows:


	March 27, 2021								June 27, 2020
	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


Corporate debt securities	$	—	$	—	$	—	$	—	$	35,417	$	137	$	(18)	$	35,536

Total available-for-sale investments	$	—	$	—	$	—	$	—	$	35,417	$	137	$	(18)	$	35,536

In the nine months ended March 27, 2021 and March 28, 2020, the Company did not recognize impairment charges on short-term investments. All available-for-sale investments have matured as of March 27, 2021.

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 Euro, Indian Rupee, Taiwan New Dollar, South Korean Won, Chinese Yuan, Japanese Yen, Singapore Dollar, and Canadian Dollar expenditures for sales offices and research and development activities undertaken outside of the U.S.

The Company has established a program that primarily 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”) 815, Derivatives and Hedging (“ASC 815”). As of March 27, 2021 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase international currencies were $75.0 million and $61.6 million, respectively and the notional amounts of forward contracts the Company held to sell international currencies in exchange for U.S. Dollars were $1.6 million and $0, respectively.

Derivatives not designated as hedging instruments

As of March 27, 2021 and June 27, 2020, the notional amounts of the forward contracts the Company held to purchase international currencies were $41.0 million and $32.3 million, respectively, and the notional amounts of forward contracts the Company held to sell international currencies were $14.1 million and $12.0 million, respectively.

The Company's foreign currency forward contract gains or losses included in the Condensed Consolidated Statements of Income were not material for the nine months ended March 27, 2021 and March 28, 2020, respectively.

Effect of hedge accounting on the Condensed Consolidated Statements of Income

The following tables summarize the gains (losses) from hedging activities recognized in the Company's Condensed Consolidated Statements of Income:


	Three Months Ended
	March 27, 2021						March 28, 2020
	Net Revenue		Cost of Goods Sold		Operating Expenses			Net Revenue		Cost of Goods Sold		Operating Expenses
	(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded	$	665,029	$	222,144	$	195,621		$	561,916	$	195,479	$	183,090

Gain (loss) on cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	—	$	209	$	626		$	—	$	76	$	(94)


	Nine Months Ended
	March 27, 2021						March 28, 2020
	Net Revenue		Cost of Goods Sold		Operating Expenses			Net Revenue		Cost of Goods Sold		Operating Expenses
	(in thousands)
Income and expenses line items in which the effects of cash flow hedges are recorded	$	1,912,674	$	636,353	$	613,958		$	1,646,026	$	575,742	$	561,877

Gain (loss) on cash flow hedges:
Foreign exchange contracts:
Gain (loss) reclassified from accumulated other comprehensive income into income	$	—	$	993	$	1,994		$	—	$	206	$	(868)

Outstanding debt obligations

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


	March 27, 2021		June 27, 2020
	(in thousands)
3.375% fixed rate notes due March 2023	$	500,000	$	500,000
3.45% fixed rate notes due June 2027	500,000		500,000
Total outstanding debt	1,000,000		1,000,000

Less: Reduction for unamortized discount and debt issuance costs	(4,900)		(5,978)
Total long-term debt	$	995,100	$	994,022

On June 15, 2017, the Company completed a public offering of $500 million aggregate principal amount of the Company's 3.45% senior unsecured and unsubordinated notes due in June 2027 (“2027 Notes”), with an effective interest rate of 3.5%. Interest on the 2027 Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2017. The net proceeds of this offering were approximately $495.2 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 2027 Notes and the 2023 Notes 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 2027 Notes or the 2023 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 Condensed 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, were $8.9 million and $8.9 million during the three months ended March 27, 2021 and March 28, 2020, respectively. Amortized discount and expenses, as well as interest expense associated with the notes, were $26.7 million and $26.7 million during the nine months ended March 27, 2021 and March 28, 2020, respectively.

The estimated fair value of the Company’s outstanding debt obligations was approximately $1.1 billion as of March 27, 2021. 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 $9.4 million and $9.3 million during the three months ended March 27, 2021, and March 28, 2020, respectively. The Company recorded interest expense of $28.1 million and $27.9 million during the nine months ended March 27, 2021, and March 28, 2020, respectively.

Other Financial Instruments

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

Interest Income and Interest Expense Disclosure

ompany recorded interest expense of $9.4 million and $9.3 million during the three months ended March 27, 2021, and March 28, 2020, respectively. The Company recorded interest expense of $28.1 million and $27.9 million during the nine months ended March 27, 2021, and March 28, 2020, respectively

- 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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