Fair Value of Financial Instruments

6 Months Ended

Dec. 31, 2023

Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is categorized into three levels based on the reliability of inputs as follows:

•Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

•Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The financial assets for which the Company performs recurring fair value remeasurements are cash equivalents and short-term investments. As of December 31, 2023 and June 25, 2023, financial assets utilizing Level 1 inputs included U.S. treasury securities, money market fund and U.S. corporation common stock, and financial assets utilizing Level 2 inputs included municipal bonds, corporate bonds, U.S. agency securities, commercial paper, certificates of deposit and variable rate demand notes. Level 2 assets are valued based on quoted prices in active markets for instruments that are similar or using a third-party pricing service’s consensus price, which is a weighted average price based on multiple sources. These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility. The Company did not have any financial assets requiring the use of Level 3 inputs as of December 31, 2023 and June 25, 2023.

The following table sets forth financial instruments carried at fair value within the U.S. GAAP hierarchy:


	December 31, 2023		June 25, 2023
(in millions of U.S. Dollars)	Level 1	Level 2	Total	Level 1	Level 2	Total

Cash equivalents:
Money market funds	$307.3	$—	$307.3	$230.4	$—	$230.4

Corporate bonds	—	4.0	4.0	—	—	—

U.S. treasury securities	44.8	—	44.8	20.7	—	20.7

Commercial paper	—	6.9	6.9	—	7.0	7.0



Total cash equivalents	352.1	10.9	363.0	251.1	7.0	258.1

Short-term investments:
U.S. treasury securities	889.4	—	889.4	260.4	—	260.4
Corporate bonds	—	470.4	470.4	—	495.6	495.6
Municipal bonds	—	135.6	135.6	—	175.3	175.3
Commercial paper	—	90.1	90.1	—	50.2	50.2
U.S. agency securities	—	58.4	58.4	—	76.8	76.8
Certificates of deposit	—	60.1	60.1	—	112.3	112.3

Variable rate demand notes	—	27.3	27.3	—	27.3	27.3

Total short-term investments	889.4	841.9	1,731.3	260.4	937.5	1,197.9
Other long-term investments:
US corporation common stock	66.1	—	66.1	—	—	—

Total assets	$1,307.6	$852.8	$2,160.4	$511.5	$944.5	$1,456.0

Other long-term investments consists of the MACOM Shares which the Company received as partial consideration in connection with the RF Business Divestiture. These shares are accounted for utilizing the fair value option and changes in the fair value of the shares are recognized in non-operating expense (income), net.

- 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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