Fair Value Measurements

12 Months Ended

Jun. 27, 2020

Note 8. Fair Value Measurements

Fair Value Measurements

The Company’s assets and liabilities measured at fair value for the periods presented are as follows (in millions):



	June 27, 2020								June 29, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Debt available-for-sale securities:
Asset-backed securities	$	0.5	$	—	$	0.5	$	—	$	0.6	$	—	$	0.6	$	—
Total debt available-for-sale securities	0.5		—		0.5		—		0.6		—		0.6		—
Money market funds	334.6		334.6		—		—		322.9		322.9		—		—
Trading securities	1.4		1.4		—		—		1.5		1.5		—		—
Foreign currency forward contracts ⁽¹⁾	2.2		—		2.2		—		1.2		—		1.2		—
Total assets ⁽²⁾	$	338.7	$	336.0	$	2.7	$	—	$	326.2	$	324.4	$	1.8	$	—

Liability:
Foreign currency forward contracts ⁽³⁾	$	1.5	$	—	$	1.5	$	—	$	4.0	$	—	$	4.0	$	—
Contingent consideration⁽⁴⁾	9.9		—		—		9.9		38.4		—		—		38.4
Total liabilities	$	11.4	$	—	$	1.5	$	9.9	$	42.4	$	—	$	4.0	$	38.4


⁽¹⁾	$2.2 million and $1.2 million in prepayments and other current assets on the Company’s Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively.

⁽²⁾

Includes as of June 27, 2020, $327.2 million in cash and cash equivalents, $1.4 million in short-term investments, $3.4 million in restricted cash, $2.2 million in prepayments and other current assets, and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets. Includes as of June 29, 2019, $315.5 million in cash and cash equivalents, $1.5 million in short-term investments, $3.5 million in restricted cash, $1.2 million in prepayments and other current assets and $4.5 million in other non-current assets on the Company’s Consolidated Balance Sheets.


⁽³⁾	Includes $1.5 million and $4.0 million in other current liabilities on the Company’s Consolidated Balance Sheets as of June 27, 2020 and June 29, 2019, respectively.


⁽⁴⁾	Includes $9.4 million and $37.7 million in other non-current liabilities and $0.5 million and $0.7 million in other current liabilities as of June 27, 2020 and June 29, 2019, respectively.

The Company’s Level 3 liabilities as of June 27, 2020, consist of contingent purchase consideration. The Company has aggregate contingent liabilities related to its business and asset acquisitions completed during fiscal 2020 and 2019. As of June 27, 2020 and June 29, 2019, the aggregate fair value of contingent consideration was $9.9 million and $38.4 million, respectively. The fair value of earn-out liabilities were determined using a Monte Carlo Simulation that includes significant unobservable inputs such as the risk-adjusted discount rate, gross profit volatility, and projected financial forecast of acquired business over the earn-out period. The fair value of contingent consideration liabilities is remeasured at each reporting period at the estimated fair value based on the inputs on the date of remeasurement, with the change in fair value recognized in the Selling, General and Administrative expense of the Consolidated Statements of Operations.

The following table provides a reconciliation of changes in fair value of the Company’s Level 3 liabilities for the year ended June 27, 2020 and June 29, 2019, as follows (in millions):



	RPC			Other (1)			Total
Balance: June 30, 2018	$	—		$	—		$	—
Additions to Contingent Consideration	36.2			8.1			44.3
Change in Fair Value measurement	(5.9		)	—			(5.9		)
Balance: June 29, 2019	$	30.3		$	8.1		$	38.4
Additions to Contingent Consideration	—			3.7			3.7
Change in Fair Value measurement	(29.6		)	(1.9		)	(31.5		)
Payments of Contingent Consideration	(0.7		)	—			(0.7		)
Balance June 27, 2020	$	—		$	9.9		$	9.9


(1)	See Note 5. Acquisitions and of the Notes to the Company’s Consolidated Financial Statements for more detail.

In connection with the acquisition of RPC, the Company agreed to pay RPC’s Securityholders up to $53.0 million over the subsequent 4-year period based on subsequent achievement of gross profit targets agreed upon at the time of close. The fair value of earn-out payments at the date of acquisition was $36.2 million.

As of June 27, 2020, the fair value of RPC related earn-out liability was remeasured to $0 million. The decrease in fair value of the earn-out liability of $29.6 million in fiscal 2020 was primarily due to the lower-than-expected rate of adoption by Android customers, which was further compounded by the macroeconomic impact of COVID-19. During fiscal 2020, the Company made a earn-out payment to RPC’s Securityholders in the amount of $0.7 million. As of June 29, 2019, the fair value was remeasured to $30.3 million. The decrease in fair value of the earn-out liability of $5.9 million in fiscal 2019 was primarily due to revised projected forecast of RPC, primarily driven by rate of adoption assumptions.

- 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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