Fair Value Measurements

3 Months Ended

Oct. 01, 2022

Note 8. Fair Value Measurements

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. There is an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. Observable inputs are inputs which market participants would use in valuing an asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs which reflect the assumptions market participants would use in valuing an asset or liability.

The three levels of inputs that may be used to measure fair value are as follows:

•Level 1: includes financial instruments for which quoted market prices for identical instruments are available in active markets. Level 1 assets of the Company include money market funds, U.S. Treasury securities and marketable equity securities as they are traded with sufficient volume and frequency of transactions.

•Level 2: includes financial instruments for which the valuations are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. Level 2 instruments of the Company generally include certain U.S. and foreign government and agency securities, commercial paper, corporate and municipal bonds and notes, asset-backed securities, certificates of deposit, foreign currency forward contracts and debt. To estimate their fair value, the Company utilizes pricing models based on market data. The significant inputs for the valuation model usually include benchmark yields, reported trades, broker and dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, and industry and economic events.

•Level 3: includes financial instruments for which fair value is derived from valuation-based inputs, that are unobservable and significant to the overall fair value measurement. As of October 1, 2022 and July 2, 2022, the Company did not hold any Level 3 investment securities. The Company’s Level 3 liabilities as of October 1, 2022 and July 2, 2022 consist of contingent purchase consideration. The Company has aggregate contingent liabilities related to its business acquisitions. The fair value of certain earn-out liabilities is 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 certain earn-out liabilities is derived using the estimated probability of success of achieving the earn-out milestones discounted to present value. 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.

Fair Value Measurements

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



	October 1, 2022								July 2, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Debt available-for-sale securities:							40
Asset-backed securities (1)	$	0.6	$	—	$	0.6	$	—	$	0.6	$	—	$	0.6	$	—
Total debt available-for-sale securities	0.6		—		0.6		—		0.6		—		0.6		—
Money market funds (2)	287.6		287.6		—		—		313.2		313.2		—		—
Trading securities (3)	1.3		1.3		—		—		1.4		1.4		—		—
Foreign currency forward contracts (4)	4.5		—		4.5		—		3.8		—		3.8		—
Total assets	$	294.0	$	288.9	$	5.1	$	—	$	319.0	$	314.6	$	4.4	$	—

Liability:
Foreign currency forward contracts (5)	$	11.2	$	—	$	11.2	$	—	$	8.4	$	—	$	8.4	$	—
Contingent consideration (6)	2.9		—		—		2.9		2.5		—		—		2.5
Total liabilities	$	14.1	$	—	$	11.2	$	2.9	$	10.9	$	—	$	8.4	$	2.5

(1)Included in other non-current assets on the Company’s Consolidated Balance Sheets.

(2)Includes, as of October 1, 2022, $276.0 million in cash and cash equivalents, $3.1 million in restricted cash, and $8.5 million in other non-current assets on the Company’s Consolidated Balance Sheets. Includes, as of July 2, 2022, $301.5 million in cash and cash equivalents, $3.1 million in restricted cash, and $8.6 million in other non-current assets on the Company’s Consolidated Balance Sheets.

(3)Included in short-term investments on the Company’s Consolidated Balance Sheets.

(4)Included in other current assets on the Company’s Consolidated Balance Sheets.

(5)Included in other current liabilities on the Company’s Consolidated Balance Sheets.

(6)Includes certain amounts in other current liabilities and other non-current liabilities on the Company’s Consolidated Balance Sheets.

Other Fair Value Measures

Fair Value of Debt: If measured at fair value in the Consolidated Balance Sheets, the Company’s 3.75% Senior Notes (2029 Notes), 1.00% Senior Convertible Notes (2024 Notes) and 1.75% Senior Convertible Notes (2023 Notes) would be classified in Level 2 of the fair value hierarchy as they are not actively traded in the markets. The Company’s debt measured at fair value for the periods presented are as follows:


	October 1, 2022								July 2, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Debt:
3.75% Senior Notes	$	320.0	$	—	$	320.0	$	—	$	337.5	$	—	$	337.5	$	—
1.00% Senior Convertible Notes	250.4		—		250.4		—		250.7		—		250.7		—
1.75% Senior Convertible Notes	72.5		—		72.5		—		73.4		—		73.4		—
Total liabilities	$	642.9	$	—	$	642.9	$	—	$	661.6	$	—	$	661.6	$	—

See “Note 11. Debt”, for further discussion of the Company’s debt.

- 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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