Investments and Fair Value Measurements

6 Months Ended

Dec. 29, 2012

Investments and Fair Value Measurements

Investments and Fair Value Measurements

Note 7. Investments and Fair Value Measurements

The Company’s investments in marketable debt and equity securities were primarily classified as available-for-sale investments.

At December 29, 2012, the Company’s available-for-sale securities were as follows (in millions):

	Amortized		Gross		Gross
	Cost / Carrying		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Debt securities:
U.S. treasuries	$	71.9	$	—	$	—		$	71.9
Agencies
U.S.	53.4		0.1		—			53.5
Foreign	4.0		0.1		—			4.1
Municipal bonds and sovereign debt instruments	6.6		—		—			6.6
Asset-backed securities	40.2		0.3		(0.4		)	40.1
Corporate securities
U.S.	213.8		1.4		(0.1		)	215.1
Foreign	33.4		2.2		—			35.6
Total available-for-sale securities	$	423.3	$	4.1	$	(0.5	)	$	426.9

The Company generally classifies debt securities as cash equivalents, short-term investments, or other non-current assets based on the stated maturities; however, certain securities with stated maturities of longer than twelve months which are highly liquid and available to support current operations are classified as current assets. As of December 29, 2012, of the total estimated fair value, $26.6 million was classified as cash equivalents, $398.9 million was classified as short-term investments, and $1.4 million was classified as other non-current assets.

In addition to the amounts presented above, at December 29, 2012, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $4.9 million, of which $1.5 million were invested in debt securities, $0.4 million were invested in money market instruments and funds and $3.0 million were invested in equity securities. Trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in Interest and other income (expense), net.

During the three and six months ended December 29, 2012 and December 31, 2011, the Company recorded no other-than-temporary impairment charge in each respective period.

At December 29, 2012, the Company’s total gross unrealized losses on available-for-sale securities, aggregated by type of investment instrument were as follows (in millions):

	Less than 12 Months		Greater than 12 Months		Total
Asset-backed securities	$	—	$	0.4	$	0.4
Corporate securities	0.1		—		0.1
Total gross unrealized losses	$	0.1	$	0.4	$	0.5

At December 29, 2012, contractual maturities of the Company’s debt securities classified as available-for-sale securities were as follows (in millions):

	Amortized
	Cost / Carrying		Estimated
	Cost		Fair Value
Amounts maturing in less than 1 year	$	241.3	$	244.4
Amounts maturing in 1 - 5 years	180.6		181.1
Amounts maturing in more than 5 years	1.4		1.4
Total debt securities	$	423.3	$	426.9

At June 30, 2012, the Company’s available-for-sale securities were as follows (in millions):

	Amortized		Gross		Gross
	Cost / Carrying		Unrealized		Unrealized			Estimated
	Cost		Gains		Losses			Fair Value
Debt securities:
U.S. treasuries	$	52.0	$	—	$	—		$	52.0
Agencies
U.S.	65.1		0.2		—			65.3
Foreign	3.3		—		—			3.3
Municipal bonds and sovereign debt instruments	11.4		—		—			11.4
Asset-backed securities	21.9		0.2		(0.4		)	21.7
Corporate securities	183.6		1.3		(0.1		)	184.8
Total available-for-sale securities	$	337.3	$	1.7	$	(0.5	)	$	338.5

The Company generally classifies debt securities as cash equivalents, short-term investments, or other non-current assets based on the stated maturities; however, certain securities with stated maturities of longer than twelve months which are highly liquid and available to support current operations are classified as current assets. As of June 30, 2012, of the total estimated fair value, $21.3 million was classified as cash equivalents, $315.9 million was classified as short-term investments, and $1.3 million was classified as other non-current assets.

In addition to the amounts presented above, at June 30, 2012, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $4.6 million, of which $0.9 million were invested in debt securities, $0.5 million were invested in money market instruments and funds and $3.2 million were invested in equity securities. Trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in interest and other income (expense), net.

At June 30, 2012, the Company’s gross unrealized losses on available-for-sale securities, aggregated by type of investment instrument were as follows (in millions):

	Less than		Greater than
	12 Months		12 Months		Total
Asset-backed securities	$	—	$	0.4	$	0.4
Corporate securities	0.1		—		0.1
Total gross unrealized losses	$	0.1	$	0.4	$	0.5

Fair Value Measurements

Assets measured at fair value at December 29, 2012 are summarized below (in millions):

			Fair value measurement as of December 29, 2012
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Assets:
Debt available-for-sale securities
U.S. treasuries	$	71.9	$	71.9	$	—
Agencies
U.S.	53.5		—		53.5
Foreign	4.1		—		4.1
Municipal bonds and sovereign debt instruments	6.6		—		6.6
Asset-backed securities	40.1		—		40.1
Corporate securities
U.S.	215.1				215.1
Foreign	35.6				35.6
Total debt available-for-sale securities	426.9		71.9		355.0
Money market funds	220.9		220.9		—
Trading securities	4.9		4.9		—
Total assets (1)	$	652.7	$	297.7	$	355.0

(1)         $210.1 million in cash and cash equivalents, $403.8 million in short-term investments, $30.9 million in restricted cash, and $7.9 million in other non-current assets on the Company’s consolidated balance sheet.

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 market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions about the factors that market participants would use in valuing the asset or liability.

The Company’s cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy based on quoted prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

·                  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 and U.S. Treasury securities as they are traded in active markets with sufficient volume and frequency of transactions.

·                 Level 2 includes financial instruments for which the valuations are based on quoted prices for similar assets, 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. 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, and foreign currency forward contracts. 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.

As of June 30, 2012 and during the three and six months ended December 29, 2012, the Company held no Level 3 investments. Level 3 includes financial instruments for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement.

Foreign Currency Forward Contracts

The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to foreign exchange risks. The Company utilizes foreign exchange forward contracts and other instruments to manage foreign currency risk associated with foreign currency denominated assets and liabilities, primarily certain short-term intercompany receivables and payables and to reduce the volatility of earnings and cash flows related to foreign-currency transactions.

The forward contracts, most with a term of less than 120 days, were transacted near month end; therefore, the fair value of the contracts as of both December 29, 2012 and June 30, 2012, is not significant. The change in the fair value of these foreign currency forward contracts is recorded as income or loss in the Company’s Consolidated Statements of Operations as a component of Interest and other income (expense), net.