Investments and Fair Value Measurements

6 Months Ended

Dec. 27, 2014

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.

As of December 27, 2014, 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	$	29.4	$	—	$	—		$	29.4
U.S agencies	91.0		—		(0.1		)	90.9
Municipal bonds and sovereign debt instruments	10.4		—		—			10.4
Asset-backed securities	75.1		—		(0.2		)	74.9
Corporate securities	368.2		0.1		(0.2		)	368.1
Total debt available-for-sale securities	$	574.1	$	0.1	$	(0.5	)	$	573.7

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 short-term investments. As of December 27, 2014, of the total estimated fair value, $31.9 million was classified as cash equivalents, $541.0 million was classified as short-term investments and $0.8 million was classified as other non-current assets.

In addition to the amounts presented above, as of December 27, 2014, the Company’s short-term investments classified as trading securities related to the deferred compensation plan were $4.0 million, of which $0.6 million was invested in debt securities, $0.5 million was invested in money market instruments and funds and $2.9 million was invested in equity securities. Trading securities are reported at fair value, with the unrealized 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 27, 2014 and December 28, 2013, the Company recorded no other-than-temporary impairment charges in each respective period.

As of December 27, 2014, 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	$	441.7	$	441.5
Amounts maturing in 1 - 5 years	131.4		131.4
Amounts maturing in more than 5 years	1.0		0.8
Total debt available-for-sale securities	$	574.1	$	573.7

As of June 28, 2014, 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	$	36.8	$	—	$	—		$	36.8
U.S. agencies	70.0		—		—			70.0
Municipal bonds and sovereign debt instruments	16.8		—		—			16.8
Asset-backed securities	94.7		0.1		(0.2		)	94.6
Corporate securities	370.5		0.2		—			370.7
Total debt available-for-sale securities	$	588.8	$	0.3	$	(0.2	)	$	588.9

As of June 28, 2014, of the total estimated fair value, $39.8 million was classified as cash equivalents, $548.3 million was classified as short-term investments and $0.8 million was classified as other non-current assets.

In addition to the amounts presented above, as of June 28, 2014, the Company’s short-term investments classified as trading securities, related to the deferred compensation plan, were $3.9 million, of which $0.4 million was invested in debt securities, $0.7 million was invested in money market instruments and funds and $2.8 million was invested in equity securities. Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in Interest and other income (expense), net.

Fair Value Measurements

Assets measured at fair value as of December 27, 2014 are summarized below (in millions):

			Fair value measurement as of December 27, 2014
			Quoted Prices in		Significant
			Active Markets		Other
			for Identical		Observable
			Assets		Inputs
	Total		(Level 1)		(Level 2)
Assets:
Debt available-for-sale securities:
U.S. treasuries	$	29.4	$	29.4	$	—
U.S. agencies	90.9		—		90.9
Municipal bonds and sovereign debt instruments	10.4		—		10.4
Asset-backed securities	74.9		—		74.9
Corporate securities	368.1		—		368.1
Total debt available-for-sale securities	573.7		29.4		544.3
Money market funds	184.3		184.3		—
Trading securities	4.0		4.0		—
Total assets (1)	$	762.0	$	217.7	$	544.3

(1)

$183.8 million in cash and cash equivalents, $545.1 million in short-term investments, $28.5 million in restricted cash, and $4.6 million in other non-current assets on the Company’s Consolidated Balance Sheets.

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. As of June 28, 2014 and during the three and six months ended December 27, 2014, the Company held no Level 3 investments.

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 monetary 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 quarter end; therefore, the fair value of the contracts as of both December 27, 2014 and June 28, 2014 is not significant. The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of Interest and other income (expense), 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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