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Long Term Debt and Other Borrowings | 12 Months Ended
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Jun. 26, 2016
Debt Disclosure [Abstract] |
Long Term Debt and Other Borrowings | Long Term Debt and Other Borrowings As of June 26, 2016 and June 28, 2015, the Company's outstanding debt consisted of the following:
| June 26, 2016 |  | June 28, 2015
| Amount (in thousands) |  | Effective Interest Rate |  | Amount (in thousands) |  | Effective Interest Rate
Fixed-rate 0.50% Convertible Notes Due May 15, 2016 ("2016 Notes") | $ | — |  |  | — |  |  | $ | 450,000 |  | (3) | 4.29 | %
Fixed-rate 1.25% Convertible Notes Due May 15, 2018 ("2018 Notes") | 449,954 |  | (1) | 5.27 | % |  | 450,000 |  | (3) | 5.27 | %
Fixed-rate 2.75% Senior Notes Due March 15, 2020 ("2020 Notes") | 500,000 |  |  | 2.88 | % |  | 500,000 |  |  | 2.88 | %
Fixed-rate 2.80% Senior Notes Due June 15, 2021 ("2021 Notes") | 800,000 |  |  | 2.95 | % |  | — |  |  | — |
Fixed-rate 3.45% Senior Notes Due June 15, 2023 ("2023 Notes") | 600,000 |  |  | 3.60 | % |  | — |  |  | — |
Fixed-rate 3.80% Senior Notes Due March 15, 2025 ("2025 Notes") | 500,000 |  |  | 3.87 | % |  | 500,000 |  |  | 3.87 | %
Fixed-rate 3.90% Senior Notes Due June 15, 2026 ("2026 Notes") | 1,000,000 |  |  | 4.01 | % |  | — |  |  | — |
Fixed-rate 2.625% Convertible Notes Due May 15, 2041 ("2041 Notes") | 699,895 |  | (1) | 4.28 | % |  | 699,935 |  | (3) | 4.28 | %
Total debt outstanding, at par | 4,549,849 |  |  |  |  | 2,599,935 |  |  |
Unamortized discount | (232,727 | ) |  |  |  | (247,849 | ) |  |
Fair value adjustment - interest rate contracts | 8,552 |  |  |  |  | — |  |  |
Total debt outstanding, at carrying value | $ | 4,325,674 |  |  |  |  | $ | 2,352,086 |  |  |
Reported as: |  |  |  |  |  |  |
Current portion of long-term debt | $ | 942,298 |  | (2) |  |  | $ | 1,358,126 |  | (2) |
Long-term debt | 3,383,376 |  |  |  |  | 993,960 |  |  |
Total debt outstanding, at carrying value | $ | 4,325,674 |  |  |  |  | $ | 2,352,086 |  |  |
______________________________ (1) As of June 26, 2016, these notes were convertible at the option of the bondholder, as a result of the condition described in (2) below. Upon closure of the conversion period, Notes not converted will be reclassified back into noncurrent liabilities and the temporary equity will be reclassified into permanent equity. (2) As of the report date the market value of the Company's Common Stock was greater than 130% of the convertible notes conversion price for 20 or more of the 30 consecutive trading days preceding the quarter-end. As a result, the convertible notes were classified in current liabilities and a portion of the equity component, representing the unamortized discount, was classified in temporary equity on the Company's Consolidated Balance Sheets. (3) As of June 28, 2015, these notes were convertible at the option of the bond holder, as a result of the condition described in (2) above. The Company’s contractual cash obligations relating to its outstanding debt as of June 26, 2016 were as follows:
Payments Due By Fiscal Year: | Long-term Debt
| (in thousands)
2017(1) | $ | 1,149,849 |
2018 | — |
2019 | — |
2020 | 500,000 |
2021 | 800,000 |
Thereafter | 2,100,000 |
Total | $ | 4,549,849 |
__________________________________ (1) As noted above, the conversion period for the 2018 and 2041 Notes is open as of June 26, 2016. As there is the potential for conversion at the option of the holder, the principal balance of the 2018 and 2041 Notes have been included in the one year payment period. Convertible Senior Notes In May 2011, the Company issued and sold $450.0 million in aggregate principal amount of 0.5% Convertible Senior Notes due May 2016 (the “2016 Notes”) at par. At the same time, the Company issued and sold $450.0 million in aggregate principal amount of 1.25% Convertible Senior Notes due May 2018 (the “2018 Notes”) at par. The Company pays cash interest at an annual rate of 0.5% and 1.25%, respectively, on the 2016 Notes and the 2018 Notes, on a semi-annual basis on May 15 and November 15 of each year. The 2016 Notes were extinguished upon maturity on May 15, 2016. Just prior to the 2016 Note's scheduled maturity, the notes were convertible at the bondholders' option. During the three months ended June 28, 2016, 449.7 thousand of the 2016 Notes, with a total par value of $449.7 million were converted, in settlement of the conversion the bondholders received a cash payment equal to the par value of the 2016 Notes converted, as well as 1.6 million shares of Common Stock. To off-set the dilutive impact of the Common Stock consideration paid, the Company exercised the associated note hedge and received 1.6 million shares from counterparties. The remaining 2016 Notes were settled at par value, without conversion. In June 2012, with the acquisition of Novellus, the Company assumed $700.0 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041 (the “2041 Notes,” collectively with the 2016 Notes (prior to the 2016 Notes current period maturity) and the 2018 Notes, the “Convertible Notes”). The Company pays cash interest at an annual rate of 2.625%, on a semi-annual basis on May 15 and November 15 of each year on the 2041 Notes. The 2041 Notes also have a contingent interest payment provision that may require the Company to pay additional interest, up to 0.60% per year, based on certain thresholds, beginning with the semi-annual interest payment on May 15, 2021, and upon the occurrence of certain events, as outlined in the indenture governing the 2041 Notes. The Company separately accounts for the liability and equity components of the Convertible Notes. The initial liability components of the Convertible Notes were valued based on the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without the conversion feature, which equals the effective interest rate on the liability component disclosed in the following table. The equity component was initially valued equal to the principle value of the notes, less the present value of the future cash flows using the Company’s borrowing rate at the date of the issuance or assumption for similar debt instruments without a conversion feature, which equated to the initial debt discount. Under certain circumstances, the Convertible Notes may be converted into shares of the Company’s Common Stock. The number of shares each debenture is convertible into is based on conversion rates, disclosed in the following table. The conversion rates are adjusted for certain corporate events, including dividends on the Company’s Common Stock. In addition to the conversion of the 2016 Notes described above, during the year ended June 26, 2016, 99 of the Convertible Notes, with a total par value of $99.0 thousand were settled at the note holders’ option. In conjunction with the conversions in the year ended June 26, 2016, 475 shares of common stock were issued. Additionally, during the year ended June 26, 2016, the Company received notice of note holders' intention to convert 12 of the 2041 Notes, the Company expects those conversions to settle in the three months ended September 25, 2016. Selected additional information regarding the Convertible Notes outstanding as of June 26, 2016 and June 28, 2015 is as follows:
| June 26, 2016 |  | June 28, 2015
| 2018 Notes |  | 2041 Notes |  | 2016 Notes |  | 2018 Notes |  | 2041 Notes
| (in thousands, except years, percentages, conversion rate, and conversion price)
Carrying amount of permanent equity component, net of tax | $ | 72,992 |  |  | $ | 152,397 |  |  | $ | 61,723 |  |  | $ | 57,215 |  |  | $ | 148,487 |
Carrying amount of temporary equity component, net of tax | $ | 31,894 |  |  | $ | 175,658 |  |  | $ | 14,507 |  |  | $ | 47,679 |  |  | $ | 179,622 |
Remaining amortization period (years) | 1.9 |  |  | 24.9 |  |  |  |  |  |  |
Fair Value of Notes (Level 2) | $ | 645,009 |  |  | $ | 1,732,240 |  |  |  |  |  |  |
Conversion rate (shares of common stock per $1,000 principal amount of notes) | 16.3354 |  |  | 29.3158 |  |  |  |  |  |  |
Conversion price (per share of common stock) | $ | 61.22 |  |  | $ | 34.11 |  |  |  |  |  |  |
If-converted value in excess of par value | $ | 154,818 |  |  | $ | 988,326 |  |  |  |  |  |  |
Estimated share dilution using average quarterly stock price of $80.08 per share | 1,731 |  |  | 11,778 |  |  |  |  |  |  |
Convertible Note Hedges and Warrants Concurrent with the issuance of the 2016 Notes and 2018 Notes, the Company purchased a convertible note hedge and sold warrants. As of June 26, 2016, the warrants had not been exercised and remained outstanding. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. The warrants settlement is contractually defined as net share settlement. In conjunction with the convertible note hedge, counterparties agreed to sell to the Company shares of Common Stock equal to the number of shares issuable upon conversion of the 2016 Notes and 2018 Notes in full. The convertible note hedge transactions will be settled in net shares. The note hedges will terminate upon the earlier of (i) the maturity date, or (ii) the first day none of the respective notes remain outstanding, due to conversion or otherwise. Settlement of the convertible note hedge in net shares, based on the number of shares issued upon conversion of the 2016 and 2018 Notes, on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 2016 Notes and 2018 Notes. The Company exercised the convertible note hedge related to the 2016 Notes in the year ended June 26, 2016, to offset the impact of the Company's Common Stock issued for conversions just prior to scheduled maturity, as described above. Additionally, the impact of the Company's exercise of the note hedge associated with the 2016 Notes and 2018 Notes converted during the year ended June 26, 2016 was the receipt of 79 shares of the Company's Common Stock. The exercise price is adjusted for certain corporate events, including dividends on the Company’s Common Stock. The following table presents the details of the warrants and convertible note hedge arrangements as of June 26, 2016:
| 2016 Notes |  | 2018 Notes
| (shares in thousands)
Warrants: |  |  |
Number of shares to be delivered upon exercise | 7,351 |  |  | 7,350 |
Estimated share dilution using average quarterly stock price $80.08 per share | 990 |  |  | 565 |
Exercise price | $ | 69.30 |  |  | $ | 73.93 |
Expiration date range | August 15 - October 21, 2016 |  |  | August 15 - October 23, 2018 |
Convertible Note Hedge: |  |  |
Number of shares available from counterparties | — |  |  | 7,350 |
Exercise price | — |  |  | $ | 61.22 |
Senior Notes On March 12, 2015, the Company completed a public offering of $500.0 million aggregate principal amount of the Company’s Senior Notes due March 2020 (the “2020 Notes”) and $500.0 million aggregate principal amount of the Company’s Senior Notes due March 2025 (the “2025 Notes”, together with the 2020 Notes, the “Senior Notes”). The Company will pay interest at an annual rate of 2.75% and 3.80%, respectively, on the 2020 Notes and 2025 Notes, on a semi-annual basis on March 15 and September 15 of each year, beginning September 15, 2015. During the year ended June 26, 2016, the Company entered into a series of interest rate contracts hedging the fair value of a portion of the 2025 Notes par value, whereby the company receives a fixed rate and pays a variable rate based on a certain benchmark interest rate. Refer to Note 8 for additional information regarding these interest rate contracts. The Company may redeem the Senior Notes at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect of the Senior Notes and accrued and unpaid interest before February 15, 2020, for the 2020 Notes and before December 15, 2024, for the 2025 Notes. The Company may redeem the Senior Notes at par, plus accrued and unpaid interest at any time on or after February 15, 2020 for the 2020 Notes and on or after December 24, 2024 for the 2025 Notes. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the Senior Notes at a price equal to 101% of the principal amount of the Senior Notes, plus accrued and unpaid interest. On June 7, 2016, The Company completed a public offering of $800.0 million aggregate principal amount of Senior Notes due June 2021 (the "2021 Notes"), $600.0 million aggregate principal amount of Senior Notes due June 2023 (the "2023 Notes") and $1.0 billion aggregate principal amount of Senior Notes due June 2026 (the "2026 Notes" together with the 2020, 2021, 2023, and 2025 Notes, the “Senior Notes”). The Company will pay interest at an annual rate of 2.80%, 3.45% and 3.90%, respectively, on the 2021 Notes, 2023 Notes and 2026 Notes, on a semi-annual basis on June 15 and December 15 of each year, beginning December 15, 2016. The Company may redeem the 2021 Notes, 2023 Notes, and 2026 Notes at a redemption price equal to 100% of the principal amount of such series (“par”), plus a “make whole” premium as described in the indenture in respect to the 2021 Notes, 2023 Notes, and 2026 Notes and accrued and unpaid interest before May 15, 2021, for the 2021 Notes, before April 15, 2023 for the 2023 Notes, and before March 15, 2026, for the 2026 Notes. The Company may redeem the 2021 Notes, 2023 Notes, and 2026 Notes at par, plus accrued and unpaid interest at any time on or after May 15, 2021 for the 2021 Notes, on or after April 15, 2023 for the 2023 Notes, and on or after March 15, 2026 for the 2026 Notes. In addition, upon the occurrence of certain events, as described in the indenture, the Company will be required to make an offer to repurchase the 2021 Notes, 2023 Notes and 2026 Notes at a price equal to 101% of the principal amount of the respective note, plus accrued and unpaid interest. In the event (i) the proposed merger with KLA-Tencor is not completed on or prior to December 30, 2016, or (ii) the Agreement and Plan of Merger and Reorganization, dated as of October 20, 2015, by and among us, KLA-Tencor, Topeka Merger Sub 1, Inc., and Topeka Merger Sub 3, Inc. (as assignee of Topeka Merger Sub 2), is terminated on or at any time prior to such date (each such event referred to as a “Special Mandatory Redemption Event”), the Company will be required to redeem all of the 2023 Notes and the 2026 Notes then outstanding, at a special mandatory redemption price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest from the date of initial issuance, or the most recent interest payment date on which interest was paid, whichever is later, to, but not including, the Special Mandatory Redemption Date (as defined below). The 2021 Notes are not subject to this special mandatory redemption. The “Special Mandatory Redemption Date” means the date specified in the notice of special mandatory redemption to be delivered to the holders of the notes within five business days following the Special Mandatory Redemption Event, which Special Mandatory Redemption Date shall be three business days after such notice is mailed. Selected additional information regarding the Senior Notes outstanding as of June 26, 2016 is as follows:
| Remaining Amortization period |  | Fair Value of Notes (Level 2)
| (years) |  | (in thousands)
2020 Notes | 3.7 |  | $ | 506,250 |
2021 Notes | 5.0 |  | $ | 818,104 |
2023 Notes | 7.0 |  | $ | 614,970 |
2025 Notes | 8.7 |  | $ | 510,750 |
2026 Notes | 10.0 |  | $ | 1,049,510 |
Term Loan Agreement On May 13, 2016, we entered into an Amended and Restated Term Loan Agreement (the “Amended and Restated Term Loan Agreement”), which amends and restates the Term Loan Agreement we entered into on November 10, 2015 with a syndicate of lenders. The Amended and Restated Term Loan Agreement provides for a $1,530.0 million senior unsecured term loan facility composed of two tranches; (i) a $1,005.0 million tranche of 3-year senior unsecured loans (the "3-Year Tranche") maturing on the 3-year anniversary of the closing date of the acquisition of KLA-Tencor subject to several conditions; and (ii) a $525.0 million tranche of 5-year senior unsecured loans (the "5-Year Tranche") maturing on the 5-year anniversary of the closing date of the acquisition of KLA-Tencor subject to several conditions. The Amended and Restated Term Loan will terminate on October 20, 2016 if the merger has not been consummated by such date. Interest on amounts borrowed under the Amended and Restated Term Loan Agreement is, at the Company’s option, based on (i) a base rate, defined as the greatest of (a) prime rate, (b) Federal Funds rate plus 0.50%, or (c) one-month LIBOR plus 1.00%, plus a spread of 0.00% to 0.75% for the 3-Year Tranche or 0.125% to 1.000% for the 5-Year Tranche or (ii) LIBOR multiplied by the statutory reserve rate, plus a spread of 1.000% to 1.750% for the 3-Year Tranche or 1.125% to 2.000% for the 5-Year Tranche, in each case as the applicable spread is determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Principal and accrued and unpaid interest is due and payable in equal quarterly amounts as set forth in the Amended and Restated Term Loan Agreement, with any remaining balance due and accrued and unpaid interest due at maturity. Additionally, the Company will pay the lenders a quarterly commitment fee that varies based on the Company’s rating described above. The Amended and Restated Term Loan Agreement also contains financial covenants that require the Company to maintain (i) a consolidated debt to capitalization ratio of no more than 0.50 to 1.00 (the “Capitalization Covenant”), provided that, until and including the earlier of (x) the end of the first two consecutive full fiscal quarters following the Amended and Restated Term Loan Agreement's closing date that the Company is in compliance with the Capitalization Covenant and (y) December 31, 2017, if the Company is not in compliance with the Capitalization Covenant, the Company will be deemed not to have violated the Capitalization Covenant so long as the Company’s consolidated debt to adjusted EBITDA ratio is less than or equal to 4.50 to 1.00 for the period of four fiscal quarters then ended, and (ii) liquidity of no less than $1.0 billion, in each case determined in accordance with the Amended and Restated Term Loan Agreement. The funding of the loans under the Amended and Restated Term Loan Agreement will be on the closing date of the acquisition of KLA-Tencor subject to several conditions. Revolving Credit Facility On November 10, 2015, we entered into an Amendment and Restatement Agreement (as amended on April 26, 2016 by Amendment No. 1 to the Amended and Restated Credit Agreement, and as further amended, restated, supplemented or otherwise modified from time to time, the “Amended and Restated Credit Agreement”), which amends and restates the Company's prior unsecured Credit Agreement, dated March 12, 2014 (as amended by Amendment No. 1, dated March 5, 2015). The Amended and Restated Credit Agreement provides for an increase to our revolving unsecured credit facility, from $300.0 million to $750.0 million with a syndicate of lenders. It includes an expansion option, subject to certain requirements, for us to request an increase in the facility of up to an additional $250.0 million, for a potential total commitment of $1.0 billion. Proceeds from the credit facility can be used for general corporate purposes. The facility matures on November 10, 2020. Interest on amounts borrowed under the credit facility is, at the Company’s option, based on (i) a base rate, defined as the greatest of (a) prime rate, (b) Federal Funds rate plus 0.5%, or (c) one-month LIBOR plus 1.0%, plus a spread of 0.0% to 0.5%, or (ii) LIBOR multiplied by the statutory rate, plus a spread of 0.9% to 1.5%, in each case as the applicable spread is determined based on the rating of the Company’s non-credit enhanced, senior unsecured long-term debt. Principal and any accrued and unpaid interest is due and payable upon maturity. Additionally, the Company will pay the lenders a quarterly commitment fee that varies based on the Company’s credit rating. The Restated Credit Agreement contains affirmative covenants, negative covenants, financial covenants and events of default that are substantially similar to those in the Amended and Restated Term Loan Agreement. As of June 26, 2016, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants. Bridge Facility On October 20, 2015, the Company obtained a commitment for $4.2 billion of bridge financing from Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC (“the Commitment Parties”) to finance, in part, the acquisition of KLA-Tencor. The Commitment Parties' commitment to provide financing (the “Bridge Facility”) is subject to certain conditions, including consummation of the merger with KLA-Tencor. On November 10, 2015, the Company entered into the Term Loan Agreement for $0.9 billion and the Bridge Facility was reduced to $3.3 billion, correspondingly, both with a syndicate of lenders. Following the execution of our June 2016 debt offering and other available credit modifications (see Note 13), this commitment was terminated during the three months ended June 26, 2016. Interest Cost The following table presents the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the debt discount, issuance costs, and effective portion of interest rate contracts with respect to the long-term debt and other borrowings during the fiscal years ended June 26, 2016, June 28, 2015, and June 29, 2014.
| June 26, 2016 |  | June 28, 2015 |  | June 29, 2014
| (in thousands)
Contractual interest coupon | $ | 63,053 |  |  | $ | 36,074 |  |  | $ | 26,248 |
Amortization of interest discount | 35,206 |  |  | 34,886 |  |  | 33,065 |
Amortization of issuance costs | 35,315 |  |  | 2,435 |  |  | 2,362 |
Amortization of interest rate contract | 359 |  |  | 113 |  |  | — |
Total interest cost recognized | $ | 133,933 |  |  | $ | 73,508 |  |  | $ | 61,675 |
The increase in interest expense during the fiscal year ended June 26, 2016 is primarily the result of the issuance of $1.0 billion Senior Notes in March 2015. The increase in amortization of issuance costs during the year ended June 26, 2016 is primarily due the amortization of bridge loan financing issuance costs of approximately $31.9 million.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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