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LONG-TERM DEBT AND OTHER BORROWINGS | 6 Months Ended
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Dec. 27, 2015
Debt Disclosure [Abstract] |
LONG-TERM DEBT AND OTHER BORROWINGS | LONG-TERM DEBT AND OTHER BORROWINGS Convertible Senior Notes In May 2011, the Company issued and sold $450 million in aggregate principal amount of 0.50% Convertible Senior Notes due May 2016 (the “2016 Notes”) at par. At the same time, the Company issued and sold $450 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 0.50% 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. In June 2012, with the acquisition of Novellus, the Company assumed $700 million in aggregate principal amount of 2.625% Convertible Senior Notes due May 2041 (the “2041 Notes,” and collectively with the 2016 Notes 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 debt 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, respectively. 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. The Company will settle any conversion of the Convertible Notes in cash up to the face value, and any amount in excess of face value will be settled in Common Stock. At December 27, 2015, the market value of the Company’s Common Stock was greater than 130% of the 2041 Notes conversion prices for 20 or more of the 30 consecutive trading days preceding the quarter end. As a result, the 2041 Notes are convertible at the option of the bondholder. The carrying amount of the 2041 Notes was classified in current liabilities and a portion of the equity component, representing the unamortized debt discount, was classified in temporary equity on the Company’s Condensed Consolidated Balance Sheets. Upon closure of the conversion period, the 2041 Notes not converted will be reclassified back into non-current liabilities, and the temporary equity will be reclassified into permanent equity. The conversion window closed for the 2016 Notes and 2018 Notes as of September 27, 2015. As such, the 2018 Notes were reclassified into non-current liabilities, and the temporary equity for the 2016 Notes and 2018 Notes was reclassified back into permanent equity. The 2016 Notes remain in current liabilities due to their scheduled maturity. During the period ending December 27, 2015, 83 of the Convertible Notes, with a total par value of $83,000, were settled at the note holders’ option. In conjunction with the conversion, 264 shares of common stock were issued. Additionally, during the period ended December 27, 2015, the Company received notice of note holders' intention to convert 10 additional Convertible Notes, the Company expects those conversions to settle in the period ended March 27, 2016. As of December 27, 2015 and June 28, 2015, the Convertible Notes consisted of the following:
| December 27, 2015 |  | June 28, 2015
2016 Notes |  | 2018 Notes |  | 2041 Notes |  | 2016 Notes |  | 2018 Notes |  | 2041 Notes
(in thousands, except years, percentages, conversion rate, and conversion price)
Carrying value, long-term | $ | — |  |  | $ | 410,067 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Carrying value, current portion | 443,704 |  |  | — |  |  | 522,249 |  |  | 435,493 |  |  | 402,320 |  |  | 520,313 |
Unamortized discount | 6,283 |  |  | 39,887 |  |  | 177,662 |  |  | 14,507 |  |  | 47,680 |  |  | 179,622 |
Principal amount | $ | 449,987 |  |  | $ | 449,954 |  |  | $ | 699,911 |  |  | $ | 450,000 |  |  | $ | 450,000 |  |  | $ | 699,935 |
Carrying amount of permanent equity component, net of tax | $ | 76,228 |  |  | $ | 104,886 |  |  | $ | 150,415 |  |  | $ | 61,723 |  |  | $ | 57,215 |  |  | $ | 148,487 |
Carrying amount of temporary equity component, net of tax | $ | — |  |  | $ | — |  |  | $ | 177,662 |  |  | $ | 14,507 |  |  | $ | 47,679 |  |  | $ | 179,622 |
Remaining amortization period (years) | 0.4 |  |  | 2.4 |  |  | 25.4 |  |  |  |  |  |  |
Effective interest rate on liability component | 4.29 | % |  | 5.27 | % |  | 4.28 | % |  |  |  |  |  |
Fair Value of Notes (Level 2) | $ | 583,858 |  |  | $ | 643,434 |  |  | $ | 1,634,292 |  |  |  |  |  |  |
Conversion rate (shares of common stock per $1,000 principal amount of notes) | 16.2107 |  |  | 16.2107 |  |  | 29.0921 |  |  |  |  |  |  |
Conversion price (per share of common stock) | $ | 61.69 |  |  | $ | 61.69 |  |  | $ | 34.37 |  |  |  |  |  |  |
If-converted value in excess of par value | $ | 136,426 |  |  | $ | 136,416 |  |  | $ | 936,978 |  |  |  |  |  |  |
Estimated share dilution using average quarterly stock price $74.11 per share | 1,223 |  |  | 1,223 |  |  | 10,918 |  |  |  |  |  |  |
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. At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. As of December 27, 2015, 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. 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 and will terminate upon the earlier of the maturity date or 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 in the three months ended December 27, 2015, to offset the impact of the 2016 note and 2018 note conversions during the period and received 79 shares of 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 December 27, 2015:
| 2016 Notes |  | 2018 Notes
(shares in thousands)
Warrants: |  |  |
Underlying shares | 7,295 |  |  | 7,295 |
Estimated share dilution using average quarterly stock price $74.11 per share | 421 |  |  | — |
Exercise price | $ | 69.83 |  |  | $ | 74.49 |
Expiration date range | August 15 - October 21, 2016 |  |  | August 15 - October 23, 2018 |
Convertible Note Hedge: |  |  |
Number of shares available from counterparties | 7,295 |  |  | 7,295 |
Exercise price | $ | 61.69 |  |  | $ | 61.69 |
Senior Notes On March 12, 2015, the Company completed a public offering of $500 million aggregate principal amount of the Company’s Senior Notes due March, 2020 (the “2020 Notes”) and $500 million aggregate principal amount of the Company’s Senior Notes due March, 2025 (the “2025 Notes” and, together with the 2020 Notes, the “Senior Notes”). The Company pays 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. 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. As of December 27, 2015 and June 28, 2015 the Senior Notes consisted of the following:
| December 27, 2015 |  | June 28, 2015
2020 Notes |  | 2025 Notes |  | 2020 Notes |  | 2025 Notes
(in thousands, except years)
Carrying value, long-term | $ | 497,348 |  |  | $ | 497,025 |  |  | $ | 497,053 |  |  | $ | 496,907 |
Unamortized discount | 2,652 |  |  | 2,975 |  |  | 2,947 |  |  | 3,093 |
Principal amount | $ | 500,000 |  |  | $ | 500,000 |  |  | $ | 500,000 |  |  | $ | 500,000 |
Remaining amortization period (years) | 4.2 |  |  | 9.2 |  |  |  |  |
Fair Value of Notes (Level 2) | $ | 484,030 |  |  | $ | 473,785 |  |  |  |  |
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 Senior Notes and the Convertible Notes during the three months ended December 27, 2015 and December 28, 2014.
| Three Months Ended |  | Six Months Ended
December 27, 2015 |  | December 28, 2014 |  | December 27, 2015 |  | December 28, 2014
(in thousands)
Contractual interest coupon | $ | 14,750 |  |  | $ | 6,562 |  |  | $ | 29,577 |  |  | $ | 13,124 |
Amortization of interest discount | 9,258 |  |  | 8,610 |  |  | 18,380 |  |  | 17,119 |
Amortization of issuance costs | 14,391 |  |  | 590 |  |  | 15,043 |  |  | 1,181 |
Amortization of interest rate contract | 95 |  |  | — |  |  | 189 |  |  | — |
Total interest cost recognized | $ | 38,494 |  |  | $ | 15,762 |  |  | $ | 63,189 |  |  | $ | 31,424 |
Term Loan Agreement On November 10, 2015, the Company entered into an unsecured term loan agreement with a syndicate of lenders (the "Term Loan Agreement"). The Term Loan Agreement provides for a $900 million senior unsecured term loan facility composed of two tranches; (i) a $375 million tranche of 3-year senior unsecured loans (the "3-Year Tranche") maturing on November 10, 2018; and (ii) a $525 million tranche of 5-year senior unsecured loans (the "5-Year Tranche") maturing on November 10, 2020. Interest on amounts borrowed under the 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 plus 1.000% and 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 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 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 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 Term Loan Agreement. The funding of the loans under the 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, the Company entered into an Amendment and Restatement Agreement (the “Restated Credit Agreement”), which amends and restates the Company's unsecured Credit Agreement, dated March 12, 2014. The Restated Credit Agreement provides for an increase to the Company's revolving unsecured credit facility, from $300 million to $750 million with a syndicate of lenders. It includes an option, subject to certain requirements, for the Company to request an increase in the facility of up to an additional $250 million, for a potential total commitment of $1 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 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 Term Loan Agreement. As of December 27, 2015, the Company had no borrowings outstanding under the credit facility and was in compliance with all financial covenants.

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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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