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FINANCIAL INSTRUMENTS | 9 Months Ended
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Mar. 27, 2022
Fair Value Disclosures [Abstract] |
FINANCIAL INSTRUMENTS | FINANCIAL INSTRUMENTS The Company maintains an investment portfolio of various holdings, types, and maturities. The Company’s mutual funds, which are related to the Company’s obligations under the deferred compensation plan, are classified as trading securities. Investments classified as trading securities are recorded at fair value based upon quoted market prices. Differences between the cost and fair value of trading securities are recognized as other income (expense), net in the Condensed Consolidated Statements of Operations. All of the Company’s debt securities are classified as available-for-sale and consequently are recorded in the Condensed Consolidated Balance Sheets at fair value with unrealized gains or losses associated with market valuation changes, unrelated to credit losses, reported as a separate component of accumulated other comprehensive income (loss), net of tax; and credit losses, if any, recognized as other income (expense), net in the Condensed Consolidated Statements of Operations. The Company periodically invests in equity securities. For equity investments that do not have a readily determinable fair value, the Company records them using either 1) the measurement alternative which measures the equity investments at cost minus impairment, if any, plus or minus changes resulting from qualifying observable price changes; or 2) the equity method whereby the Company recognizes its proportional share of the income or loss from the equity method investment on a one-quarter lag. The equity method is utilized when the Company does not have the ability to control the investee but is deemed to have the ability to exercise significant influence over the investee’s operating or financial policies. For equity investments that have a readily determinable fair value, the Company records them at fair market value on a recurring basis based upon quoted market prices. Realized and unrealized gains and losses resulting from application of the measurement alternative, the impact of the application of the equity method to the Company’s equity investments, and recognition of changes in fair market value, as applicable, are recognized as other income (expense), net in the Condensed Consolidated Statements of Operations. Fair Value The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability. A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The level of an asset or liability in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories: Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities with sufficient volume and frequency of transactions. Level 2: Valuations based on observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or model-derived valuations techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Valuations based on unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities and based on non-binding, broker-provided price quotes and may not have been corroborated by observable market data. The Company engages with pricing vendors to provide fair values for a majority of its Level 1 and Level 2 investments. The vendors provide either a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Significant observable inputs include interest rates and yield curves observable at commonly quoted intervals, volatility and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the foreign currency rates, forward rate curves, currency volatility and interest rates and considers nonperformance risk of the Company and its counterparties. The Company’s primary financial instruments include its cash, cash equivalents, investments, restricted cash and investments, long-term investments, accounts receivable, accounts payable, long-term debt and leases, and foreign currency related derivative instruments. The estimated fair value of cash, accounts receivable, and accounts payable approximates their carrying value due to the short period of time to their maturities. The estimated fair values of lease obligations approximate their carrying value as the majority of these obligations have interest rates that adjust to market rates on a periodic basis. Refer to Note 12 - Long-Term Debt and Other Borrowings for additional information regarding the fair value of the Company’s senior notes. Investments Equity Investments measured at fair value on a non-recurring basis As of March 27, 2022, and June 27, 2021, equity investments of $121.8 million and $117.3 million, respectively, were recognized in other assets in the Condensed Consolidated Balance Sheets. With the exception of one equity investee that became publicly traded during the nine months ended March 27, 2022, net gains resulting from the application of the measurement alternative to the Company’s equity investments were immaterial for the three and nine months ended March 27, 2022, and March 28, 2021. Refer to Note 5 - Other Income (Expense), net for additional information regarding the gain associated with an equity investee that became publicly traded in the nine months ended March 27, 2022. Additionally, following the equity investee becoming publicly traded, the Company began measuring the investment at fair market value on a recurring basis in the category corporate equities. Debt and Equity Investments measured at fair value on a recurring basis The following tables set forth the Company’s cash, cash equivalents, investments, restricted cash and investments, and other assets measured at fair value on a recurring basis as of March 27, 2022, and June 27, 2021:
| March 27, 2022
|  |  |  |  |  |  |  |  | (Reported Within)
| Cost |  | Unrealized Gain |  | Unrealized (Loss) |  | Fair Value |  | Cash and Cash Equivalents |  | Investments |  | Restricted Cash & Investments |  | Other Assets
| (in thousands)
Cash | $ | 1,217,415 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,217,415 |  |  | $ | 1,216,406 |  |  | $ | — |  |  | $ | 1,009 |  |  | $ | — |
Time deposits | 2,228,391 |  |  | — |  |  | — |  |  | 2,228,391 |  |  | 1,978,364 |  |  | — |  |  | 250,027 |  |  | — |
Level 1: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds | 999,949 |  |  | — |  |  | — |  |  | 999,949 |  |  | 999,949 |  |  | — |  |  | — |  |  | — |
Corporate equities | 3,000 |  |  | 63,634 |  |  | — |  |  | 66,634 |  |  | — |  |  | — |  |  | — |  |  | 66,634 |
Mutual funds | 95,527 |  |  | 15,883 |  |  | (339) |  |  | 111,071 |  |  | — |  |  | — |  |  | — |  |  | 111,071 |
Level 1 Total | 1,098,476 |  |  | 79,517 |  |  | (339) |  |  | 1,177,654 |  |  | 999,949 |  |  | — |  |  | — |  |  | 177,705 |
Level 2: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Corporate notes and bonds | 161,947 |  |  | — |  |  | (1,875) |  |  | 160,072 |  |  | — |  |  | 160,072 |  |  | — |  |  | — |
Level 2 Total | 161,947 |  |  | — |  |  | (1,875) |  |  | 160,072 |  |  | — |  |  | 160,072 |  |  | — |  |  | — |
Total | $ | 4,706,229 |  |  | $ | 79,517 |  |  | $ | (2,214) |  |  | $ | 4,783,532 |  |  | $ | 4,194,719 |  |  | $ | 160,072 |  |  | $ | 251,036 |  |  | $ | 177,705 |
| June 27, 2021
|  |  |  |  |  |  |  |  | (Reported Within)
| Cost |  | Unrealized Gain |  | Unrealized (Loss) |  | Fair Value |  | Cash and Cash Equivalents |  | Investments |  | Restricted Cash & Investments |  | Other Assets
| (in thousands)
Cash | $ | 875,738 |  |  | $ | — |  |  | $ | — |  |  | $ | 875,738 |  |  | $ | 873,278 |  |  | $ | — |  |  | $ | 2,460 |  |  | $ | — |
Time deposits | 1,548,874 |  |  | — |  |  | — |  |  | 1,548,874 |  |  | 1,298,847 |  |  | — |  |  | 250,027 |  |  | — |
Level 1: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds | 2,246,138 |  |  | — |  |  | — |  |  | 2,246,138 |  |  | 2,246,138 |  |  | — |  |  | — |  |  | — |
U.S. Treasury and agencies | 204,743 |  |  | 96 |  |  | (47) |  |  | 204,792 |  |  | — |  |  | 204,792 |  |  | — |  |  | — |
Mutual funds | 80,694 |  |  | 15,510 |  |  | (33) |  |  | 96,171 |  |  | — |  |  | — |  |  | — |  |  | 96,171 |
Level 1 Total | 2,531,575 |  |  | 15,606 |  |  | (80) |  |  | 2,547,101 |  |  | 2,246,138 |  |  | 204,792 |  |  | — |  |  | 96,171 |
Level 2: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government-sponsored enterprises | 3,498 |  |  | 7 |  |  | — |  |  | 3,505 |  |  | — |  |  | 3,505 |  |  | — |  |  | — |
Foreign government bonds | 32,995 |  |  | 21 |  |  | (4) |  |  | 33,012 |  |  | — |  |  | 33,012 |  |  | — |  |  | — |
Corporate notes and bonds | 1,043,308 |  |  | 2,247 |  |  | (457) |  |  | 1,045,098 |  |  | — |  |  | 1,045,098 |  |  | — |  |  | — |
Mortgage backed securities — residential | 5,623 |  |  | 54 |  |  | — |  |  | 5,677 |  |  | — |  |  | 5,677 |  |  | — |  |  | — |
Mortgage backed securities — commercial | 18,830 |  |  | 17 |  |  | (59) |  |  | 18,788 |  |  | — |  |  | 18,788 |  |  | — |  |  | — |
Level 2 Total | 1,104,254 |  |  | 2,346 |  |  | (520) |  |  | 1,106,080 |  |  | — |  |  | 1,106,080 |  |  | — |  |  | — |
Total | $ | 6,060,441 |  |  | $ | 17,952 |  |  | $ | (600) |  |  | $ | 6,077,793 |  |  | $ | 4,418,263 |  |  | $ | 1,310,872 |  |  | $ | 252,487 |  |  | $ | 96,171 |
The Company accounts for its investment portfolio at fair value. Realized gains (losses) for investment sales are specifically identified. Management assesses the fair value of investments in debt securities that are not actively traded through consideration of interest rates and their impact on the present value of the cash flows to be received from the investments. The Company evaluates its investments with fair value less than amortized cost by first considering whether the Company has the intent to sell the security or whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. In either such situation, the difference between fair value and amortized cost is recognized as a loss in the income statement. Where such sales are not likely to occur, the Company considers whether a portion of the loss is the result of a credit loss. To the extent such losses are the result of credit losses, those amounts are recognized in the income statement. All other differences between fair value and amortized cost are recognized in other comprehensive income. No such losses were recognized through the income statement during the three and nine months ended March 27, 2022 and March 28, 2021. Gross realized gains/(losses) from sales of investments were insignificant in the three and nine months ended March 27, 2022 and March 28, 2021. The following is an analysis of the Company’s cash, cash equivalents, investments, and restricted cash and investments in unrealized loss positions:
| March 27, 2022
| Unrealized Losses Less than 12 Months |  | Unrealized Losses 12 Months or Greater |  | Total
| Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss
| (in thousands)
Mutual funds | 7,048 |  |  | (197) |  |  | 1,735 |  |  | (142) |  |  | 8,783 |  |  | (339) |
Corporate notes and bonds | 158,942 |  |  | (1,875) |  |  | — |  |  | — |  |  | 158,942 |  |  | (1,875) |
| $ | 165,990 |  |  | $ | (2,072) |  |  | $ | 1,735 |  |  | $ | (142) |  |  | $ | 167,725 |  |  | $ | (2,214) |
The amortized cost and fair value of cash equivalents, investments, and restricted investments with contractual maturities are as follows as of March 27, 2022:
| Cost |  | Fair Value
| (in thousands)
Due in one year or less | $ | 3,279,093 |  |  | $ | 3,278,694 |
Due after one year through five years | 111,194 |  |  | 109,718 |
| $ | 3,390,287 |  |  | $ | 3,388,412 |
The Company has the ability, if necessary, to liquidate its investments in order to meet the Company’s liquidity needs in the next 12 months. Accordingly, those investments with contractual maturities greater than 12 months from the date of purchase nonetheless are classified as short-term on the accompanying Condensed Consolidated Balance Sheets. Derivative Instruments and Hedging The Company carries derivative financial instruments (“derivatives”) on its Condensed Consolidated Balance Sheets at their fair values. The Company enters into foreign currency forward contracts and foreign currency options with financial institutions with the primary objective of reducing volatility of earnings and cash flows related to foreign currency exchange rate fluctuations. In addition, the Company enters into interest rate swap arrangements to manage interest rate risk. The counterparties to these derivatives are large global financial institutions that the Company believes are creditworthy, and therefore, it does not consider the risk of counterparty nonperformance to be material. Under the master netting agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. However, the Company has elected to present the derivative assets and derivative liabilities on a gross basis on its balance sheet. As of March 27, 2022 and June 27, 2021, the potential effect of rights of offset associated with the above foreign exchange and interest rate contracts would be immaterial to the Condensed Consolidated Balance Sheets. Cash Flow Hedges The Company’s financial position is routinely subjected to market risk associated with foreign currency exchange rate fluctuations on non-U.S. dollar transactions or cash flows. The Company’s policy is to mitigate the foreign exchange risk arising from the fluctuations in the value of these non-U.S. dollar denominated transactions or cash flows through a foreign currency cash flow hedging program, using forward contracts and foreign currency options that generally expire within 12 months and no later than 24 months. These hedge contracts are designated as cash flow hedges and are carried on the Company’s balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income (loss) and subsequently recognized in revenue/expense in the same period the hedged items affect earnings. In addition, the Company has entered into interest rate swap agreements to hedge against the variability of cash flows due to changes in certain benchmark interest rates on fixed rate debt. These instruments are designated as cash flow hedges at inception and are settled in conjunction with the issuance of debt. The effective portion of the contracts’ gains or losses is included in accumulated other comprehensive income (loss) and is amortized into income as the hedged item affects earnings. At inception and at each quarter-end, hedges are tested prospectively and retrospectively for effectiveness using regression analysis. Changes in the fair value of foreign exchange contracts due to changes in time value are included in the assessment of effectiveness. To qualify for hedge accounting, the hedge relationship must meet criteria relating to both the derivative instrument and the hedged item. These criteria include identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and how the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows will be measured. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be tested to demonstrate an expectation of providing highly effective offsetting changes to future cash flows on hedged transactions. When derivative instruments are designated and qualify as effective cash flow hedges, the Company recognizes effective changes in the fair value of the hedging instrument within accumulated other comprehensive income (loss) until the hedged exposure is realized. Consequently, the Company’s results of operations are not subject to fluctuation as a result of changes in the fair value of the derivative instruments. If hedges are not highly effective or if the Company does not believe that the underlying hedged forecasted transactions will occur, the Company may not be able to account for its derivative instruments as cash flow hedges. If this were to occur, future changes in the fair values of the Company’s derivative instruments would be recognized in earnings. Additionally, related amounts previously recorded in other comprehensive income would be reclassified to earnings immediately. There were no material gains or losses during the three and nine months ended March 27, 2022 and March 28, 2021 associated with forecasted transactions that did not occur. As of March 27, 2022 and June 27, 2021, the fair value of outstanding cash flow hedges was not material. Additionally, as of March 27, 2022, the Company had an immaterial net gain or loss accumulated in other comprehensive income, net of tax, related to foreign exchange cash flow hedges and interest rate contracts which it expects to reclassify from other comprehensive income into earnings over the next 12 months. The following table provides the total notional value of cash flow hedge instruments outstanding as of March 27, 2022:
| March 27, 2022
| (In thousands)
Buy Contracts | $ | 432,352 |
Sell Contracts | 260,210 |
The effect of derivative instruments designated as cash flow hedges on the Company’s Condensed Consolidated Statements of Operations, including accumulated other comprehensive income (“AOCI”), was as follows:
|  | Three Months Ended |  | Nine Months Ended
| March 27, 2022 |  | March 27, 2022
| Location of Gain or (Loss) Recognized in or Reclassified into Net Income | Gain (Loss) Recognized in AOCI |  | Gain (Loss) Reclassified from AOCI into Net Income |  | Gain (Loss) Recognized in AOCI |  | Gain (Loss) Reclassified from AOCI into Net Income
Derivatives in Cash Flow Hedging Relationships | (in thousands)
Foreign Exchange Contracts | Revenue | $ | 16,260 |  |  | $ | 10,383 |  |  | $ | 30,701 |  |  | $ | 26,751 |
Foreign Exchange Contracts | Cost of goods sold | (3,840) |  |  | (3,752) |  |  | (13,974) |  |  | (6,620) |
Foreign Exchange Contracts | Research and Development | — |  |  | (3) |  |  | (1,247) |  |  | (3) |
Foreign Exchange Contracts | Selling, general, and administrative | (191) |  |  | (524) |  |  | (3,602) |  |  | (1,071) |
Interest Rate Contracts | Other income (expense), net | — |  |  | (1,062) |  |  | — |  |  | (3,170) |
|  | $ | 12,229 |  |  | $ | 5,042 |  |  | $ | 11,878 |  |  | $ | 15,887 |
|  | Three Months Ended |  | Nine Months Ended
| March 28, 2021 |  | March 28, 2021
| Location of Gain or (Loss) Recognized in or Reclassified into Income | Gain (Loss) Recognized in AOCI |  | (Loss) Gain Reclassified from AOCI into Net Income |  | Gain Recognized in AOCI |  | (Loss) Gain Reclassified from AOCI into Net Income
Derivatives in Cash Flow Hedging Relationships | (in thousands)
Foreign Exchange Contracts | Revenue | $ | 15,285 |  |  | $ | (1,323) |  |  | $ | 6,948 |  |  | $ | (3,598) |
Foreign Exchange Contracts | Cost of goods sold | (3,473) |  |  | 1,355 |  |  | 3,429 |  |  | 3,073 |
Foreign Exchange Contracts | Research and Development | (1,319) |  |  | — |  |  | 950 |  |  | — |
Foreign Exchange Contracts | Selling, general, and administrative | (1,741) |  |  | 1,326 |  |  | 4,056 |  |  | 2,649 |
Interest Rate Contracts | Other income (expense), net | — |  |  | (962) |  |  | — |  |  | (2,871) |
|  | $ | 8,752 |  |  | $ | 396 |  |  | $ | 15,383 |  |  | $ | (747) |
Balance Sheet Hedges The Company also enters into foreign currency forward contracts to hedge fluctuations associated with foreign currency denominated monetary assets and liabilities, primarily cash, third-party accounts receivable, accounts payable, and intercompany receivables and payables. These forward contracts are not designated for hedge accounting treatment. Therefore, the change in the carrying value of these derivatives is recorded as a component of other income (expense), net and offsets the change in fair value of the foreign currency denominated assets and liabilities related to remeasurement, which are also recorded in other income (expense), net. As of March 27, 2022 and June 27, 2021, the fair value of outstanding balance sheet hedges was not material. The following table provides the total notional value of balance sheet hedge instruments outstanding as of March 27, 2022:
| March 27, 2022
| (In thousands)
Buy Contracts | $ | 291,892 |
Sell Contracts | 290,401 |
The effect of the Company’s balance sheet hedge derivative instruments on the Company’s Condensed Consolidated Statements of Operations was as follows:
|  | Three Months Ended |  | Nine Months Ended
|  | March 27, 2022 |  | March 28, 2021 |  | March 27, 2022 |  | March 28, 2021
Derivatives Not Designated as Hedging Instruments: | Location of Gain Recognized in Income | Gain Recognized in Net Income |  | Gain Recognized in Net Income |  | Gain Recognized in Net Income |  | Gain Recognized in Net Income
|  | (in thousands)
Foreign Exchange Contracts | Other income (expense), net | $ | 1,850 |  |  | $ | 2,992 |  |  | $ | 11,787 |  |  | $ | 6,895 |
Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, restricted cash and investments, trade accounts receivable, and derivative financial instruments used in hedging activities. Cash is placed on deposit at large global financial institutions. Such deposits may be in excess of insured limits. Management believes that the financial institutions that hold the Company’s cash are creditworthy and, accordingly, minimal credit risk exists with respect to these balances. The Company’s overall portfolio of available-for-sale securities must maintain an average minimum rating of “AA-” or “Aa3” as rated by Standard and Poor’s, Fitch Ratings, or Moody’s Investor Services. To ensure diversification and minimize concentration, the Company’s policy limits the amount of credit exposure with any one financial institution or commercial issuer. The Company is exposed to credit losses in the event of nonperformance by counterparties on foreign currency and interest rate hedge contracts that are used to mitigate the effect of exchange rate and interest rate fluctuations, and on contracts related to structured share repurchase arrangements. These counterparties are large global financial institutions, and, to date, no such counterparty has failed to meet its financial obligations to the Company. Credit risk evaluations, including trade references, bank references, and Dun & Bradstreet ratings, are performed on all new customers and the Company monitors its customers’ financial condition and payment performance. In general, the Company does not require collateral on sales.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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