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INVESTMENTS AND FAIR VALUE MEASUREMENTS | 3 Months Ended
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Mar. 30, 2025
Fair Value Disclosures [Abstract] |
INVESTMENTS AND FAIR VALUE MEASUREMENTS |
3. INVESTMENTS AND FAIR VALUE MEASUREMENTS
Strategic Investments Marketable Equity Securities Our short-term investments consist of marketable equity securities. As of March 30, 2025 and December 29, 2024, the fair value of our marketable equity securities totaled $124 million and $93 million, respectively. Gains recognized in other income, net on marketable equity securities were as follows:
In millions | Q1 2025 |  | Q1 2024 |  |  |  |
Net gains recognized during the period | $ | 31 |  |  | $ | 1 |  |  |  |  |
Less: Net gains recognized during the period on securities sold during the period | — |  |  | — |  |  |  |  |
Net unrealized gains recognized during the period on securities still held at the reporting date | $ | 31 |  |  | $ | 1 |  |  |  |  |
Non-Marketable Equity Securities As of March 30, 2025 and December 29, 2024, non-marketable equity securities, without readily determinable fair values, included in other assets, were $46 million and $26 million, respectively. Venture Funds We invest in three venture capital investment funds (the Funds), which are accounted for as equity-method investments. The aggregate carrying amount of the Funds, included in other assets, was $205 million and $201 million as of March 30, 2025 and December 29, 2024, respectively. We recorded net gains of $2 million and $6 million in Q1 2025 and Q1 2024, respectively, in other income, net. Our commitments to the Funds are as follows:
Dollars in millions | Capital commitments |  | Callable through date |  | Remaining callable as of March 30, 2025 (1)
Fund I | $ | 100 |  |  | April 2026 |  | $ | 3 |
Fund II | $ | 150 |  |  | July 2029 |  | $ | 42 |
Fund III | $ | 60 |  |  | December 2034 |  | $ | 47 |
_____________ (1)Fund I also had recallable distributions of approximately $10 million. Revenue recognized from transactions with our strategic investees was immaterial for both Q1 2025 and Q1 2024. Fair Value Measurements The following table presents the hierarchy for assets and liabilities measured at fair value on a recurring basis:
| March 30, 2025 |  | December 29, 2024
In millions | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds (cash equivalents) | $ | 927 |  |  | $ | — |  |  | $ | — |  |  | $ | 927 |  |  | $ | 931 |  |  | $ | — |  |  | $ | — |  |  | $ | 931 |
Marketable equity securities | 124 |  |  | — |  |  | — |  |  | 124 |  |  | 93 |  |  | — |  |  | — |  |  | 93 |
Other investments | — |  |  | — |  |  | 17 |  |  | 17 |  |  | — |  |  | — |  |  | 17 |  |  | 17 |
Deferred compensation plan assets | — |  |  | 70 |  |  | — |  |  | 70 |  |  | — |  |  | 70 |  |  | — |  |  | 70 |
Total assets measured at fair value | $ | 1,051 |  |  | $ | 70 |  |  | $ | 17 |  |  | $ | 1,138 |  |  | $ | 1,024 |  |  | $ | 70 |  |  | $ | 17 |  |  | $ | 1,111 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration liabilities | $ | — |  |  | $ | — |  |  | $ | 62 |  |  | $ | 62 |  |  | $ | — |  |  | $ | — |  |  | $ | 73 |  |  | $ | 73 |
Deferred compensation plan liability | — |  |  | 66 |  |  | — |  |  | 66 |  |  | — |  |  | 65 |  |  | — |  |  | 65 |
Total liabilities measured at fair value | $ | — |  |  | $ | 66 |  |  | $ | 62 |  |  | $ | 128 |  |  | $ | — |  |  | $ | 65 |  |  | $ | 73 |  |  | $ | 138 |
Marketable equity securities are measured at fair value based on quoted trade prices in active markets. Other investments, included in other assets, consist of convertible notes, for which we elected the fair value option. Fair value is derived using a probability-weighted scenario approach. Changes in fair value are recognized in other income, net. Deferred compensation plan assets consist primarily of investments in life insurance contracts carried at cash surrender value, which reflects the net asset value of the underlying publicly traded mutual funds. We corroborate the fair value of our holdings, comparing valuations obtained from our investment service provider to valuations reported by our asset custodians, validating pricing sources and models, and reviewing key model inputs. Contingent Consideration Liabilities We reassess the fair value of contingent consideration related to acquisitions on a quarterly basis, with changes in the fair value, subsequent to the acquisition date, recognized in selling, general and administrative expense. Changes in the estimated fair value of our contingent consideration liabilities during Q1 2025 were as follows:
In millions |
Balance as of December 29, 2024 | $ | 73 |
Change in estimated fair value | (11) |
Balance as of March 30, 2025 | $ | 62 |
The fair value of our contingent consideration liability related to GRAIL was $61 million and $71 million as of March 30, 2025 and December 29, 2024, respectively, of which $59 million and $70 million, respectively, was included in other long-term liabilities, with the remaining balances included in accrued liabilities. The contingent value rights issued as part of the GRAIL acquisition entitle the holders to receive future cash payments on a quarterly basis (Covered Revenue Payments) representing a pro rata portion of certain GRAIL-related revenues (Covered Revenues) each year for a 12-year period (through August 2033). As defined in the Contingent Value Rights Agreement, this will reflect a 2.5% payment right to the first $1 billion of revenue each year for 12 years. Revenue above $1 billion each year will be subject to a 9% contingent payment right during this same period. Covered Revenues for the periods Q4 2024 and Q4 2023 were $38 million and $30 million, respectively, driven primarily by sales of GRAIL’s Galleri test. Covered Revenue Payments relating to such periods were $360,000 and $284,000, respectively, which were paid in Q1 2025 and Q1 2024, respectively. We use a Monte Carlo simulation to estimate the fair value of our GRAIL contingent consideration. Estimates and assumptions used in the Monte Carlo simulation include forecasted revenues for GRAIL, a revenue risk premium, a revenue volatility estimate, an operational leverage ratio and a counterparty credit spread. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Subsequent to the GRAIL Spin-Off, we no longer have access to GRAIL management’s forecasts. Therefore, we rely on information made public by GRAIL and information published in analyst reports to estimate forecasted revenues through August 2033. To estimate the liability as of March 30, 2025, we selected a revenue risk premium of 5%, derived from reconciling our forecasted revenues for GRAIL to GRAIL’s market capitalization based on a 10-day trailing average. We used a 10-day trailing average in Q1 2025, instead of a 60-day trailing average as used in prior periods, given the volatility in GRAIL’s market capitalization at the beginning of Q1 2025. The assumptions used in estimating the fair value of our contingent consideration liability related to GRAIL are inherently subject to uncertainty and we note that small changes in these assumptions could have a significant impact on the concluded value. For example, an increase or decrease of 20%, in each year, to the forecasted revenues would have resulted in an increase and a decrease, respectively, of $15 million in the liability as of March 30, 2025. Additionally, an increase or decrease of 250 basis points to the selected revenue risk premium would have resulted in a decrease of $10 million and an increase of $13 million, respectively. We expect certain levels of volatility in the GRAIL contingent consideration liability are possible in future periods.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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