v2.4.0.6

Fair Value | 9 Months Ended
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Mar. 30, 2012
Fair Value |
Fair Value |
8. Fair Value Measurement of Fair Value Fair value is defined 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 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. Fair Value Hierarchy A fair value hierarchy is based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflects the Company’s own assumptions of market participant valuation (unobservable inputs). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value: Level 1 — Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2 — Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or Level 3 — Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement. The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate the Company’s or the counterparty’s non-performance risk is considered in determining the fair values of liabilities and assets, respectively. Items Measured at Fair Value on a Recurring Basis The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of March 30, 2012:
|  | Fair Value Measurements at Reporting Date Using |
(Dollars in millions) |  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Balance |
Assets: |  |  |  |  |  |  |  |  |
Commercial paper |  | $ | — |  | $ | 363 |  | $ | — |  | $ | 363 |
Money market funds |  | 1,115 |  | — |  | — |  | 1,115 |
U.S. treasuries and agency bonds |  | — |  | 95 |  | — |  | 95 |
Corporate bonds |  | — |  | 207 |  | — |  | 207 |
Other debt securities |  | — |  | 107 |  | — |  | 107 |
Total cash equivalents and short-term investments |  | 1,115 |  | 772 |  | — |  | 1,887 |
Restricted cash and investments: |  |  |  |  |  |  |  |  |
Mutual funds |  | 71 |  | — |  | — |  | 71 |
Other debt securities |  | 25 |  | 2 |  | — |  | 27 |
Auction rate securities |  | — |  | — |  | 15 |  | 15 |
Total assets |  | $ | 1,211 |  | $ | 774 |  | $ | 15 |  | $ | 2,000 |
Liabilities: |  |  |  |  |  |  |  |  |
Derivative liabilities |  | $ | — |  | $ | 3 |  | $ | — |  | $ | 3 |
Total liabilities |  | $ | — |  | $ | 3 |  | $ | — |  | $ | 3 |
|  | Fair Value Measurements at Reporting Date Using |
(Dollars in millions) |  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Balance |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,115 |  | $ | 364 |  | $ | — |  | $ | 1,479 |
Short-term investments |  | — |  | 408 |  | — |  | 408 |
Restricted cash and investments |  | 96 |  | 2 |  | — |  | 98 |
Other assets, net |  | — |  | — |  | 15 |  | 15 |
Total assets |  | $ | 1,211 |  | $ | 774 |  | $ | 15 |  | $ | 2,000 |
Liabilities: |  |  |  |  |  |  |  |  |
Accrued expenses |  | $ | — |  | $ | 3 |  | $ | — |  | $ | 3 |
Total liabilities |  | $ | — |  | $ | 3 |  | $ | — |  | $ | 3 |
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding accrued interest components, as of July 1, 2011:
|  | Fair Value Measurements at Reporting Date Using |
(Dollars in millions) |  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Balance |
Assets: |  |  |  |  |  |  |  |  |
Commercial paper |  | $ | — |  | $ | 1,729 |  | $ | — |  | $ | 1,729 |
Money market funds |  | 800 |  | — |  | — |  | 800 |
U.S. treasuries and agency bonds |  | — |  | 190 |  | — |  | 190 |
Certificates of deposit |  | — |  | 133 |  | — |  | 133 |
Corporate bonds |  | — |  | 116 |  | — |  | 116 |
Other debt securities |  | — |  | 96 |  | — |  | 96 |
Total cash equivalents and short-term investments |  | 800 |  | 2,264 |  | — |  | 3,064 |
Restricted cash and investments: |  |  |  |  |  |  |  |  |
Mutual funds |  | 81 |  | — |  | — |  | 81 |
Other debt securities |  | 19 |  | 2 |  | — |  | 21 |
Auction rate securities |  | — |  | — |  | 16 |  | 16 |
Derivative assets |  | — |  | 5 |  | — |  | 5 |
Total assets |  | $ | 900 |  | $ | 2,271 |  | $ | 16 |  | $ | 3,187 |
Liabilities: |  |  |  |  |  |  |  |  |
Derivative liabilities |  | $ | — |  | $ | (6 | ) | $ | — |  | $ | (6 | )
Total liabilities |  | $ | — |  | $ | (6 | ) | $ | — |  | $ | (6 | )
|  | Fair Value Measurements at Reporting Date Using |
(Dollars in millions) |  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Balance |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 800 |  | $ | 1,790 |  | $ | — |  | $ | 2,590 |
Short-term investments |  | — |  | 474 |  | — |  | 474 |
Restricted cash and investments |  | 100 |  | 2 |  | — |  | 102 |
Other current assets |  | — |  | 5 |  | — |  | 5 |
Other assets, net |  | — |  | — |  | 16 |  | 16 |
Total assets |  | $ | 900 |  | $ | 2,271 |  | $ | 16 |  | $ | 3,187 |
Liabilities: |  |  |  |  |  |  |  |  |
Accrued expenses |  | $ | — |  | $ | (6 | ) | $ | — |  | $ | (6 | )
Total liabilities |  | $ | — |  | $ | (6 | ) | $ | — |  | $ | (6 | )
Level 1 assets consist of money market funds and mutual funds for which quoted prices are available in an active market. The Company classifies items in Level 2 if the financial asset or liability is valued using observable inputs. The Company uses observable inputs including quoted prices in active markets for similar assets or liabilities. Level 2 assets include: agency bonds, corporate bonds, commercial paper, municipal bonds, certificates of deposit, international government securities, asset backed securities, mortgage backed securities and U.S. Treasuries. These debt investments are priced using observable inputs and valuation models which vary by asset class. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents and short-term investments. For the cash equivalents and short-term investments in the Company’s portfolio, multiple pricing sources are generally available. The pricing service uses inputs from multiple industry standard data providers or other third party sources and various methodologies, such as weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the pricing service against other independent sources and, as of March 30, 2012, has not found it necessary to make any adjustments to the prices obtained. The Company’s derivative financial instruments are also classified within Level 2. The Company’s derivative financial instruments consist of foreign currency forward exchange contracts. The Company recognizes derivative financial instruments in its condensed consolidated financial statements at fair value. The Company determines the fair value of these instruments by considering the estimated amount it would pay or receive to terminate these agreements at the reporting date. The Company’s Level 3 assets consist of auction rate securities with a par value of approximately $17 million, all of which are collateralized by student loans guaranteed by the Federal Family Education Loan Program. Beginning in fiscal year 2008, these securities failed to settle at auction and have continued to fail through March 30, 2012. Since there is no active market for these securities, the Company valued them using a discounted cash flow model. The valuation model is based on the income approach and reflects both observable and significant unobservable inputs. The table below presents a reconciliation of assets measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the nine months ended March 30, 2012:
(Dollars in millions) |  | Auction Rate Securities |
Balance at July 1, 2011 |  | $ | 16 |
Total net gains (losses) (realized and unrealized): |  |  |
Realized gains (losses)(1) |  | — |
Unrealized gains (losses)(2) |  | — |
Sales and Settlements |  | (1 | )
Balance at March 30, 2012 |  | $ | 15 |
(1) Realized gains (losses) on auction rate securities are recorded in Other, net in the Condensed Consolidated Statements of Operations. (2) Unrealized gains (losses) on auction rate securities are recorded as a separate component of Other comprehensive income (loss) in Accumulated other comprehensive income (loss), which is a component of Shareholders’ equity. Items Measured at Fair Value on a Non-Recurring Basis
|  | Fair Value Measurements Using |
(Dollars in millions) |  | Quoted Prices in Active Markets for Identical Instruments (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Balance |
Assets: |  |  |  |  |  |  |  |  |
Equity investment |  | $ | — |  | $ | — |  | $ | 5 |  | $ | 5 |
The Company enters into certain strategic investments for the promotion of business and strategic objectives. Strategic investments are included in Other assets, net in the Condensed Consolidated Balance Sheets, are recorded at cost and are periodically analyzed to determine whether or not there are indicators of impairment. The carrying value of the Company’s strategic investments at March 30, 2012 and July 1, 2011 totaled $21 million and $27 million, respectively. The Company sold certain strategic investments during the nine months ended March 30, 2012, and recorded a gain of $12 million in Other, net in the Condensed Consolidated Statements of Operations for the three and nine months ended March 30, 2012. There were no impairment charges recognized for the three months ended March 30, 2012. During the first quarter of fiscal year 2012, the Company determined that an equity investment accounted for under the cost method was other-than-temporarily impaired, and recognized a charge of $7 million, in order to write down the carrying amount of the investment to its estimated fair value. The amount was recorded in Other, net in the Condensed Consolidated Statements of Operations. There were no impairment charges recognized for the three and nine months ended April 1, 2011. Since there was no active market for the equity securities of the investee, the Company estimated fair value of the investee by using the market approach, which was then used to estimate the Company’s applicable portion of the fair value of its underlying intellectual property assets at the end of the third quarter of fiscal 2012. Other Fair Value Disclosures The Company’s debt is carried at amortized cost. The fair value of the Company’s debt is derived using the average of bid and ask prices from brokers on the date of valuation, which takes into account the yield curve, interest rates, and other observable inputs. Accordingly, these fair value measurements are categorized as Level 2. The following table presents the fair value and amortized cost of the Company’s debt and capital lease in order of maturity:
|  | March 30, 2012 |  | July 1, 2011 |
(Dollars in millions) |  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value |
Capital Lease |  | $ | — |  | $ | — |  | $ | 1 |  | $ | 1 |
6.375% Senior Notes due October 2011 |  | — |  | — |  | 559 |  | 561 |
10.0% Senior Secured Second-Priority Notes due May 2014 |  | 313 |  | 363 |  | 403 |  | 481 |
6.8% Senior Notes due October 2016 |  | 599 |  | 660 |  | 599 |  | 647 |
7.75% Senior Notes due December 2018 |  | 750 |  | 825 |  | 750 |  | 780 |
6.875% Senior Notes due May 2020 |  | 600 |  | 639 |  | 600 |  | 591 |
7.00% Senior Notes due November 2021 |  | 600 |  | 651 |  | 600 |  | 598 |
|  | 2,862 |  | 3,138 |  | 3,512 |  | 3,659 |
Less short-term borrowings and current portion of long-term debt |  | — |  | — |  | (560 | ) | (562 | )
Long-term debt, less current portion |  | $ | 2,862 |  | $ | 3,138 |  | $ | 2,952 |  | $ | 3,097 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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