v2.4.0.8
Fair Value
 3 Months Ended
Sep. 27, 2013
Fair Value Disclosures [Abstract]  
Fair Value
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 September 27, 2013:
 
 
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:
 
 
 
 
 
 
 
Money market funds
$
692

 
$
—

 
$
—

 
$
692

Equity securities
3

 
—

 
—

 
3

Corporate bonds
—

 
214

 
—

 
214

Other debt securities
—

 
121

 
—

 
121

U.S. treasuries and agency bonds
—

 
84

 
—

 
84

Certificates of deposit
—

 
152

 
—

 
152

Commercial paper
—

 
908

 
—

 
908

Total cash equivalents and short-term investments
695

 
1,479

 
—

 
2,174

Restricted cash and investments:
 
 
 
 
 
 
 
Mutual Funds
82

 
—

 
—

 
82

Other debt securities
22

 
4

 
—

 
26

Auction rate securities
—

 
—

 
15

 
15

Derivative assets
—

 
4

 
—

 
4

Total assets
$
799

 
$
1,487

 
$
15

 
$
2,301

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$
—

 
$
—

 
$
—

 
$
—

Total liabilities
$
—

 
$
—

 
$
—

 
$
—

 
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
$
692

 
$
993

 
$
—

 
$
1,685

Short-term investments
3

 
486

 
—

 
489

Restricted cash and investments
104

 
4

 
—

 
108

Other current assets
—

 
—

 
—

 
—

Other assets, net
—

 
4

 
15

 
19

Total assets
$
799

 
$
1,487

 
$
15

 
$
2,301

Liabilities:
 
 
 
 
 
 
 
     Accrued expenses
$
—

 
$
—

 
$
—

 
$
—

Total liabilities
$
—

 
$
—

 
$
—

 
$
—




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 June 28, 2013:
 
 
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:
 
 
 
 
 
 
 
Money market funds
$
787

 
$
—

 
$
—

 
$
787

Equity securities
4

 
—

 
—

 
4

Commercial paper
—

 
655

 
—

 
655

Corporate bonds
—

 
96

 
—

 
96

U.S. treasuries and agency bonds
—

 
149

 
—

 
149

Certificates of deposit
—

 
211

 
—

 
211

Other debt securities
—

 
106

 
—

 
106

Total cash equivalents and short-term investments
791

 
1,217

 
—

 
2,008

Restricted cash and investments:
 
 
 
 
 
 
 
Mutual Funds
74

 
—

 
—

 
74

Other debt securities
22

 
5

 
—

 
27

Auction rate securities
—

 
—

 
15

 
15

Derivative assets
—

 
—

 
—

 
—

Total assets
$
887

 
$
1,222

 
$
15

 
$
2,124

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$
—

 
$
(1
)
 
$
—

 
$
(1
)
Total liabilities
$
—

 
$
(1
)
 
$
—

 
$
(1
)
 
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
$
787

 
$
741

 
$
—

 
$
1,528

Short-term investments
4

 
476

 
—

 
480

Restricted cash and investments
96

 
5

 
—

 
101

Other current assets
—

 
—

 
—

 
—

Other assets, net
—

 
—

 
15

 
15

Total assets
$
887

 
$
1,222

 
$
15

 
$
2,124

Liabilities:
 
 
 
 
 
 
 
     Accrued expenses
$
—

 
$
(1
)
 
$
—

 
$
(1
)
Total liabilities
$
—

 
$
(1
)
 
$
—

 
$
(1
)


 
Level 1 assets consist of securities 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 September 27, 2013, 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 September 27, 2013. 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 Company's auction rate securities are measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3). The fair value of the Company's auction rate securities as of September 27, 2013 and June 28, 2013 totaled $15 million and $15 million, respectively.
 
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 closing price as of 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 in order of maturity:
 
 
 
September 27, 2013
 
June 28, 2013
(Dollars in millions)
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
6.8% Senior Notes due October 2016
 
$
334

 
$
375

 
$
335

 
$
370

7.75% Senior Notes due December 2018
 
238

 
265

 
238

 
259

6.875% Senior Notes due May 2020
 
600

 
660

 
600

 
644

7.00% Senior Notes due November 2021
 
600

 
666

 
600

 
645

4.75% Senior Notes due June 2023
 
1,000

 
971

 
1,000

 
938

Other
 
1

 
1

 
4

 
4

 
 
2,773

 
2,938

 
2,777

 
2,860

Less short-term borrowings and current portion of long-term debt
 
(1
)
 
(1
)
 
(3
)
 
(3
)
Long-term debt, less current portion
 
$
2,772

 
$
2,937

 
$
2,774

 
$
2,857