Fair Value Measurements

9 Months Ended

Apr. 02, 2022

Note 5. Fair Value Measurements

We determine fair value based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:


Level 1:			Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:			Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3:			Inputs are unobservable inputs based on our assumptions.

The fair value of our Level 1 financial instruments, such as money market funds and U.S. Treasury securities, which are traded in active markets, is based on quoted market prices for identical instruments. The fair value of our Level 2 fixed income securities is obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market data or inputs corroborated by observable market data. Our marketable securities are held by custodians who obtain investment prices from a third-party pricing provider that incorporates standard inputs in various asset price models. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our pricing service against fair values obtained from another independent source.

Financial assets measured at fair value on a recurring basis are summarized below (in millions):


	Level 1		Level 2		Level 3		Total
April 2, 2022: (1)
Assets:
Cash equivalents:

Commercial paper	$	—	$	291.9	$	—	$	291.9
Corporate debt securities	—		10.2		—		10.2
Money market funds	178.4		—		—		178.4
U.S. Treasury securities	500.4		—		—		500.4




Short-term investments:
Certificates of deposit	—		11.3		—		11.3
Commercial paper	—		99.3		—		99.3

Corporate debt securities	—		643.1		—		643.1
Municipal bonds	—		1.0		—		1.0


U.S. Agency securities	—		64.0		—		64.0
U.S. Treasury securities	615.1		—		—		615.1
Total assets	$	1,293.9	$	1,120.8	$	—	$	2,414.7

(1) Excludes $149.4 million in cash held in our bank accounts as of April 2, 2022.


	Level 1		Level 2		Level 3		Total
July 3, 2021: (1)
Assets:
Cash equivalents:
Commercial paper	$	—	$	7.5	$	—	$	7.5
Corporate debt securities	—		7.0		—		7.0
Money market funds	631.5		—		—		631.5


Short-term investments:
Certificates of deposit	—		28.5		—		28.5
Commercial paper	—		136.7		—		136.7

Corporate debt securities	—		625.9		—		625.9
Municipal bonds	—		1.0		—		1.0


U.S. Agency securities	—		29.3		—		29.3
U.S. Treasury securities	350.3		—		—		350.3
Total assets	$	981.8	$	835.9	$	—	$	1,817.7

(1) Excludes $128.3 million in cash held in our bank accounts as of July 3, 2021.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

We report our financial instruments at fair value with the exception of the 2028 Notes, 2026 Notes and the 2024 Notes. The estimated fair value of the notes was determined based on the trading price of the notes as of the last day of trading for the period. We consider the fair value of the notes to be a Level 2 measurement as they are not actively traded in markets.

The carrying amounts and estimated fair values of the 2028 Notes, 2026 Notes and the 2024 Notes are as follows for the periods presented (in millions):


	April 2, 2022				July 3, 2021
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
2028 Notes	$	626.8	$	831.3	$	—	$	—
2026 Notes	820.8		1,208.0		789.8		1,146.1
2024 Notes	406.1		728.4		390.7		669.3
	$	1,853.7	$	2,767.7	$	1,180.5	$	1,815.4

Assets Measured at Fair Value on a Non-Recurring Basis

We periodically review our intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. If not recoverable, an impairment loss would be calculated based on the excess of the carrying amount over the fair value.

Management utilizes various valuation methods, including an income approach, a market approach and a cost approach, to estimate the fair value of intangibles and other long-lived assets. During the annual impairment testing performed in the fourth quarter of fiscal 2021, we concluded that our intangible and other long-lived assets were not impaired. We review our intangible and other long-lived assets for impairment at least annually in the fourth quarter of each fiscal year, absent any interim indicators of impairment. There were no indicators of impairment during the nine months ended April 2, 2022.

- 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 + Details