Investments and Forward Contracts

6 Months Ended

Jan. 01, 2022

Investments, Debt and Equity Securities [Abstract]

Investments and Forward Contracts

Note 7. Investments and Forward Contracts

Short-Term Investments

As of January 1, 2022 the Company’s short-term investments of $1.7 million were comprised primarily of trading securities related to the deferred compensation plan, of which $0.4 million was invested in debt securities, $0.2 million was invested in money market instruments and $1.1 million was invested in equity securities.

As of July 3, 2021, the Company’s short-term investments of $1.6 million were comprised primarily of trading securities related to the deferred compensation plan, of which $0.3 million was invested in debt securities, $0.3 million was invested in money market instruments and $1.0 million was invested in equity securities.

Trading securities are reported at fair value, with the unrealized gains or losses resulting from changes in fair value recognized in the Company’s Consolidated Statements of Operations as a component of Interest income and other income, net.

Non-Designated Foreign Currency Forward Contracts

The Company has foreign subsidiaries that operate and sell the Company’s products in various markets around the world. As a result, the Company is exposed to foreign exchange risks. The Company utilizes foreign exchange forward contracts to manage foreign currency risk associated with foreign currency denominated

monetary assets and liabilities, primarily certain short-term intercompany receivables and payables, and to reduce the volatility of earnings and cash flows related to foreign-currency transactions. The Company does not use these foreign currency forward contracts for trading purposes.

As of January 1, 2022, the Company had forward contracts that were effectively closed but not settled with the counterparties by quarter end. Therefore, the fair value of these contracts of $1.8 million and $2.2 million is reflected as prepayments and other current assets and other current liabilities, respectively. As of July 3, 2021, the fair value of these contracts of $2.6 million and $1.4 million is reflected as prepayments and other current assets and other current liabilities, respectively.

The forward contracts outstanding and not effectively closed, with a term of less than 120 days, were transacted near quarter end; therefore, the fair value of the contracts is not significant. As of January 1, 2022 and July 3, 2021, the notional amounts of the forward contracts the Company held to purchase foreign currencies were $123.4 million and $114.0 million, respectively, and the notional amounts of forward contracts the Company held to sell foreign currencies were $25.5 million and $27.8 million, respectively.

The change in the fair value of these foreign currency forward contracts is recorded as gain or loss in the Company’s Consolidated Statements of Operations as a component of Interest income and other income, net. The cash flows related to the settlement of foreign currency forward contracts are classified as operating activities. The foreign exchange forward contracts incurred a loss of $0.7 million and $2.5 million for the three and six months ended January 1, 2022 and gains of $6.9 million and $13.3 million for the three and six months ended January 2, 2021