Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments (Notes)

v3.3.0.814
Financial Instruments (Notes)
9 Months Ended
Sep. 26, 2015
Fair Value, Assets, Liabilities and Stockholders' Equity Measured on Recurring Basis [Abstract]  
Financial Instruments
Financial Instruments
Cash and Cash Equivalents and Marketable Securities
Cash and financial instruments measured and recorded at fair value on a recurring basis as of September 26, 2015 and December 27, 2014 are summarized below:
 
Total Fair
Value
 
Cash and
Cash
Equivalents
 
(In millions)
September 26, 2015
 
 
 
Cash
$
370

 
$
370

Level 2(2) (3)
 
 
 
Commercial paper
385

 
385

Total level 2
385

 
385

Total
$
755

 
$
755

 
Total Fair
Value
 
Cash and
Cash
Equivalents
 
Short-Term
Marketable
Securities
 
(In millions)
December 27, 2014
 
 
 
 
 
Cash
$
391

 
$
391

 
$

Level 1(1) (2)
 
 
 
 
 
Money market funds
4

 
4

 

Total level 1
4

 
4

 

Level 2(2) (3)
 
 
 
 
 
Commercial paper
618

 
410

 
208

Corporate bonds
27

 

 
27

Total level 2
645

 
410

 
235

Total
$
1,040

 
$
805

 
$
235



(1) 
The Company’s Level 1 assets are valued using quoted prices for identical instruments in active markets.
(2) 
The Company did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the quarter and nine months ended September 26, 2015 or the year ended December 27, 2014.
(3) 
The Company’s Level 2 short-term investments are valued using broker reports that utilize quoted market prices for identical or comparable instruments. Brokers gather observable inputs for all of the Company’s fixed income securities from a variety of industry data providers and other third-party sources.
Available-for-sale securities held by the Company as of September 26, 2015 consisted of commercial paper and as of December 27, 2014 also consisted of money market funds and corporate bonds. The amortized cost of available-for-sale securities approximated the fair value for all periods presented.
In addition to those amounts presented above, as of September 26, 2015 and December 27, 2014, the Company had approximately $1 million and $10 million, respectively, of available-for-sale investments in money market funds, used as collateral for leased buildings and letters of credit deposits, which were included in Other assets on the Company’s condensed consolidated balance sheets. These money market funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized costs are the same as the fair value for all periods presented. The Company is restricted from accessing these deposits.
Also in addition to those amounts presented above, as of September 26, 2015 and December 27, 2014, the Company had approximately $15 million and $16 million, respectively, of available-for-sale investments in mutual funds held in a Rabbi trust established for the Company's deferred compensation plan, which were also included in Other assets on the Company's condensed consolidated balance sheets. These mutual funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized cost approximates the fair value for all periods presented. The Company is restricted from accessing these investments.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis. The Company carries its financial instruments at fair value with the exception of its debt. Financial instruments that are not recorded at fair value are measured at fair value on a quarterly basis for disclosure purposes. The carrying amounts and estimated fair values of financial instruments not recorded at fair value are as follows:
 
September 26, 2015
 
December 27, 2014
 
Carrying
Amount
 
Estimated
Fair Value
 
Carrying
Amount
 
Estimated
Fair Value
 
(In millions)
Short-term debt (excluding capital leases)
$
230

 
$
230

 
$
172

 
$
173

Long-term debt (excluding capital leases)
$
2,025

 
$
1,341

 
$
2,025

 
$
1,858


The Company’s short-term and long-term debt are classified within Level 2. The fair value of the debt was estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The fair value of the Company’s accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing payment terms.
Hedging Transactions and Derivative Financial Instruments
Cash Flow Hedges
The following table shows the amount of gain (loss) included in accumulated other comprehensive income (loss), the amount of gain (loss) reclassified from accumulated other comprehensive income (loss) and included in earnings related to the foreign currency forward contracts designated as cash flow hedges and the amount of gain (loss) included in other income (expense), net, related to contracts not designated as hedging instruments, which was allocated in the condensed consolidated statements of operations:
 
Three Months Ended
 
Nine Months Ended
 
September 26,
2015
 
September 27,
2014
 
September 26,
2015
 
September 27,
2014
 
(In millions)
Foreign Currency Forward Contracts - gains (losses)
 
 
 
 
 
 
 
Contracts designated as cash flow hedging instruments
 
 
 
 
 
 
 
Other comprehensive income (loss)
$
(7
)
 
$
(2
)
 
$
(7
)
 
$
1

Cost of sales
(1
)
 

 
(2
)
 

Research and development
(3
)
 

 
(7
)
 
(2
)
Marketing, general and administrative
(2
)
 
(1
)
 
(5
)
 
$
(2
)
Contracts not designated as hedging instruments
 
 
 
 
 
 
 
Other income (expense), net
$
(2
)
 
$
(2
)
 
$
(3
)
 
$
(2
)

The Company’s foreign currency derivative contracts are classified within Level 2 because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
The following table shows the fair value amounts included in Other current assets should the foreign currency forward contracts be in a gain position or included in Other current liabilities should these contracts be in a loss position. As of September 26, 2015, the Company’s outstanding contracts were in a net loss position of $15 million. These amounts were recorded in the Company's condensed consolidated balance sheets as follows:
 
September 26,
2015
 
December 27,
2014
 
(In millions)
Foreign Currency Forward Contracts - gains (losses)
 
 
 
Contracts designated as cash flow hedging instruments
$
(13
)
 
$
(6
)
Contracts not designated as hedging instruments
$
(2
)
 
$
(1
)

For the foreign currency contracts designated as cash flow hedges, the ineffective portions of the hedging relationship and the amounts excluded from the assessment of hedge effectiveness were immaterial.
As of September 26, 2015 and December 27, 2014, the notional values of the Company’s outstanding foreign currency forward contracts were $197 million and $298 million, respectively. All the contracts mature within 12 months, and, upon maturity, the amounts recorded in Accumulated other comprehensive income (loss) are expected to be reclassified into earnings. The Company hedges its exposure to the variability in future cash flows for forecasted transactions over a maximum of 12 months.
Fair Value Hedges
The Company’s fair value hedge derivative contracts are classified within Level 2 because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets.
The following table shows the fair value amounts included in Other assets should the fair value hedge derivative contracts be in a gain position or included in Other long-term liabilities should these contracts be in a loss position. These amounts were recorded in the Company’s condensed consolidated balance sheets as follows:
 
 
September 26,
2015
 
December 27,
2014
 
 
(In millions)
Interest Rate Swap Contracts - gains (losses)
 
 
 
 
Contracts designated as fair value hedging instruments
 
$
5

 
$
3