Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

v3.22.2.2
Financial Instruments
 9 Months Ended
Sep. 24, 2022
Investments, Debt and Equity Securities [Abstract]  
Fair Value Disclosures Financial Instruments
Fair Value Measurements
The Company’s financial instruments are measured and recorded at fair value on a recurring basis, except for non-marketable equity investments in privately-held companies. These equity investments are generally accounted for under the measurement alternative, defined as cost, less impairments, adjusted for subsequent observable price changes and are periodically assessed for impairment when events or circumstances indicate that a decline in value may have occurred.
Fair Value Hierarchy
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The guidance for fair value measurements requires that assets and liabilities carried at fair value be classified and disclosed in one of the following categories:
Level 1 — Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 — Unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.
Financial Instruments Recorded at Fair Value on a Recurring Basis
September 24, 2022 December 25, 2021
(In millions) Level 1 Level 2 Total Level 1 Level 2 Total
Cash equivalents
Money market funds $ 2,616  $ —  $ 2,616  $ 4  $ —  $ 4 
Commercial paper —  —  —  —  45  45 
U.S. Treasury and agency securities —  15  15  —  —  — 
Foreign government and agency securities —  25  25  —  —  — 
Short-term investments
Commercial paper —  868  868  —  880  880 
Time deposits and certificates of deposits —  50  50  —  193  193 
Asset-backed and mortgage-backed securities —  41  41  —  —  — 
U.S. Treasury and agency securities 620  —  620  —  —  — 
Foreign government and agency securities —  617  617  —  —  — 
Other non-current assets
Time deposits and certificates of deposits —  6  6  —  —  — 
Equity investments 11  —  11  66  —  66 
Deferred compensation plan investments 81  —  81  72  —  72 
Total assets measured at fair value $ 3,328  $ 1,622  $ 4,950  $ 142  $ 1,118  $ 1,260 
Deferred compensation plan investments are primarily mutual fund investments held in a Rabbi trust established to maintain the Company’s executive deferred compensation plan.
The following is a summary of cash equivalents and short-term investments:
September 24, 2022
Cost/ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value
(in millions)
Asset-backed and mortgage-backed securities $ 44  $ —  $ (3) $ 41 
Commercial paper 869  —  (1) 868 
Money market funds 2,616  —  —  2,616 
Time deposits and certificates of deposits 50  —  —  50 
U.S. Treasury and agency securities 640  —  (5) 635 
Foreign government and agency securities 642  —  —  642 
$ 4,861  $ —  $ (9) $ 4,852 
As of September 24, 2022, the Company did not have material available-for-sale debt securities which had been in a continuous unrealized loss position of more than twelve months.
The contractual maturities of investments classified as available-for-sale are as follows:
September 24, 2022 December 25, 2021
Amortized Cost Fair Value Amortized Cost Fair Value
(In millions) (In millions)
Due within 1 year $ 2,101  $ 2,098  $ 1,118  $ 1,118 
Due in 1 year through 5 years 107  104  —  — 
Due in 5 years and later 43  40  —  — 
$ 2,251  $ 2,242  $ 1,118  $ 1,118 
Financial Instruments Not Recorded at Fair Value
The Company carries its financial instruments at fair value except for its debt. The carrying amounts and estimated fair values of the Company’s debt are as follows:
  September 24, 2022 December 25, 2021
  Carrying
Amount		 Estimated
Fair Value		 Carrying
Amount		 Estimated
Fair Value
  (In millions)
Current portion of long-term debt, net $ —  $ —  $ 312  $ 326 
Long-term debt, net of current portion $ 2,466  $ 2,268  $ 1  $ 15 
The estimated fair value of the Company’s long-term debt is based on Level 2 inputs of quoted prices for the Company’s debt and comparable instruments in inactive markets.
The fair value of the Company’s accounts receivable, accounts payable and other short-term obligations approximate their carrying value based on existing terms.
Financial Instruments Measured at Fair Value on a Non-Recurring Basis
As of September 24, 2022, the Company had non-marketable securities in privately-held companies of $138 million, which were classified as Level 3 assets. The Company’s investments in non-marketable securities in privately-held companies are recorded using a measurement alternative that adjusts the securities to fair value when the Company recognizes an observable price adjustment or an impairment. The balance of non-marketable securities in privately-held companies as of December 25, 2021 was not material.
During the three and nine months ended September 24, 2022, the Company recognized a net loss of $3 million and $57 million, respectively, in Other income (expense) due to decreases in fair value of equity investments and non-marketable securities in privately-held companies.
Hedging Transactions and Derivative Financial Instruments
Foreign Currency Forward Contracts Designated as Accounting Hedges
The Company enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in currencies other than the U.S. Dollar. These contracts generally mature within 18 months and are designated as accounting hedges. As of September 24, 2022 and December 25, 2021, the notional value of the Company’s outstanding foreign currency forward contracts designated as cash flow hedges was $1.7 billion and $894 million, respectively. The fair value of these contracts, recorded as a liability, was $89 million as of September 24, 2022. The fair value of these contracts as of December 25, 2021 was not material.
Foreign Currency Forward Contracts Not Designated as Accounting Hedges
The Company also enters into foreign currency forward contracts to reduce the short-term effects of foreign currency fluctuations on certain receivables or payables denominated in currencies other than the U.S. Dollar. These forward contracts generally mature within 3 months and are not designated as accounting hedges. As of September 24, 2022 and December 25, 2021, the notional value of these outstanding contracts was $463 million and $291 million, respectively. The fair value of these contracts was not material as of September 24, 2022 and December 25, 2021.