(3) Investments

The Company’s marketable securities are all classified as available-for-sale within Current Assets in the Company’s Consolidated Balance Sheets. FASB has established three levels of inputs that may be used to measure fair value:

Level 1 Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 Observable inputs, other than Level 1 inputs in active markets, that are observable either directly

or indirectly; and

Level 3 Unobservable inputs for which there is little or no market data, which require the reporting entity

to develop its own assumptions.

The Company’s marketable securities valued using Level 1 inputs include highly liquid equity securities, for which quoted market prices are available. The Company’s bond portfolio is valued using Level 2 inputs. The Company’s bonds are valued using a combination of pricing for similar securities, recently executed transactions, cash flow models with yield curves and other pricing models utilizing observable inputs, which are considered Level 2 inputs.

For Level 2 investment valuation, the Company utilizes standard pricing procedures of its investment advisory firm(s) which include various third party pricing services. These procedures also require specific price monitoring practices as well as pricing review reports, valuation oversight and pricing challenge procedures to maintain the most accurate representation of investment fair market value. In addition, the Company engages an independent firm to value a sample of the Company’s municipal bond holdings annually in order to validate the investment’s assigned fair value.

The Company accrues interest on its bond portfolio throughout the life of each bond held. Dividends from the equity securities are recognized as received. Both interest and dividends are recognized in “Investment income (loss)” on the Company’s Consolidated Statements of Income.

Marketable securities, as of September 26, 2015 and December 27, 2014, consisted of:





(dollars in thousands) September 26, 2015	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Available-for-sale:
Level 1
Equity securities	$	1,198	$	6,207	$	-	$	7,405
Level 2
Municipal bonds		80,959		1,448		(64)		82,343
	$	82,157	$	7,655	$	(64)	$	89,748





(dollars in thousands) December 27, 2014	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
Available-for-sale:
Level 1
Equity securities	$	1,198	$	6,683	$	-	$	7,881
Level 2
Municipal bonds		64,561		1,613		(96)		66,078
	$	65,759	$	8,296	$	(96)	$	73,959

Maturities of marketable securities classified as available-for-sale at September 26, 2015, were as follows:


		Amortized		Fair
(dollars in thousands)		Cost		Value
Available-for-sale:
Due within one year	$	6,455	$	6,514
Due after one year through five years		53,775		54,803
Due after five years through ten years		20,729		21,026
Equity securities		1,198		7,405
	$	82,157	$	89,748

The Company also maintains a non-qualified supplemental executive retirement plan and a non-qualified pharmacist deferred compensation plan for certain of its associates which allows them to defer income to future periods. Participants in the plans earn a return on their deferrals based on mutual fund investments. The Company chooses to invest in the underlying mutual fund investments to offset the liability associated with the non-qualified deferred compensation plans. Such investments are reported on the balance sheet as SERP investments, are classified as trading securities and are carried at fair value using Level 1 inputs with gains and losses included in investment income. The changes in the underlying liability to the employee are recorded in operating expenses.