Fair Value Measurements

Under our investment management strategy, we use cash holdings to purchase investment grade securities that are diversified among security types, industries and issuers. Each of the investments within our investment portfolio is measured at fair value, and is recorded within cash equivalents, short-term investments, and long-term investments in our consolidated balance sheets. With the exception of our mutual fund investments held in our supplemental retirement plan, all of our investments are classified as available-for-sale securities. Investments held in our supplemental retirement plan are classified as trading securities. Our investments primarily consist of municipal debt securities, commercial paper, corporate bonds and United States agency securities. In addition to the security types noted above, our cash and cash equivalents also consist of highly-liquid money market funds. Consistent with our investment policy, none of the municipal debt investments that we hold are supported by letters of credit or standby purchase agreements.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. We minimize the use of unobservable inputs and use observable market data, if available, when determining fair value. We classify our inputs to measure fair value using the following three-level hierarchy:

Level 1: Quoted prices in active markets at the measurement date for identical assets and liabilities.

Level 2: Prices may be based upon quoted prices in active markets or inputs not quoted on active markets but are corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

Financial assets and liabilities carried at fair value are classified below (in thousands):



	December 27, 2013
	Level 1	Level 2	Level 3	Total
Assets:
Investments held in supplemental retirement plan (1)	$2,316	$—	$—	$2,316
Money market funds (2)	2,813	—	—	2,813
U.S. agency securities (2), (3), (4)	58,047	—	—	58,047
Commercial paper (2), (3), (4)	—	20,618	—	20,618
Corporate bonds (3), (4)	—	123,953	—	123,953
Municipal debt securities (3), (4)	—	273,407	—	273,407
Total	$63,176	$417,978	$—	$481,154

Liabilities:
Investments held in supplemental retirement plan (5)	$2,316	$—	$—	$2,316
Total	$2,316	$—	$—	$2,316



	September 27, 2013
	Level 1	Level 2	Level 3	Total
Assets:
Investments held in supplemental retirement plan (1)	$2,242	$—	$—	$2,242
Money market funds (2)	16,193	—	—	16,193
U.S. agency securities (2), (3), (4)	60,066	—	—	60,066
Commercial paper (2), (3)	—	10,991	—	10,991
Corporate bonds (3), (4)	—	134,238	—	134,238
Municipal debt securities (3), (4)	—	256,445	—	256,445
Total	$78,501	$401,674	$—	$480,175

Liabilities:
Investments held in supplemental retirement plan (5)	$2,242	$—	$—	$2,242
Total	$2,242	$—	$—	$2,242


(1)	These assets are included within prepaid expenses and other current assets and within other non-current assets.


(2)	These assets are included within cash and cash equivalents.


(3)	These assets are included within short-term investments.


(4)	These assets are included within long-term investments.


(5)	These liabilities are included within accrued liabilities and within other non-current liabilities.

We base the fair value of our Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.

We obtain the fair value of our Level 2 financial instruments from a professional 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.

To validate the fair value determination provided by our primary pricing service, we perform quality controls over values received which include comparing our pricing service provider’s assessment of the fair values of our investment securities against the fair values of our investment securities obtained from another independent source, reviewing the pricing movement in the context of overall market trends, and reviewing trading information from our investment managers. In addition, we assess the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

We did not own any Level 3 financial assets or liabilities as of December 27, 2013 or September 27, 2013.