Investments & Fair Value Measurements

Investment Strategy. 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 which are classified as trading securities, all of our investments are classified as available-for-sale securities. Our investments primarily consist of municipal debt securities, corporate and government bonds (domestic and international), United States agency securities and commercial paper. 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.

The following tables summarize the unrealized gains and losses on our cash and investment portfolio and our financial assets and liabilities measured at fair value on a recurring basis (in thousands):



	June 26, 2015
	Cost		Unrealized							Estimated Fair Value
			Gains		Losses			Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	453,796						$	453,796
Cash equivalents:
Money market funds	16,117							16,117		16,117
Municipal debt securities	955							955				955
Cash and cash equivalents	470,868		—		—			470,868		16,117		955		—

Short-term investments:
Government bonds	2,000		4					2,004		2,004
Commercial paper	6,469		4					6,473				6,473
Corporate bonds	81,115		49		(31		)	81,133				81,133
Municipal debt securities	76,116		107					76,223				76,223
Short-term investments	165,700		164		(31		)	165,833		2,004		163,829		—

Long-term investments:
U.S. agency securities	2,999		1		(3		)	2,997		2,997
Government bonds	24,520		2		(57		)	24,465		24,465
Corporate bonds	184,947		105		(293		)	184,759				184,759
Municipal debt securities	159,786		84		(230		)	159,640				159,640
Other long-term investments (1)	1,637							1,637		1,131				506
Long-term investments	373,889		192		(583		)	373,498		28,593		344,399		506

Total cash, cash equivalents, and investments	$	1,010,457	$	356	$	(614	)	$	1,010,199	$	46,714	$	509,183	$	506

Investments held in supplemental retirement plan:
Assets	2,613							2,613		2,613
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	2,613							2,613		2,613
Included in accrued liabilities & other non-current liabilities

Contingent consideration related to acquisition:
Liabilities	740							740						740
Included in accrued liabilities


(1)	Other long-term investments as of June 26, 2015 include a marketable equity security of $1.1 million and cost method investments of $0.5 million.



	September 26, 2014
	Cost		Unrealized							Estimated Fair Value
			Gains		Losses			Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	564,745						$	564,745
Cash equivalents:
Money market funds	1,727							1,727		1,727
Commercial paper	2,000							2,000				2,000
Cash and cash equivalents	568,472		—		—			568,472		1,727		2,000		—

Short-term investments:
U.S. agency securities	35,443		5		(3		)	35,445		35,445
Commercial paper	21,788							21,788				21,788
Corporate bonds	56,106		81		(10		)	56,177				56,177
Municipal debt securities	117,606		197		(5		)	117,798				117,798
Short-term investments	230,943		283		(18		)	231,208		35,445		195,763		—

Long-term investments:
U.S. agency securities	31,980		19		(6		)	31,993		31,993
Corporate bonds	117,063		226		(80		)	117,209				117,209
Municipal debt securities	146,337		326		(30		)	146,633				146,633
Other long-term investments (1)	500							500						500
Long-term investments	295,880		571		(116		)	296,335		31,993		263,842		500

Total cash, cash equivalents, and investments	$	1,095,295	$	854	$	(134	)	$	1,096,015	$	69,165	$	461,605	$	500

Investments held in supplemental retirement plan:
Assets	2,507							2,507		2,507
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	2,507							2,507		2,507
Included in accrued liabilities & other non-current liabilities


(1)	Other long-term investments as of September 26, 2014 include a cost method investment of $0.5 million.

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

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. 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.

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.

Securities In Gross Unrealized Loss Position. We periodically evaluate our investments for other-than- temporary declines in fair value. The unrealized losses on our available-for-sale securities were primarily as a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. The following table presents the gross unrealized losses and fair value for those available-for-sale securities that were in an unrealized loss position as of June 26, 2015 and September 26, 2014 (in thousands):



	June 26, 2015					September 26, 2014
Investment Type	Fair Value		Gross Unrealized Losses (1)			Fair Value		Gross Unrealized Losses (1)
U.S. agency securities	$	2,997	$	(3	)	$	31,930	$	(9	)
Government bonds	22,467		(57		)	—		—
Corporate bonds	157,435		(324		)	78,166		(90		)
Municipal debt securities	106,249		(230		)	55,979		(35		)
Total	$	289,148	$	(614	)	$	166,075	$	(134	)


(1)	Our available-for-sale securities in an unrealized loss position were in such position for less than twelve months as of both June 26, 2015 and September 26, 2014.

Although we had certain securities that were in an unrealized loss position as of June 26, 2015, we expect to recover the full carrying value of these securities as we do not intend to, nor do we currently anticipate a need to sell these securities prior to recovering the associated unrealized losses. As a result, we do not consider any portion of the unrealized losses at either June 26, 2015 or September 26, 2014 to represent an other-than-temporary impairment, nor do we consider any of the unrealized losses to be credit losses.

Investment Maturities. The following table summarizes the amortized cost and estimated fair value of the available-for-sale securities within our investment portfolio based on stated maturities as of June 26, 2015 and September 26, 2014, which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):



	June 26, 2015				September 26, 2014
Range of maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within 1 year	$	177,544	$	177,678	$	232,944	$	233,208
Due in 1 to 2 years	207,747		207,682		179,177		179,536
Due in 2 to 3 years	169,734		169,406		116,204		116,299
Total	$	555,025	$	554,766	$	528,325	$	529,043