4. Investments & Fair Value Measurements

We use cash holdings to purchase investment grade securities diversified among security types, industries and issuers. All investments are measured at fair value, and are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets. With the exception of our mutual fund investments held in our SERP which are classified as trading securities, all of our investments are classified as AFS securities.

Our investments primarily consist of municipal debt securities, corporate bonds, U.S. agency securities and commercial paper. In addition, our cash and cash equivalents also consist of highly-liquid money market funds. Consistent with our investment policy, none of our municipal debt investments are supported by letters of credit or standby purchase agreements. Our cash and investment portfolio consisted of the following (in thousands):



	September 30, 2016
	Cost		Unrealized							Estimated Fair Value
			Gains		Losses			Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	501,863						$	501,863
Cash equivalents:
Commercial paper	1,099		—		—			1,099				1,099
Corporate bonds	2,240		—		—			2,240				2,240
Money market funds	10,910		—		—			10,910		10,910
Cash and cash equivalents	516,112		—		—			516,112		10,910		3,339		—

Short-term investments:
Certificate of deposit (1)	13,912		6		—			13,918				13,918
Commercial paper	19,629		1		(10		)	19,620				19,620
Corporate bonds	63,762		24		(14		)	63,772				63,772
Municipal debt securities	24,334		—		(15		)	24,319				24,319
Short-term investments	121,637		31		(39		)	121,629		—		121,629		—

Long-term investments:
Certificate of deposit (1)	4,500		10		—			4,510				4,510
U.S. agency securities	27,536		24		(26		)	27,534		27,534
Government bonds	31,971		77		(12		)	32,036		32,036
Corporate bonds	295,921		715		(266		)	296,370				296,370
Municipal debt securities	30,090		28		(32		)	30,086				30,086
Other long-term investments (2)	3,002		366		—			3,368		366
Long-term investments	393,020		1,220		(336		)	393,904		59,936		330,966		—

Total cash, cash equivalents, and investments	$	1,030,769	$	1,251	$	(375	)	$	1,031,645	$	70,846	$	455,934	$	—

Investments held in supplemental retirement plan:
Assets	2,638							2,638		2,638
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	2,638							2,638		2,638
Included in accrued liabilities & other non-current liabilities


(1)	Certificates of deposit include marketable securities and those with a maturity in excess of one year as of September 30, 2016 are classified within long-term investments.


(2)	Other long-term investments as of September 30, 2016 include a marketable equity security of $0.4 million, and other investments that are not carried at fair value including an equity method investment of $0.5 million and two cost method investments of $2.0 million and $0.5 million.



	September 25, 2015
	Cost		Unrealized							Estimated Fair Value
			Gains		Losses			Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	511,736						$	511,736
Cash equivalents:
Money market funds	19,014		—		—			19,014		19,014
Corporate bonds	1,176		—		—			1,176				1,176
Cash and cash equivalents	531,926		—		—			531,926		19,014		1,176		—

Short-term investments:
Government bonds	2,000		1		—			2,001		2,001
Commercial paper	6,478		—		—			6,478				6,478
Corporate bonds	86,543		46		(11		)	86,578				86,578
Municipal debt securities	43,746		98		—			43,844				43,844
Short-term investments	138,767		145		(11		)	138,901		2,001		136,900		—

Long-term investments:
U.S. agency securities	1,999		1		—			2,000		2,000
Government bonds	30,505		19		(17		)	30,507		30,507
Corporate bonds	167,394		138		(392		)	167,140				167,140
Municipal debt securities	117,552		189		(60		)	117,681				117,681
Other long-term investments (1)	2,961		726		—			3,687		726
Long-term investments	320,411		1,073		(469		)	321,015		33,233		284,821		—

Total cash, cash equivalents, and investments	$	991,104	$	1,218	$	(480	)	$	991,842	$	54,248	$	422,897	$	—

Investments held in supplemental retirement plan:
Assets	2,498							2,498		2,498
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	2,498							2,498		2,498
Included in accrued liabilities & other non-current liabilities

Contingent consideration related to acquisition:
Liabilities	95							95						95
Included in accrued liabilities


(1)	Other long-term investments as of September 25, 2015 include a marketable equity security of $0.7 million, and other investments that are not carried at fair value including an equity method investment of $0.5 million and two cost method investments of $2.0 million and $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.

The following table describes the valuation techniques and inputs applicable to each class of security held within our investment portfolio as of September 30, 2016:



Asset Type	Primary Source	Update Frequency	Fair Value Methodology	Secondary Source

Level 1
Money Market Funds	Not Applicable	Daily	$1 per share	Not Applicable
U.S. Agency Securities	FT Interactive Data	Daily	Institutional Bond Quotes - evaluations based on various market and industry inputs	Standard & Poor's Bloomberg
U.S. Government Bonds	FT Interactive Data	Daily	Institutional Bond Quotes - evaluations based on various market and industry inputs	Standard & Poor's Bloomberg

Level 2
Certificates Of Deposit	FT Interactive Data	Monthly	Market Prices	Standard & Poor's Bloomberg
Commercial Paper	U.S. Bank Pricing Unit	Daily	Matrix Pricing	Not Applicable
Corporate Bonds	FT Interactive Data	Daily	Institutional Bond Quotes - evaluations based on various market and industry inputs	Standard & Poor's Bloomberg
Municipal Debt Securities	Standard & Poor's	Daily	Evaluations based on various market and industry inputs	FT Interactive Data Bloomberg

Securities In Gross Unrealized Loss Position. We periodically evaluate our investments for other-than- temporary declines in fair value. The unrealized losses on our AFS securities were primarily the 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 AFS securities that were in an unrealized loss position as of September 30, 2016 and September 25, 2015 (in thousands):



	September 30, 2016										September 25, 2015
	Less Than 12 Months					Greater Than 12 Months					Less Than 12 Months
Investment Type	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses (1)
U.S. agency securities	$	22,988	$	(38	)	$	—	$	—		$	19,005	$	(17	)
Commercial paper	11,479		(10		)	—		—			—		—
Corporate bonds	153,491		(280		)	1,000		—			148,034		(403		)
Municipal debt securities	35,625		(42		)	4,615		(5		)	35,476		(60		)
Total	$	223,583	$	(370	)	$	5,615	$	(5	)	$	202,515	$	(480	)

(1) As of September 25, 2015, no AFS securities were in an unrealized loss position for 12 months or greater.

Although we had certain securities that were in an unrealized loss position as of September 30, 2016, 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 September 30, 2016 or September 25, 2015 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 AFS securities within our investment portfolio based on stated maturities as of September 30, 2016 and September 25, 2015, which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):



	September 30, 2016				September 25, 2015
Range of maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within 1 year	$	135,886	$	135,884	$	158,957	$	159,090
Due in 1 to 2 years	225,679		225,953		173,571		173,577
Due in 2 to 3 years	164,339		164,583		143,879		143,752
Total	$	525,904	$	526,420	$	476,407	$	476,419