Investments & Fair Value Measurements

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

Our investment securities primarily consist of government bonds, certificates of deposit, 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 28, 2018
	Cost		Unrealized							Estimated Fair Value
			Gains		Losses			Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	905,660						$	905,660	$	905,660
Cash equivalents:
Commercial paper	5,058		—		—			5,058				5,058
Corporate bonds	1,005				—			1,005				1,005
Money market funds	3,301							3,301		3,301
Municipal debt securities	545				(1		)	544				544
Government bonds	2,495		—					2,495		2,495
Cash and cash equivalents	918,064		—		(1		)	918,063		911,456		6,607		—

Short-term investments:
Certificate of deposit (1)	12,875		14					12,889				12,889
U.S. agency securities	11,997				(135		)	11,862				11,862
Government bonds	7,970		—		(15		)	7,955		7,955
Commercial paper	4,276		—		—			4,276				4,276
Corporate bonds	111,245		50		(494		)	110,801				110,801
Municipal debt securities	30,475				(120		)	30,355				30,355
Short-term investments	178,838		64		(764		)	178,138		7,955		170,183		—

Long-term investments:
U.S. agency securities	9,791				(166		)	9,625				9,625
Government bonds	15,966				(317		)	15,649		15,649
Corporate bonds	146,561		33		(1,810		)	144,784				144,784
Municipal debt securities	17,235				(112		)	17,123				17,123
Other long-term investments (2)	355		246					601		246
Long-term investments	189,908		279		(2,405		)	187,782		15,895		171,532		—

Total cash, cash equivalents, and investments	$	1,286,810	$	343	$	(3,170	)	$	1,283,983	$	935,306	$	348,322	$	—

Investments held in supplemental retirement plan:
Assets	3,486							3,486		3,486
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	3,486							3,486		3,486
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 28, 2018 are classified within long-term investments.

(2)

Other long-term investments as of September 28, 2018 include a marketable equity security of $0.2 million, and other investments that are not carried at fair value including an equity method investment of $0.4 million. During fiscal 2018, we recorded write-off charges to reduce the carrying value of two cost method equity investments to zero in recognition of an other-than-temporary impairment for each investment.



	September 29, 2017
	Cost		Unrealized							Estimated Fair Value
			Gains		Losses			Total		Level 1		Level 2		Level 3
Cash and cash equivalents:
Cash	$	623,244						$	623,244
Cash equivalents:
Commercial paper	1,223		—		—			1,223				1,223
Money market funds	2,550		—		—			2,550		2,550
Cash and cash equivalents	627,017		—		—			627,017		2,550		1,223		—

Short-term investments:
Certificate of deposit (1)	17,236		9		(1		)	17,244				17,244
U.S. agency securities	9,518		—		(20		)	9,498				9,498
Government bonds	2,034		—		(6		)	2,028		2,028
Commercial paper	15,160		2		(1		)	15,161				15,161
Corporate bonds	174,750		54		(163		)	174,641				174,641
Municipal debt securities	29,178		16		(9		)	29,185				29,185
Short-term investments	247,876		81		(200		)	247,757		2,028		245,729		—

Long-term investments:
Certificate of deposit (1)	22,940		5		(6		)	22,939				22,939
U.S. agency securities	21,779		—		(178		)	21,601				21,601
Government bonds	17,839		—		(107		)	17,732		17,732
Corporate bonds	218,857		327		(537		)	218,647				218,647
Municipal debt securities	28,913		29		(25		)	28,917				28,917
Other long-term investments (2)	4,171		357		—			4,528		357				—
Long-term investments	314,499		718		(853		)	314,364		18,089		292,104		—

Total cash, cash equivalents, and investments	$	1,189,392	$	799	$	(1,053	)	$	1,189,138	$	22,667	$	539,056	$	—

Investments held in supplemental retirement plan:
Assets	3,026							3,026		3,026
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	3,026							3,026		3,026
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 29, 2017 are classified within long-term investments.

(2)

Other long-term investments as of September 29, 2017 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 $0.6 million and two cost method equity investments of $3.0 million and $0.5 million. During fiscal 2017, we recorded a write-off charge to reduce the carrying value of a cost method equity investment to zero in recognition of an other-than-temporary impairment.

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 28, 2018:



Asset Type	Primary Source	Update Frequency	Fair Value Methodology	Secondary Source

Level 1
Money Market Funds	ICE (Intercontinental Exchange)	Daily	$1 per share	Not Applicable
U.S. Government Bonds	ICE (Intercontinental Exchange)	Daily	Market Prices	Bloomberg

Level 2
Certificates of Deposit	ICE (Intercontinental Exchange)	Monthly	Market Prices	Bloomberg
Commercial Paper	U.S. Bank Pricing Unit	Daily	Matrix Pricing	Not Applicable
Corporate Bonds	ICE (Intercontinental Exchange)	Daily	Institutional Bond Quotes - evaluations based on various market and industry inputs	Bloomberg
Municipal Debt Securities	Standard & Poor's	Daily	Evaluations based on various market and industry inputs	ICE (Intercontinental Exchange) & Bloomberg
U.S. Agency Securities	ICE (Intercontinental Exchange)	Daily	Institutional Bond Quotes - evaluations based on various market and industry inputs	Bloomberg
Int'l Government Bonds	ICE (Intercontinental Exchange) Extel Financial Ltd	Daily	Evaluations based on various market factors	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 28, 2018 and September 29, 2017 (in thousands):



	September 28, 2018										September 29, 2017
	Less Than 12 Months					Greater Than 12 Months					Less Than 12 Months					Greater Than 12 Months
Investment Type	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Certificate of deposit	$	—	$	—		$	—	$	—		$	19,750	$	(6	)	$	—	$	—
U.S. agency securities	—		—			21,486		(302		)	19,713		(91		)	11,386		(108		)
Government bonds	16,633		(332		)	—		—			15,029		(64		)	4,729		(49		)
Commercial paper	5,737		(1		)	—		—			4,292		(1		)	—		—
Corporate bonds	143,051		(1,680		)	52,162		(624		)	125,890		(251		)	109,806		(449		)
Municipal debt securities	41,058		(191		)	6,965		(41		)	26,749		(24		)	3,625		(10		)
Total	$	206,479	$	(2,204	)	$	80,613	$	(967	)	$	211,423	$	(437	)	$	129,546	$	(616	)

Although we had certain securities that were in an unrealized loss position as of September 28, 2018, 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 28, 2018 or September 29, 2017 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 28, 2018 and September 29, 2017, which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):



	September 28, 2018				September 29, 2017
Range of maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within 1 year	$	191,241	$	190,541	$	251,649	$	251,530
Due in 1 to 2 years	122,131		120,545		213,555		213,154
Due in 2 to 3 years	67,423		66,637		96,773		96,682
Total	$	380,795	$	377,723	$	561,977	$	561,366