Investments & Fair Value Measurements

9 Months Ended

Jun. 28, 2019

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract]

. 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. Derivative contracts are used to hedge currency risk, these are carried at fair value and classified as other assets and other liabilities.

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):



	June 28, 2019
	Cost		Unrealized								Estimated Fair Value
			Gains		Losses			Total			Level 1		Level 2			Level 3
Cash and cash equivalents:
Cash	$	652,269	$	—	$	—		$	652,269		$	652,269	$	—		$	—
Cash equivalents:
Certificate of deposit (1)	12,376		—		—			12,376			—		12,376			—
Commercial paper	13,051		2		—			13,053			—		13,053			—
Corporate bonds	6,265		—		(1		)	6,264			—		6,264			—
Money market funds	15,084		—		—			15,084			15,084		—			—
Municipal debt securities	1,000		—		—			1,000			—		1,000			—
Government bonds	16,513		1		—			16,514			16,514		—			—
Cash and cash equivalents	716,558		3		(1		)	716,560			683,867		32,693			—

Short-term investments:
Certificate of deposit (1)	1,486		1		—			1,487			—		1,487			—
U.S. agency securities	6,272		10		(6		)	6,276			—		6,276			—
Government bonds	11,952		11		—			11,963			11,963		—			—
Commercial paper	6,472		13		—			6,485			—		6,485			—
Corporate bonds	82,230		51		(112		)	82,169			—		82,169			—
Municipal debt securities	12,345		14		(2		)	12,357			—		12,357			—
Short-term investments	120,757		100		(120		)	120,737			11,963		108,774			—

Long-term investments:
Asset backed securities	7,799		66		—			7,865			—		7,865			—
U.S. agency securities	11,895		134		(19		)	12,010			—		12,010			—
Government bonds	21,871		177		(36		)	22,012			22,012		—			—
Corporate bonds	154,196		1,563		(55		)	155,704			—		155,704			—
Municipal debt securities	11,809		103		(2		)	11,910			—		11,910			—
Other long-term investments (2)	1,851		—		—			1,851			7		—			—
Long-term investments	209,421		2,043		(112		)	211,352			22,019		187,489			—

Total cash, cash equivalents, and investments	$	1,046,736	$	2,146	$	(233	)	$	1,048,649		$	717,849	$	328,956		$	—

Investments held in supplemental retirement plan:
Assets	3,382		—		—			3,382			3,382		—			—
Included in prepaid expenses and other current assets & other non-current assets
Liabilities	3,382		—		—			3,382			3,382		—			—
Included in accrued liabilities & other non-current liabilities

Currency derivatives as hedge instruments:
Assets	—		231		—			231			—		231			—
Included in other current assets
Liabilities	—		—		(47		)	(47		)	—		(47		)	—
Included in other accrued expenses


(1)	Certificates of deposit include marketable securities, while those with a maturity in excess of one year as of June 28, 2019 are classified within long-term investments.


(2)	Other long-term investments as of June 28, 2019 include investments that are not carried at fair value including an equity method investment of $1.8 million.



	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, while 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.

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 investments 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. The fair value of the currency derivatives are calculated from market spot rates, forward rates, interest rates, and credit ratings at the end of the period.

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 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 for less than twelve months and for twelve months or greater as of June 28, 2019 and September 28, 2018 (in thousands):



	June 28, 2019										September 28, 2018
	Less Than 12 Months					12 Months Or Greater					Less Than 12 Months					12 Months Or Greater
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	$	2,300	$	—		$	—	$	—		$	—	$	—		$	—	$	—
U.S. agency securities	796		(3		)	7,074		(22		)	—		—			21,486		(302		)
Government bonds	16,649		(1		)	8,647		(36		)	16,633		(332		)	—		—
Commercial paper	—		—			—		—			5,737		(1		)	—		—
Corporate bonds	20,145		(30		)	53,766		(137		)	143,051		(1,680		)	52,162		(624		)
Municipal debt securities	1,683		—			4,299		(3		)	41,058		(191		)	6,965		(41		)
Total	$	41,573	$	(34	)	$	73,786	$	(198	)	$	206,479	$	(2,204	)	$	80,613	$	(967	)

Although we had certain securities that were in an unrealized loss position as of June 28, 2019, we expect to recover the full carrying value of these securities. As a result, we do not consider any portion of the unrealized losses at either June 28, 2019 or September 28, 2018 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 June 28, 2019 and September 28, 2018, which are recorded within cash equivalents and both short and long-term investments in our consolidated balance sheets (in thousands):



	June 28, 2019				September 28, 2018
Range of maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due within 1 year	$	189,056	$	189,039	$	191,241	$	190,541
Due in 1 to 2 years	125,979		126,737		122,131		120,545
Due in 2 to 3 years	77,591		78,764		67,423		66,637
Total	$	392,626	$	394,540	$	380,795	$	377,723