
(4)	Investments


(a)	Debt Securities

Debt securities are classified as available-for-sale and carried at fair value. The Company evaluates whether debt securities are other-than-temporarily impaired (OTTI) based on criteria that include the extent to which the cost (cost of the debt security adjusted for amortization of premium or accretion of discount) exceeds market value, the duration of the market value decline, the credit rating of the issuer or security, the failure of the issuer to make scheduled principal or interest payments and the financial health and prospects of the issuer or security.

Declines in the fair value of debt securities determined to be OTTI are recognized in earnings and reported as OTTI losses. Debt securities with unrealized losses are considered OTTI if the Company intends to sell the debt security or if the Company will be required to sell the debt security prior to any anticipated recovery. If the Company determines that a debt security is OTTI under these circumstances, the impairment recognized in earnings is measured as the difference between the cost and the fair value. A debt security is also determined to be OTTI if the Company does not expect to recover the cost of the debt security. However, in this circumstance, if the Company does not intend to sell the debt security and will not be required to sell the debt security, the impairment recognized in earnings equals the estimated credit loss as measured by the difference between the present value of expected cash flows and the cost of the debt security. Expected cash flows are discounted using the debt security’s effective interest rate. Changes in the fair value of debt securities determined to be temporary are reported in other comprehensive earnings net of income taxes and included as a component of stockholders’ equity.

Following is a summary of debt securities as of September 29, 2018 and December 30, 2017:



	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Amounts are in thousands)
September 29, 2018
Tax exempt bonds	$	1,340,795		110		20,347	1,320,558
Taxable bonds	2,406,444			340		58,739	2,348,045
	$	3,747,239		450		79,086	3,668,603
December 30, 2017
Tax exempt bonds	$	1,811,523		602		16,420	1,795,705
Taxable bonds	2,115,174			695		25,443	2,090,426
	$	3,926,697		1,297		41,863	3,886,131

The cost and fair value of debt securities by expected maturity as of September 29, 2018 and December 30, 2017 are as follows:



	September 29, 2018			December 30, 2017
	Cost		Fair Value	Cost	Fair Value
	(Amounts are in thousands)
Due in one year or less	$	577,480	575,195	917,576	915,579
Due after one year through five years	2,713,698		2,640,263	2,794,099	2,757,504
Due after five years through ten years	448,838		445,862	205,792	203,533
Due after ten years	7,223		7,283	9,230	9,515
	$	3,747,239	3,668,603	3,926,697	3,886,131

Following is a summary of temporarily impaired debt securities by the time period impaired as of September 29, 2018 and December 30, 2017:



	Less Than 12 Months				12 Months or Longer			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(Amounts are in thousands)
September 29, 2018
Tax exempt bonds	$	775,195		8,384	537,591		11,963	1,312,786		20,347
Taxable bonds	1,214,748			20,329	1,017,301		38,410	2,232,049		58,739
	$	1,989,943		28,713	1,554,892		50,373	3,544,835		79,086
December 30, 2017
Tax exempt bonds	$	1,543,151		13,827	136,217		2,593	1,679,368		16,420
Taxable bonds	811,886			4,908	1,153,645		20,535	1,965,531		25,443
	$	2,355,037		18,735	1,289,862		23,128	3,644,899		41,863

There are 436 debt securities contributing to the total unrealized losses of $79,086,000 as of September 29, 2018. Unrealized losses related to debt securities are primarily due to increases in interest rates impacting the market value of certain bonds. The Company continues to receive scheduled principal and interest payments on these debt securities.


(b)	Equity Securities

In 2018, the Company adopted the ASU requiring equity securities be measured at fair value with net unrealized gains and losses from changes in the fair value recognized in earnings (fair value adjustment). The fair value adjustment also includes the cumulative effect of the ASU as of December 31, 2017 reclassified from accumulated other comprehensive earnings to retained earnings.

Prior to adoption of the ASU, changes in the fair value of equity securities were accounted for similar to changes in the fair value of debt securities. Equity securities were classified as available-for-sale and carried at fair value. Declines in the fair value of equity securities determined to be OTTI were recognized in earnings and reported as OTTI losses. An equity security was determined to be OTTI if the Company did not expect to recover the cost of the equity security. Changes in the fair value of equity securities determined to be temporary were reported in other comprehensive earnings net of income taxes and included as a component of stockholders’ equity.

Following is a summary of the fair value of equity securities as of September 29, 2018 and December 30, 2017:



	September 29, 2018			December 30, 2017
	(Amounts are in thousands)
Equity securities		$	3,023,603		2,383,095
Restricted investment		161,307			164,085
		$	3,184,910		2,547,180

The Company maintains a restricted investment for the benefit of the Company’s insurance carrier related to self-insurance reserves. This investment is held as collateral and is not used for self-insured claims payments.


(c)	Investment Income

Interest and dividend income, amortization of premiums, accretion of discounts and realized gains and losses on the sale of debt and equity securities are included in investment income. Interest income is accrued as earned. Dividend income is recognized as income on the ex-dividend date. The cost of debt and equity securities sold is based on the first-in, first-out method. With the adoption of the ASU, the fair value adjustment on equity securities held as of September 29, 2018 is also included in investment income.

In the following table, net realized gain on the sale of investments represents the difference between the cost and the proceeds from the sale of debt and equity securities. For the three and nine months ended September 29, 2018, the net realized gain on the sale of investments excludes the net gain on the sale of equity securities previously recognized through the fair value adjustment, which is presented separately.

Following is a summary of investment income for the three and nine months ended September 29, 2018 and September 30, 2017:



		Three Months Ended						Nine Months Ended
	September 29, 2018				September 30, 2017		September 29, 2018			September 30, 2017
	(Amounts are in thousands)
Interest income		$	21,822			16,984		60,077			59,031
Dividend income		10,904				11,123		32,802			28,994
Net realized gain on sale of investments		69,251				10,323		92,918			104,881
		101,977				38,430		185,797			192,906
Fair value adjustment (net unrealized gain) on equity securities held at end of period		166,267				—		217,314			—
Net gain on sale of equity securities previously recognized through fair value adjustment		(38,010		)		—		(60,424	)		—
		$	230,234			38,430		342,687			192,906