4. FINANCIAL INSTRUMENTS

Investments consist of the following as of March 31, 2017 and December 31, 2016 (dollars in thousands):

	March 31, 2017
			Gross Unrealized
	Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	1,000	$	-	$	-		$	1,000
Non-governmental debt securities		107,023		18		(80	)		106,961
Treasury and federal agencies		35,431		7		(76	)		35,362
Total short-term investments		143,454		25		(156	)		143,323
Restricted short-term investments (available for sale):
Non-governmental debt securities		8,597		-		-			8,597
Total investments (available for sale)	$	152,051	$	25	$	(156	)	$	151,920

	December 31, 2016
			Gross Unrealized
	Cost		Gain		(Loss)			Fair Value
Short-term investments (available for sale):
Municipal bonds	$	4,050	$	-	$	-		$	4,050
Non-governmental debt securities		107,305		22		(113	)		107,214
Treasury and federal agencies		36,480		10		(73	)		36,417
Total short-term investments		147,835		32		(186	)		147,681
Restricted short-term investments (available for sale):
Non-governmental debt securities		8,597		-		-			8,597
Total investments (available for sale)	$	156,432	$	32	$	(186	)	$	156,278

In the table above, unrealized holding gains (losses) as of March 31, 2017 relate to short-term investments that have been in a continuous unrealized gain (loss) position for less than one year.

Our unrestricted non-governmental debt securities primarily consist of corporate bonds and commercial paper. Our treasury and federal agencies primarily consist of U.S. Treasury bills and federal home loan debt securities. We do not intend to sell our investments in these securities and it is not likely that we will be required to sell these investments before recovery of the amortized cost basis. Our restricted short-term investments are comprised entirely of certificates of deposit, which secure our letters of credit.

Fair Value Measurements

FASB ASC Topic 820 – Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of March 31, 2017, we held investments that are required to be measured at fair value on a recurring basis. These investments (available-for-sale) consist of municipal bonds, non-governmental debt securities, and treasury and federal agencies securities. Available for sale securities included in Level 1 are valued at quoted prices in active markets for identical assets and liabilities. Available for sale securities included in Level 2 are estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for identical or similar assets or liabilities in inactive markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Investments measured at fair value on a recurring basis subject to the disclosure requirements of FASB ASC Topic 820 – Fair Value Measurements at March 31, 2017 and December 31, 2016 were as follows (dollars in thousands):

	As of March 31, 2017
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	-	$	1,000	$	-	$	1,000
Non-governmental debt securities		38,597		76,961		-		115,558
Treasury and federal agencies		-		35,362		-		35,362
Totals	$	38,597	$	113,323	$	-	$	151,920

	As of December 31, 2016
	Level 1		Level 2		Level 3		Total
Municipal bonds	$	-	$	4,050	$	-	$	4,050
Non-governmental debt securities		33,597		82,214		-		115,811
Treasury and federal agencies		-		36,417		-		36,417
Totals	$	33,597	$	122,681	$	-	$	156,278

Equity Method Investment

Our investment in an equity affiliate, which is recorded within other noncurrent assets on our condensed consolidated balance sheets, represents an international investment in a private company. As of March 31, 2017, our investment in an equity affiliate equated to a 30.7%, or $3.0 million, non-controlling interest in CCKF, a Dublin-based educational technology company providing intelligent adaptive systems to power the delivery of individualized and personalized learning.

During the quarters ended March 31, 2017 and 2016, we recorded approximately $0.2 million and $0.1 million of loss, respectively, related to our proportionate investment in CCKF within miscellaneous income on our unaudited condensed consolidated statements of income and comprehensive income.

We make periodic operating maintenance payments related to proprietary rights that we use in our intellipath^TM adaptive learning technology. The total fees paid to CCKF for the quarters ended March 31, 2017 and 2016 were as follows (dollars in thousands):

	Maintenance Fee Payments
For the quarter ended March 31,2017	$	325
For the quarter ended March 31,2016	$	342

Credit Agreement

During the fourth quarter of 2015, the Company; its wholly-owned subsidiary, CEC Educational Services, LLC (“CEC-ES”); and the subsidiary guarantors thereunder entered into a Fourth Amendment to its Amended and Restated Credit Agreement dated as of December 30, 2013 (as amended, the “Credit Agreement”) with BMO Harris Bank N.A., in its capacities as the initial lender and letter of credit issuer thereunder and the administrative agent for the lenders which from time to time may be parties to the Credit Agreement, to among other things, decrease the revolving credit facility to $95.0 million and require pre-approval by the lenders for each credit extension (other than letter of credit extensions) occurring after December 31, 2015. The revolving credit facility under the Credit Agreement is scheduled to mature on December 31, 2018. The loans and letter of credit obligations under the Credit Agreement are required to be secured by 100% cash collateral. As of March 31, 2017 and December 31, 2016, there were no outstanding borrowings under the revolving credit facility.