Financial Instruments Measured at Fair Value

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities. We do not hold investment securities for trading purposes. All short-term investments are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

Gains and losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Factors that could indicate an impairment exists include, but are not limited to: earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented were not significant.

Investments that we have classified as short-term, by security type, are as follows

(

in thousands

)

	June 25, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Corporate debt securities	$	7,647	$	-	$	-	$	7,647
Foreign government security		655		-		-		655
Bank certificates of deposit		913		-		-		913
	$	9,215	$	-	$	-	$	9,215

	December 26, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Foreign government security	$	650	$	-	$	-	$	650
Bank certificates of deposit		1,002		-		-		1,002
	$	1,652	$	-	$	-	$	1,652

Effective maturities of short-term investments are as follows

(in thousands)

	June 25, 2016				December 26, 2015
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	9,215	$	9,215	$	1,450	$	1,450
Due after one year through three years		-		-		202		202
	$	9,215	$	9,215	$	1,652	$	1,652

Accounting standards pertaining to fair value measurements establish 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. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information, and they are included in Level 2.

The following table summarizes, by major security type, our financial instruments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy

(in thousands)

	Fair value measurements at June 25, 2016 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	65,878	$	-	$	-	$	65,878
Corporate debt securities		-		15,045		-		15,795
Money market funds		-		35,437		-		35,437
Bank certificates of deposit		-		913		-		163
Foreign government security		-		655		-		655
	$	65,878	$	52,050	$	-	$	117,928

	Fair value measurements at December 26, 2015 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	73,746	$	-	$	-	$	73,746
Foreign government security		-		650		-		650
Money market funds		-		41,624		-		41,624
Bank certificates of deposit		-		1,002		-		1,002
	$	73,746	$	43,276	$	-	$	117,022