Note 3. Fair Value Measurements and Disclosures

The Company determines the fair values of its financial instruments based on the fair value hierarchy established in FASB Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into the following three levels that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 — Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Such unobservable inputs include an estimated discount rate used in the Company’s discounted present value analysis of future cash flows, which reflects the Company’s estimate of debt with similar terms in the current credit markets. As there is currently minimal activity in such markets, the actual rate could be materially different.

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standard assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability.

The following tables present the Company’s assets and liabilities measured at estimated fair value on a recurring basis, excluding accrued interest components, categorized in accordance with the fair value hierarchy (in thousands), as of the following dates:

	July 1, 2017								December 31, 2016
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	5,371	$	—	$	—	$	5,371	$	959	$	—	$	—	$	959
Commercial paper and corporate debt securities		—		2,996		—		2,996		—		2,499		—		2,499
Total cash equivalents	$	5,371	$	2,996	$	—	$	8,367	$	959	$	2,499	$	—	$	3,458
Marketable securities:
U.S. Treasury securities and U.S. Government agency debt securities		—		5,747		—		5,747		—		17,072		—		17,072
Certificates of deposits		—		26,308		—		26,308		—		23,019		—		23,019
Commercial paper		—		17,424		—		17,424		—		22,402		—		22,402
Municipal securities and corporate debt securities		—		38,012		—		38,012		—		14,943		—		14,943
Asset-backed Securities		—		5,849		—		5,849		—		5,463		—		5,463
Total marketable securities	$	—	$	93,340	$	—	$	93,340	$	-	$	82,899	$	—	$	82,899
Total⁽¹⁾	$	5,371	$	96,336	$	—	$	101,707	$	959	$	85,398	$	—	$	86,357

⁽¹⁾	Excludes $34.0 million and $43.6 million held in operating accounts as of July 1, 2017 and December 31, 2016, respectively. See “Cash and Investments” in Note 4 of the Notes to Consolidated Financial Statements for more information.

The fair values of the marketable securities that are classified as Level 1 in the table above were derived from quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access. The fair value of marketable securities that are classified as Level 2 in the table above were derived from non-binding market consensus prices that were corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques with all significant inputs derived from or corroborated by observable market data. There were no transfers of instruments between Level 1, Level 2 and Level 3 during the financial periods presented.

Derivatives

The Company uses foreign currency exchange forward contracts to mitigate variability in gains and losses generated from the re-measurement of certain monetary assets and liabilities denominated in foreign currencies. These derivatives are carried at fair value with changes recorded in other income (expense), net in the consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by re-measurement of the underlying assets and liabilities. The derivatives have maturities of approximately 30 days.

The settlement of forward foreign currency contracts included in the three months ended July 1, 2017 and June 25, 2016 was a loss of $0.3 million and $0.8 million, respectively. The settlement of forward foreign currency contracts included in the six months ended July 1, 2017 and June 25, 2016 was a gain of $0.7 million and a loss of $1.3 million, respectively. These are included in other income (expense), net, in the consolidated statements of operations.

The following table presents the notional amounts and fair values of the Company’s outstanding derivative instruments in U.S. Dollar equivalent (in millions):

	As of July 1, 2017						As of December 31, 2016
			Fair Value					Fair Value
	Notional Amount		Asset		Liability		Notional Amount	Asset		Liability
Undesignated Hedges:
Forward Foreign Currency Contracts
Purchase		20.0		—		—	12.6		—		—
Sell		11.5		—		—	1.3		—		—