2. Financial Instruments

The FASB-issued guidance establishes a framework for measuring fair value that is based on the inputs market participants use to determine fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The guidance under this statement describes a hierarchy of three levels of input that may be used to measure fair value:

· Level 1 — Inputs based on quoted prices in active markets for identical assets and liabilities.

· Level 2 — Inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

· Level 3 — Unobservable inputs based on little market or no market activity and which are significant to the fair value of the assets and liabilities.

The Company’s material financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued expenses. The fair values of cash, accounts receivable, accounts payable and accrued expenses are equal to their carrying values based on their liquidity.

Considerable judgment is required in interpreting market data to develop estimates of fair value. The fair value estimate presented herein is not necessarily indicative of the amount that the Company or the debt holders could realize in a current market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value.

Certificates of deposit, money market securities and tax-free municipal bonds with an initial maturity date of three months or less when purchased are classified as cash and cash equivalents on the accompanying unaudited Consolidated Balance Sheets. Municipal bonds and certificates of deposit with an initial maturity date greater than three months when purchased and a maturity of one year or less are classified as short-term investments on the accompanying unaudited Consolidated Balance Sheets. As of June 29, 2013, municipal bonds in the amount of $5.5 million and money market securities in the amount of $5.2 million were included in cash and cash equivalents.

Money market securities, which are short-term investments of excess cash, are classified as cash and cash equivalents on the accompanying unaudited Consolidated Balance Sheets.

The Company has determined the estimated fair value amounts of its financial instruments using available market information. The assets that are measured at fair value on a recurring basis as of June 29, 2013 and June 30, 2012, respectively, include the following:

			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
	June 29,		Markets		Inputs		Inputs
Description	2013		(Level 1)		(Level 2)		(Level 3)
	(in thousands)

Municipal Bonds	$	12,731	$	—	$	12,731	$	—
Money Market Funds	5,157		5,157		—		—

Total	$	17,888	$	5,157	$	12,731	$	—

			Quoted		Significant
			Prices in		Other		Significant
			Active		Observable		Unobservable
	June 30,		Markets		Inputs		Inputs
Description	2012		(Level 1)		(Level 2)		(Level 3)
	(in thousands)

Municipal Bonds	$	19,748	$	—	$	19,748	$	—
Money Market Funds	1,462		1,462		—		—
Certificates of Deposit	1,960		1,960		—		—

Total	$	23,170	$	3,422	$	19,748	$	—