NOTE 5: FINANCIAL INSTRUMENTS

Cash, Cash Equivalents and Marketable Securities

The following tables show our cash and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long-term marketable securities as of December 31, 2013 and December 31, 2012 (in thousands):


	December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities		Long-Term Marketable Securities
Cash	$	195,226	$	—	$	—		$	195,226	$	195,226	$	—	$	—
Level 1:
Money market funds		155,922		—		—			155,922		155,922		—		—

Level 2:
U.S. agency securities		36,753		9		(18	)		36,744		—		13,718		23,026
Certificates of deposit		23,901		17		(4	)		23,914		—		16,410		7,504
Commercial paper		5,493		1		(1	)		5,493		—		5,493		—
Corporate debt securities		253,597		132		(322	)		253,407		—		95,599		157,808

Subtotal		319,744		159		(345	)		319,558		—		131,220		188,338

Total	$	670,892	$	159	$	(345	)	$	670,706	$	351,148	$	131,220	$	188,338


	December 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities		Long-Term Marketable Securities
Cash	$	141,460	$	—	$	—		$	141,460	$	141,460	$	—	$	—
Level 1:
Money market funds		215,052		—		—			215,052		215,052		—		—

Level 2:
U.S. agency securities		13,634		4		(3	)		13,635		—		7,635		6,000
Commercial paper		48,710		15		(22	)		48,703		9,999		38,704		—
Corporate debt securities		162,050		12		(180	)		161,882		1,004		67,630		93,248
Municipal securities		5,003		—		(2	)		5,001		—		5,001		—

Subtotal		229,397		31		(207	)		229,221		11,003		118,970		99,248

Total	$	585,909	$	31	$	(207	)	$	585,733	$	367,515	$	118,970	$	99,248

Our cash and cash equivalents consist of cash on hand in global financial institutions, money market funds and marketable securities, with maturities of 90 days or less at the date purchased. The remaining maturities of our long-term marketable securities range from one to three years and our short-term marketable securities include maturities that were greater than 90 days at the date purchased and have 12 months or less remaining at December 31, 2013 and 2012, respectively.

We classify our cash equivalents and marketable securities within Level 1 and Level 2 as we value our cash equivalents and marketable securities using quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we used to measure the fair value of money market funds were derived from quoted prices in active markets for identical assets or liabilities. Fair values for Level 2 investments are considered “Level 2” valuations because they are obtained from independent pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. Our procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from our independent pricing services against fair values obtained from another independent source.

There were no material realized gains or losses related to sales of our marketable securities for the years ended December 31, 2013, 2012 and 2011.

As of December 31, 2013, we have marketable securities with a total fair value of $168.8 million in a total gross unrealized loss position of $0.3 million. We consider the declines in market value of our marketable securities investment portfolio to be temporary in nature and do not consider any of our investments other-than-temporarily impaired. When evaluating an investment for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, and the our intent to sell, or whether it is more likely than not we will be required to sell the investment before recovery of the investment’s cost basis. During the years ended December 31, 2013, 2012 and 2011, we did not recognize any impairment charges. We did not have any material investments in marketable securities that were in a continuous unrealized loss position for 12 months or greater at December 31, 2013 or 2012.

Derivative Financial Instruments

In the normal course of business, we are exposed to the impact of foreign currency fluctuations, which we attempt to mitigate through the use of derivative instruments. Accordingly, we have entered into forward contracts to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. We do not use derivatives for trading or speculative purposes. In accordance with current accounting guidance on derivative instruments and hedging activities, we record all our derivative instruments as either an asset or liability measured at their fair value. Our derivative instruments are typically short-term in nature.

Our current forward contracts are not designated as hedges. Consequently, any gain or loss resulting from the change in fair value is recognized in the current period earnings. These gains or losses are offset by the exposure related to receivables and payables with our foreign subsidiaries. We recorded a net loss of $0.3 million and $0.7 million for the years ended December 31, 2013 and 2012, respectively, related to our forward contracts in our consolidated statements of operations in Other, net. The net cash received or paid related to our derivative instruments are classified as operating in our consolidated statements of cash flows, which is based on the objective of the derivative instruments. No derivative instruments were entered into or settled during the year ended December 31, 2011.

The following table shows the fair value and notional principal amounts of our outstanding or unsettled derivative instruments that are not designated as hedging instruments for the periods presented:

December 31, 2013

Balance Sheet Caption

Fair Value of
Derivative (2)

U.S. Dollar
Notional

(in thousands)

Asset

Liability

Foreign exchange-forward contracts (current)

Accrued and other current liabilities

(1)

$ —

$64

$5,164



				December 31, 2012
	Balance Sheet Caption			Fair Value of Derivative (2)				U.S. Dollar Notional
(in thousands)				Asset		Liability
Foreign exchange-forward contracts (current)		Accrued and other current liabilities	(1)	$	—	$	64	$	2,710

(1)	Current derivative contracts address foreign exchange fluctuations for the Euro versus the U.S. Dollar.

(2)	The fair value of our derivative liability is measured using Level 2 fair value inputs as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets, or observable market inputs.

Concentration of Credit Risk

Counterparties to currency exchange derivatives consist of major international financial institutions. We monitor our positions and the credit ratings of the counterparties involved and, by policy limits, the amount of credit exposure to any one party. While we may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, receivables from Expedia, trade payables, deferred merchant payables, short-term debt, accrued and other current liabilities and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value because of the short maturity of these instruments as reported on the consolidated balance sheets as of December 31, 2013 and December 31, 2012. The carrying value of the long-term borrowings outstanding on our Credit Agreement bear interest at a variable rate and therefore is also considered to approximate fair value.

We did not have any Level 3 assets or liabilities at December 31, 2013 or 2012.