FAIR VALUES OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2014

NOTE 7—FAIR VALUES OF FINANCIAL INSTRUMENTS

The valuation methodologies we use to measure the fair values of our derivatives and available-for-sale securities are as follows:

Derivatives

Level 2 derivative assets and liabilities primarily include over-the-counter forward contracts, largely consisting of foreign currency derivative instruments. Where applicable, the value of these derivative assets and liabilities is computed by discounting the projected future cash flow amounts to present value using market-based observable inputs, including foreign exchange forward and spot rates, interest rates and counterparty performance risk adjustments.

At December 31, 2014, we had forward contracts outstanding to purchase or sell foreign currencies with a total notional value of $844.3 million and a total liability position fair value of $46.9 million.

Available-for-Sale Securities

The following is a summary of our available-for-sale securities measured at fair value:

	December 31, 2014
	Total		Level 1		Level 2		Level 3
	(in thousands)
Mutual funds⁽¹⁾	$	2,216	$	—	$	2,216	$	—
Commercial paper		1,699		—		1,699		—

Total	$	3,915	$	—	$	3,915	$	—

	December 31, 2013
	Total		Level 1		Level 2		Level 3
	(in thousands)
Mutual funds⁽¹⁾	$	2,173	$	—	$	2,173	$	—
Commercial paper		3,699		—		3,699		—
Asset-backed securities and collateralized mortgage obligations⁽²⁾		7,639		—		2,082		5,557

Total	$	13,511	$	—	$	7,954	$	5,557

(1)	Various U.S. equities and other investments managed under mutual funds

(2)	Asset-backed and mortgage-backed securities with maturities of up to 26 years

Our Level 2 investments consist primarily of commercial paper, asset-backed commercial paper notes backed by a pool of mortgage-backed securities and mutual funds. The fair value of our Level 2 investments was determined using a market approach which is based on quoted prices and other information for similar or identical instruments.

Our Level 3 investment consists of asset-backed commercial paper notes backed by a pool of mortgage-backed securities. The fair value of this Level 3 investment was based on the calculation of an overall weighted-average valuation, using the prices of the underlying individual securities. Individual securities in the pool were valued based on market observed prices, where available. If market prices were not available, prices of similar securities backed by similar assets were used.

Changes in Level 3 Instrument

The following is a summary of the changes in our Level 3 instrument measured on a recurring basis for the years ended December 31, 2014 and 2013:

	December 31,
	2014			2013
	(in thousands)
Balance at beginning of period	$	5,557		$	6,343
Total realized and unrealized gains (losses)		(375	)		484
Sales and principal repayments		(5,182	)		(1,270	)
Balance at end of period	$	—		$	5,557

Other Financial Instruments

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Cash and cash equivalents and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying consolidated balance sheets for cash, cash equivalents and restricted cash and cash equivalents approximate their fair values and are classified as Level 1 within the fair value hierarchy.

Short-term and long-term debt. The fair value of debt instruments is classified as Level 2 within the fair value hierarchy and is valued using a market approach based on quoted prices for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value these instruments based on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms.

Forward contracts. The fair value of forward contracts is classified as Level 2 within the fair value hierarchy and is valued using observable market parameters for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value forward contracts, which discounts future cash flows based on current market expectations and credit risk.

The estimated fair values of certain of our financial instruments are as follows:

	December 31, 2014						December 31, 2013
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(In thousands)
Balance Sheet Instruments
Cash and cash equivalents	$	665,309		$	665,309		$	118,702		$	118,702
Restricted cash and cash equivalents	$	187,585		$	187,585		$	23,652		$	23,652
Investments	$	3,915		$	3,915		$	13,511		$	13,511
Debt	$	(891,547	)	(737,980		)	$	(88,562	)	$	(90,005	)
Forward contracts	$	(46,912	)	$	(46,912	)	$	(28,767	)	$	(28,767	)

See Note 1 “Basis of Presentation and Significant Accounting Policies—Impairment Review,” for a description of significant Level 3 inputs used in development of fair value of nonfinancial assets during the year ended December 31, 2014.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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