Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset and liability in an orderly transaction between market participants at the measurement date. The Company estimates the fair value of its assets and liabilities utilizing an established three-level hierarchy. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as follows:

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

Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.

Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that are unable to be corroborated with observable market data.

The fair value of our financial assets and liabilities is determined by reference to market data and other valuation techniques as appropriate. We believe the fair value of our financial instruments, which are principally cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, approximates their recorded values. Our assets and liabilities measured at fair value on a recurring basis are described below:

Interest rate swap contracts

In August 2013, we entered into forward starting interest rate swap contracts with an aggregate notional value of $500.0 million. In October 2013, we entered into additional forward starting interest rate swap contracts with an aggregate notional value of $200.0 million. These hedges become effective in April 2015 and mature in January 2018. We entered into the forward starting interest rate swap contracts, which are designated as cash flow hedges of the future interest payment transactions in accordance with ASC 815, Derivatives and Hedging, in order to eliminate the variability of cash flows attributable to the LIBOR component of interest expense to be paid on our variable-rate debt. Under these hedges, we will pay interest on the notional amount of debt at a weighted average fixed rate of 2.151% and receive interest on the notional amount at the greater of 1% or the then prevailing three-month LIBOR rate beginning April 2015.

These hedges are highly effective in offsetting changes in our future expected cash flows due to fluctuation in the three-month LIBOR rate associated with the notional amount of our variable-rate debt. The effectiveness of these hedges is measured quarterly on a retrospective basis by comparing the cumulative change in the hedging instrument's fair value to the change in the hedged transaction's fair value. To the extent these hedges have no ineffectiveness, all gains and losses from these hedges are recorded in other comprehensive income (loss) until the future underlying interest payment transactions occur. Any realized gains or losses resulting from the hedges will be recognized (together with the hedged transaction) as interest expense within our Consolidated Statements of Operations and Comprehensive Income beginning in in June 2015. For the year ended December 31, 2013, we recorded a loss, net of tax, representing the change in fair value associated with these hedges of $1.0 million in other comprehensive income (loss) in our Consolidated Statements of Operations and Comprehensive Income. The fair value of these hedges as of December 31, 2013 is $0.4 million recorded in other assets and $1.9 million recorded in other long-term liabilities in our Consolidated Balance Sheets.

Interest rate swaption contract

On January 30, 2014, we entered into a swaption contract with an aggregate notional value of $150.0 million. The swaption gives us the right, but not the obligation, to enter into a swap in which we would pay a fixed rate of 2.151% and receive interest on the notional amount of a floating LIBOR rate. We paid a premium of $0.9 million at the time we entered into the swaption and have no additional payment obligations. We elected to have the swaption settle for cash on its expiration date in April 2015. The cash settlement value depends on the extent to which prevailing LIBOR swap rates exceed the fixed rate on the swaption. To the extent the prevailing swap rate on the expiration date exceeds the swaption rate, a payment would be due to us which would effectively reduce our future interest costs. To the extent the prevailing swap rate is at or below the swaption rate we would not exercise the swaption and it would expire with no further cash payment from either party.

We have determined the swaption will be highly effective in offsetting our exposure to the variability of the three-month LIBOR rate associated with our variable rate debt. The effectiveness of the swaption is measured quarterly on a retrospective basis by comparing the cumulative change in the hedging instrument's fair value to the change in the underlying hedged transaction's fair value.

In accordance with ASC 815, Derivatives and Hedging, we have designated the intrinsic value associated with the swaption contract as a qualifying hedge. We have elected to exclude the time value, inclusive of premium paid, from our qualifying hedging relationship. As a result, the time value of the contract will be amortized over the period of the contract and recognized as interest expense within our Consolidated Statements of Operations and Comprehensive Income. We will defer all gains and losses associated with the intrinsic value of the contract in other comprehensive income (loss) until its expiration date. Realized gain, if any, owed by the counterparty at expiration will be recognized as a reduction to interest expense within our Consolidated Statements of Operations and Comprehensive Income by applying the effective interest method for the applicable periods

Foreign currency forward contracts

During 2012, we entered into foreign currency forward contracts for the sale of Euros for U.S. dollars at a weighted average rate of 1.319 to hedge a portion of the net investment in one of our subsidiaries that is denominated in Euros. Some of these foreign currency forward contracts settled in 2012. In May 2013, we settled the remaining €20.0 million in aggregate notional amount of the foreign currency forward contracts, which had a weighted average rate of 1.269%.

We designated the forward contracts as qualified hedges in accordance with ASC 815, Derivatives and Hedging. Gains and losses from the foreign currency forward contracts are recorded in other comprehensive income (loss) on our Consolidated Balance Sheets until the investment is liquidated. As of December 31, 2013, we recorded a loss net of tax associated with the forward contracts of $1.1 million in other comprehensive income (loss) on our Consolidated Statements of Operations and Comprehensive Income.

Other

In accordance with ASC 323, Investments - Equity Method and Joint Ventures, we record our share of a derivative instrument held by LNS, an entity in which we have a 20% equity investment. Changes in the fair value of the derivative instrument are recorded by LNS within other comprehensive income on LNS's statement of comprehensive income. As of December 31, 2013, we recorded a loss associated with our share of this derivative instrument of $0.1 million in other comprehensive income (loss) on our Consolidated Statements of Operations and Comprehensive Income and in equity investments on our Consolidated Balance Sheet.

Notes Receivable

The fair value of notes receivable is estimated by discounting expected future cash flows using current interest rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities. At December 31, 2013 and 2012, the fair value of the notes receivable, net, approximated the carrying value.

Debt

We believe that the fair value of our fixed interest rate debt approximated $963 million and $987 million as of December 31, 2013 and 2012, respectively, based on quoted market prices for our securities. We believe that the fair value of our variable interest rate debt approximated $2,311.5 million as of December 31, 2013, based on quoted market prices for our securities. We believe that the fair value of our variable interest rate debt as of December 31, 2012 approximated its carrying value, based on quoted market prices for our securities.

Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

The following are the classes of assets and liabilities measured at fair value on a non-recurring basis at December 31, 2013:



	Level 1	Level 2	Level 3	Total at December 31, 2013	Total Loss	Valuation Technique	Weighted-Average Discount Rate

Property and Equipment	$—	$—	$10.0	$7.5	$(2.5)	Discounted Cash Flow	9%

Equity Investment in GLB	$—	$—	$38.3	$31.9	$(6.4)	Discounted Cash Flow/Market Approach	10%

In accordance with ASC 360, Property, Plant, and Equipment, machinery, equipment and deferred installation costs with a carrying amount of $10.0 million were written down to a fair value of $7.5 million, resulting in an impairment charge of $2.5 million, which is included in depreciation and amortization expense in our Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2013.

During the fourth quarter of 2013, we concluded that indicators of potential impairment were present related to our investment in GLB based on continued declines in the operating performance and future projections of its business. To measure the recoverability of the investment, we estimated the fair value of the investment using both a discounted cash flow analysis and a market approach. Based on our valuation, we determined the decline in fair value of our investment in GLB to be other than temporary and that the carrying value of the investment in GLB exceeded its fair value by $6.4 million. We recorded an impairment charge of $6.4 million in the fourth quarter of 2013, which is reflected in earnings from equity investments in our Consolidated Statements of Operations and Comprehensive Income.

There were no other assets or liabilities that were measured at fair value on a non-recurring basis as of December 31, 2013.