FINANCIAL INSTRUMENTS

Marketable Securities

At September 30, 2018 and December 31, 2017, the fair value of marketable securities are as follows:



	September 30, 2018		December 31, 2017
	(In thousands)
Available-for-sale marketable debt securities	$	208,005	$	4,995
Marketable equity security	550		—
Total marketable securities	$	208,555	$	4,995

At September 30, 2018, current available-for-sale marketable debt securities are as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Treasury discount notes	$	171,974	$	—	$	(10	)	$	171,964
Commercial paper	36,041		—		—			36,041
Total available-for-sale marketable debt securities	$	208,015	$	—	$	(10	)	$	208,005

The contractual maturities of debt securities classified as current available-for-sale at September 30, 2018 are within one year. There are no investments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of September 30, 2018.

At December 31, 2017, current available-for-sale marketable debt securities are as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Commercial paper	$	4,995	$	—	$	—	$	4,995
Total available-for-sale marketable debt securities	$	4,995	$	—	$	—	$	4,995

The following table presents the proceeds from maturities and sales of available-for-sale marketable debt securities:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In thousands)
Proceeds from maturities and sales of available-for-sale marketable debt securities	$	115,000	$	15,000	$	125,000	$	114,350

The specific-identification method is used to determine the cost of available-for-sale marketable debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss) into earnings. There were no gross realized gains or losses from the maturities and sales of available-for-sale marketable debt securities for the three and nine months ended September 30, 2018 and 2017.

Equity securities without readily determinable fair values

At September 30, 2018 and December 31, 2017, the carrying values of the Company's investments in equity securities without readily determinable fair values totaled $216.4 million and $63.4 million, respectively, and are included in "Long-term investments" in the accompanying consolidated balance sheet. Following the adoption of the measurement alternative under ASU No. 2016-01 on January 1, 2018, the Company's equity securities without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. All gains and losses on equity securities without readily determinable fair values, realized and unrealized, are recognized in "other income (expense), net" in the accompanying consolidated statement of operations.

The following table presents a summary of realized and unrealized gains and losses recorded in other income (expense), net, as adjustments to the carrying value of equity securities without readily determinable fair values held as of September 30, 2018. The gross unrealized gains relate to the Company's remaining investments in an investee following the sale of a portion of the Company's investment during the second quarter of 2018.



	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
	(In thousands)
Upward adjustments (gross unrealized gains)	$	—	$	128,786
Downward adjustments (including impairment) (gross unrealized losses)	—		(2,588		)
Total	$	—	$	126,198

Realized and unrealized gains and losses for the Company's marketable equity security and investments without a readily determinable fair value for the three and nine months ended September 30, 2018 are as follows:



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	(In thousands)
Realized gains, net, for equity securities sold	$	702		$	27,874
Unrealized (losses) gains, net, on equity securities held	(115		)	126,444
Total gains recognized, net, in other income, net	$	587		$	154,318

Fair Value Measurements

The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:


•	Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.

•

Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.


•	Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. See below for a discussion of fair value measurements made using Level 3 inputs.

The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:



	September 30, 2018
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	745,046	$	—	$	—		$	745,046
Treasury discount notes	—		194,843		—			194,843
Commercial paper	—		157,808		—			157,808
Time deposits	—		105,034		—			105,034
Marketable securities:
Treasury discount notes	—		171,964		—			171,964
Commercial paper	—		36,041		—			36,041
Marketable equity security	550		—		—			550
Total	$	745,596	$	665,690	$	—		$	1,411,286

Liabilities:
Contingent consideration arrangements	$	—	$	—	$	(1,980	)	$	(1,980	)



	December 31, 2017
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	780,425	$	—	$	—		$	780,425
Treasury discount notes	—		100,457		—			100,457
Commercial paper	—		215,325		—			215,325
Time deposits	—		60,000		—			60,000
Certificates of deposit	—		6,195		—			6,195
Marketable securities:
Commercial paper	—		4,995		—			4,995
Total	$	780,425	$	386,972	$	—		$	1,167,397

Liabilities:
Contingent consideration arrangements	$	—	$	—	$	(2,647	)	$	(2,647	)

The Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are its contingent consideration arrangements.



	Contingent Consideration Arrangements
	Three Months Ended September 30,
	2018			2017
	(In thousands)
Balance at July 1	$	(1,910	)	$	(24,829	)
Total net losses:
Included in earnings:
Fair value adjustments	(55		)	(60		)
Included in other comprehensive loss	(15		)	(332		)
Settlements	—			23,429
Balance at September 30	$	(1,980	)	$	(1,792	)



	Contingent Consideration Arrangements
	Nine Months Ended September 30,
	2018			2017
	(In thousands)
Balance at January 1	$	(2,647	)	$	(33,871	)
Total net losses:
Included in earnings:
Fair value adjustments	(265		)	(4,945		)
Included in other comprehensive loss	(16		)	(1,405		)
Settlements	948			38,429
Balance at September 30	$	(1,980	)	$	(1,792	)

Contingent Consideration Arrangements

As of September 30, 2018, there are three contingent consideration arrangements related to business acquisitions. Two of the contingent consideration arrangements have limits as to the maximum amount that can be paid. The maximum contingent payments related to these arrangements is $32.0 million and the gross fair value of these arrangements, before the unamortized discount, at September 30, 2018 is $2.0 million. No payment is expected for the one contingent consideration arrangement which does not have a limit on the maximum earnout.

The contingent consideration arrangements are based upon earnings performance and/or operating metrics. The Company generally determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, because the arrangements were initially long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligation to determine the net amount reflected in the consolidated financial statements. The fair values of the contingent consideration arrangements at both September 30, 2018 and December 31, 2017 reflect discount rates of 12%.

The fair value of contingent consideration arrangements is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, including the accretion of the discount, if applicable, and changes are recognized in “General and administrative expense” in the accompanying consolidated statement of operations. The contingent consideration arrangement liability at September 30, 2018 and December 31, 2017 includes a current portion of $2.0 million and $0.6 million, respectively, and non-current portion of $2.0 million at December 31, 2017, which are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet. At September 30, 2018, there is no non-current portion of the contingent consideration arrangement liability.

Assets measured at fair value on a nonrecurring basis

The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity method investments, are adjusted to fair value only when an impairment charge is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.

Financial instruments measured at fair value only for disclosure purposes

The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:



	September 30, 2018						December 31, 2017
	Carrying Value			Fair Value			Carrying Value			Fair Value
	(In thousands)
Current portion of long-term debt	$	(13,750	)	$	(13,664	)	$	(13,750	)	$	(13,802	)
Long-term debt, net^(a)	(1,983,993		)	(2,353,160		)	(1,979,469		)	(2,168,108		)

_________________


^(a)	At September 30, 2018 and December 31, 2017, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $93.9 million and $109.1 million, respectively.

The fair value of long-term debt, including the current portion, is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.