Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Fair Value of Financial Instruments

Fair Value of Financial Instruments

(7) The fair value hierarchy established by ASC 820, “Fair Value Measurement,” prioritizes the use of inputs used in valuation techniques into the following three levels:

·  Level 1	–	quoted prices in active markets for identical assets and liabilities
·  Level 2	–	inputs other than quoted prices in active markets for identical assets and liabilities that are observable, either directly or indirectly
·  Level 3	–	unobservable inputs

The following table presents, for each of the fair value hierarchy levels required under ASC 820-10, the company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012:

	March 31, 2013										December 31, 2012
	Fair Value Hierarchy										Fair Value Hierarchy
(in thousands)	Total		Level 1			Level 2			Level 3		Total		Level 1			Level 2			Level 3
Assets(1):
Cash and cash equivalents	$	11,245	$	11,245	(2)	$	—		$	—	$	14,457	$	14,457	(2)	$	—		$	—
Marketable securities, current	105,375		—			105,375		(3)	—		102,439		—			102,439		(3)
Deferred compensation trusts	93,173		93,173		(4)	—			—		80,842		80,842		(4)	—			—
Marketable securities, noncurrent	319,150		—			319,150		(5)	—		318,355		—			318,355		(5)	—
Derivative assets(6)
Commodity swap forward contracts	53		—			53			—		95		—			95			—
Foreign currency contracts	3,404		—			3,404			—		640		—			640			—
Liabilities(1):
Derivative liabilities(6)
Commodity swap forward contracts	$	1	$	—		$	1		$	—	$	28	$	—		$	28		$	—
Foreign currency contracts	328		—			328			—		2,151		—			2,151			—

(1) The company measures and reports assets and liabilities at fair value utilizing pricing information received from third parties. The company performs procedures to verify the reasonableness of pricing information received for significant assets and liabilities classified as Level 2.

(2) Consists primarily of registered money market funds valued at fair value. These investments represent the net asset value of the shares of such funds as of the close of business at the end of the period.

(3) Consists of investments in U.S. agency securities, U.S. Treasury securities, corporate debt securities and other debt securities that are valued based on pricing models, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets.

(4) Consists primarily of registered money market funds and an equity index fund valued at fair value. These investments, which are trading securities, represent the net asset value of the shares of such funds as of the close of business at the end of the period.

(5) Consists of investments in U.S. agency securities, U.S. Treasury securities, corporate debt securities and other debt securities with maturities ranging from one year to five years that are valued based on pricing models, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets.

(6) See Note 8 for the classification of commodity swap contracts and foreign currency forward contracts on the Condensed Consolidated Balance Sheet. Commodity swap contracts and foreign currency forward contracts are estimated using standard pricing models with market-based inputs, which take into account the present value of estimated future cash flows.

All of the company’s financial instruments carried at fair value are included in the table above. All of the above financial instruments are available-for-sale securities except for those held in the deferred compensation trusts (which are trading securities) and derivative assets and liabilities. The company has determined that there was no other-than-temporary impairment of available-for-sale securities with unrealized losses, and the company expects to recover the entire cost basis of the securities. The available-for-sale securities are made up of the following security types as of March 31, 2013: money market funds of $11 million, U.S. agency securities of $165 million, U.S. Treasury securities of $65 million, corporate debt securities of $186 million, and other securities of $9 million. As of December 31, 2012, available-for-sale securities consisted of money market funds of $14 million, U.S. agency securities of $161 million, U.S. Treasury securities of $67 million, corporate debt securities of $184 million, and other securities of $9 million. The amortized cost of these available-for-sale securities is not materially different than the fair value. During the three months ended March 31, 2013 and 2012, proceeds from the sales and maturities of available-for-sale securities were $75 million and $178 million, respectively.

The carrying values and estimated fair values of the company’s financial instruments that are not required to be measured at fair value in the Condensed Consolidated Balance Sheet are as follows:

		March 31, 2013				December 31, 2012
	Fair Value	Carrying		Fair		Carrying		Fair
(in thousands)	Hierarchy	Value		Value		Value		Value
Assets:
Cash(1)	Level 1	$	1,366,670	$	1,366,670	$	1,343,866	$	1,343,866
Cash equivalents(2)	Level 2	636,885		636,885		796,218		796,218
Marketable securities, current(3)	Level 2	55,067		55,067		34,688		34,688
Notes receivable, including noncurrent portion(4)	Level 3	34,408		34,408		34,471		34,471
Liabilities:
3.375% Senior Notes(5)	Level 2	$	496,274	$	523,783	$	496,164	$	527,219
1.5% Convertible Senior Notes(5)	Level 2	18,472		44,386		18,472		39,392
5.625% Municipal Bonds(5)	Level 2	—		—		17,795		17,878
Notes payable, including noncurrent portion(6)	Level 3	—		—		8,566		8,566

(1) Cash consists of bank deposits. Carrying amounts approximate fair value.

(2) Cash equivalents consist of held-to-maturity time deposits with maturities of three months or less at the date of purchase. The carrying amounts of these time deposits approximate fair value because of the short-term maturity of these instruments.

(3) Marketable securities, current consist of held-to-maturity time deposits with original maturities greater than three months that will mature within one year. The carrying amounts of these time deposits approximate fair value because of the short-term maturity of these instruments. Amortized cost is not materially different from the fair value.

(4) Notes receivable are carried at net realizable value which approximates fair value. Factors considered by the company in determining the fair value include current interest rates, the term of the note, the credit worthiness of the borrower and any collateral pledged as security. Notes receivable are periodically assessed for impairment.

(5) The fair value of the 3.375% Senior Notes, 1.5% Convertible Senior Notes and 5.625% Municipal Bonds are estimated based on quoted market prices for similar issues.

(6) Notes payable consist primarily of equipment loans with banks at various interest rates with maturities ranging from less than one year to four years. The carrying value of notes payable approximates fair value. Factors considered by the company in determining the fair value include the company’s current credit rating, current interest rates, the term of the note and any collateral pledged as security.