3. Fair Value of Financial Instruments

The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Such transactions to sell an asset or transfer a liability are assumed to occur in the principal or most advantageous market for the asset or liability. Accordingly, fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant rather than from a reporting entity’s perspective.

The Company reports assets and liabilities that are measured at fair value using a three level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date.

Level 2—Inputs are: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.); and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3—Unobservable inputs that reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.

In accordance with the fair value hierarchy described above, the following tables show the fair value of the Company’s financial assets and liabilities that are required to be measured at fair value, in thousands of dollars:


	Fair Value Measurements at
	September 30, 2018
	(unaudited)
					Significant
	Total Carrying		Quoted Prices		Other		Significant
	Value at		in Active		Observable		Unobservable
	September 30,		Markets		Inputs		Inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	123,818	$	123,818	$	—	$	—
Marketable securities		156,407		263		156,144		—
Long term marketable securities:
Corporate debt securities		457,183		690		456,493		—
Government debt securities		3,121		—		3,121		—
Other non-current assets:
Marketable securities - restricted (SERP)		386		1		385		—
Total assets at fair value	$	740,915	$	124,772	$	616,143	$	—


	Fair Value Measurements at
	December 31, 2017
					Significant
	Total Carrying		Quoted Prices		Other		Significant
	Value at		in Active		Observable		Unobservable
	December 31,		Markets		Inputs		Inputs
	2017		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	100,304	$	100,304	$	—	$	—
Marketable securities		39,736		2,118		37,618		—
Long term marketable securities:
Corporate debt securities		132,477		448		132,029		—
Government debt securities		1,161		—		1,161		—
Other non-current assets:
Marketable securities - restricted (SERP)		335		—		335		—
Total assets at fair value	$	274,013	$	102,870	$	171,143	$	—

The fair value of the restricted marketable securities is included within other non-current assets in the consolidated balance sheets.

The Company’s Level 1 assets include cash held with banks, certificates of deposit, money market funds and investment grade corporate and government debt securities.

Level 2 assets include the SERP (Supplemental Executive Retirement Plan) assets, commercial paper and investment grade corporate and government debt securities and other fixed income securities. Level 2 securities are valued using third-party pricing sources that apply applicable inputs and other relevant data in their models to estimate fair value.

The carrying value, face value and estimated fair value of the 2023 Notes were approximately $325.7 million, $402.5 million and $450.7 million, respectively, as of September 30, 2018. The fair value was estimated based on actual trade information as well as quoted prices provided by bond traders and are characterized within Level 2 of the fair value hierarchy.

The carrying amounts of other financial instruments, including accounts receivable, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

Unrestricted marketable securities held by the Company were as follows, in thousands of dollars:


At September 30, 2018 (unaudited):
			Gross	Gross
	Amortized		Unrealized	Unrealized
Available for Sale	Cost		Gains	Losses	Fair Value
Corporate and government debt securities	$	621,436	6	(4,731)	$	616,711


At December 31, 2017:
			Gross	Gross
	Amortized		Unrealized	Unrealized
Available for Sale	Cost		Gains	Losses	Fair Value
Corporate and government debt securities	$	174,235	48	(909)	$	173,374

The contractual maturities of the unrestricted available for sale marketable securities held by the Company were as follows, in thousands of dollars:


	September 30,
	2018
	(unaudited)
Less Than 1 Year	$	156,407
1 year to 2 years		169,074
2 year to 3 years		161,614
3 years to 4 years		129,616
Greater Than 4 Years		—
Total	$	616,711

The Company has not experienced any other-than-temporary losses on its marketable securities and restricted marketable securities. The cost of securities sold is calculated using the specific identification method.