NOTE 4: FINANCIAL INSTRUMENTS

Cash, Cash Equivalents and Marketable Securities

The following tables show our cash and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long-term marketable securities as of September 30, 2013 and December 31, 2012 (in thousands):


	September 30, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents(1)		Short-Term Marketable Securities		Long-Term Marketable Securities
Cash (1)	$	231,400	$	—	$	—		$	231,400	$	231,400	$	—	$	—
Level 1:

Money market funds		44,958		—		—			44,958		44,958		—		—


Subtotal		44,958		—		—			44,958		44,958		—		—


Level 2:
U.S. agency securities		38,522		13		(28	)		38,507		—		16,026		22,481
U.S. treasury securities		15,298		1		—			15,299		—		15,299		—
Certificates of deposit		19,200		22		—			19,222		—		16,221		3,001
Commercial paper		999		1		—			1,000		—		1,000		—
Corporate securities		240,755		77		(339	)		240,493		—		102,450		138,043
Municipal securities		5,001		—		—			5,001		—		5,001		—


Subtotal		319,775		114		(367	)		319,522		—		155,997		163,525


Total	$	596,133	$	114	$	(367	)	$	595,880	$	276,358	$	155,997	$	163,525


	December 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities		Long-Term Marketable Securities
Cash	$	141,460	$	—	$	—		$	141,460	$	141,460	$	—	$	—
Level 1:
Money market funds		215,052		—		—			215,052		215,052		—		—


Subtotal		215,052		—		—			215,052		215,052		—		—


Level 2:
U.S. agency securities		13,634		4		(3	)		13,635		—		7,635		6,000
Commercial paper		48,710		15		(22	)		48,703		9,999		38,704		—
Corporate securities		162,050		12		(180	)		161,882		1,004		67,630		93,248
Municipal securities		5,003		—		(2	)		5,001		—		5,001		—


Subtotal		229,397		31		(207	)		229,221		11,003		118,970		99,248


Total	$	585,909	$	31	$	(207	)	$	585,733	$	367,515	$	118,970	$	99,248

(1)

Total cash does not include $40.4 million of marketable securities which were sold during the period, but had not yet settled on report date. This amount was recorded to Receivable—sale of marketable securities on our consolidated balance sheet at September 30, 2013. This cash was received on October 1, 2013.

Our cash and cash equivalents consist of cash on hand in global financial institutions, money market funds and marketable securities with contractual maturity dates of 90 days or less at the date purchased. The remaining contractual maturity dates of our long-term marketable securities range from one to three years and our short-term marketable securities include contractual maturity dates that were greater than 90 days at the date purchased and have 12 months or less remaining at September 30, 2013.

We classify our cash equivalents and marketable securities within Level 1 and Level 2 as we value our cash equivalents and marketable securities using quoted market prices (Level 1) or alternative pricing sources (Level 2). The valuation technique we used to measure the fair value of money market funds was derived from quoted prices in active markets for identical assets or liabilities. Investments in U.S. Treasury securities are considered “Level 2” valuations because we have access to quoted prices, but do not have visibility into the volume and frequency of trading for all investments. Fair values for our U.S. agency securities, commercial paper, corporate securities, certificates of deposit and municipal securities are considered “Level 2” valuations because they are obtained from pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets.

There were no material realized gains or losses related to sales of our marketable securities for the three and nine months ended September 30, 2013 and 2012.

As of September 30, 2013, we have marketable securities with a total fair value of $165.1 million in a total gross unrealized loss position of $0.4 million. We consider the declines in market value of our marketable securities investment portfolio to be temporary in nature and do not consider any of our investments other-than-temporarily impaired. When evaluating an investment for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not we will be required to sell the investment before recovery of the investment’s cost basis. During the nine months ended September 30, 2013 and 2012, we did not recognize any impairment charges. We did not have any investments in marketable securities that were in a continuous unrealized loss position for 12 months or greater at September 30, 2013 or December 31, 2012.

Derivative Financial Instruments

In the normal course of business, we are exposed to the impact of foreign currency fluctuations, which we attempt to mitigate through the use of derivative instruments. Accordingly, we have entered into forward contracts to reduce the effects of fluctuating foreign currency exchange rates on our cash flows denominated in foreign currencies. We do not use derivatives for trading or speculative purposes. In accordance with current accounting guidance on derivative instruments and hedging activities, we record all our derivative instruments as either an asset or liability measured at their fair value. Our derivative instruments are typically short-term in nature.

Our current forward contracts are not designated as hedges. Consequently, any gain or loss resulting from the change in fair value is recognized in the current period earnings. These gains or losses are offset by the exposure related to receivables and payables with our foreign subsidiaries. We recorded a net loss of $1.2 million and $0.6 million for the three and nine month periods ended September 30, 2013, respectively, related to our forward contracts in our consolidated statement of operations in Other, net. We recorded a net loss of $0.3 million for the three and nine month periods ended September 30, 2012, respectively, related to our forward contracts in our consolidated statement of operations in Other, net. The net cash received or paid related to our derivative instruments are classified as operating in our consolidated statements of cash flows, which is based on the objective of the derivative instruments.

The following tables show the fair value and notional principal amounts of our outstanding or unsettled derivative instruments that are not designated as hedging instruments (in thousands):


	Balance Sheet Caption	September 30, 2013
		Fair Value of Derivative(2)				U.S. Dollar Notional
		Asset		Liability

Foreign exchange-forward contracts (current)	Accrued and other current liabilities (1)	$	—	$	160	$	6,604


	Balance Sheet Caption	December 31, 2012
		Fair Value of Derivative(2)				U.S. Dollar Notional
		Asset		Liability

Foreign exchange-forward contracts (current)	Accrued and other current liabilities (1)	$	—	$	64	$	2,710

(1)	Derivative contracts address foreign exchange fluctuations for the Euro versus the U.S. dollar.

(2)	The fair value of our derivatives are measured using Level 2 fair value inputs, as we use a pricing model that takes into account the contract terms as well as current foreign currency exchange rates in active markets.

Concentration of Credit Risk

Counterparties to currency exchange derivatives consist of major international financial institutions. We monitor our positions and the credit ratings of the counterparties involved and, by policy limits, the amount of credit exposure to any one party. While we may be exposed to potential losses due to the credit risk of non-performance by these counterparties, losses are not anticipated.

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, related party receivables, trade payables, deferred merchant payables, short-term debt, accrued and other current liabilities and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value because of the short maturity of these instruments as reported on our consolidated balance sheets as of September 30, 2013 and December 31, 2012. The carrying value of the long-term borrowings outstanding on our Credit Agreement bears interest at a variable rate and therefore is also considered to approximate fair value.

We did not have any Level 3 assets or liabilities for the periods ended September 30, 2013 and December 31, 2012.