Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis



(In millions)	Balance			Level 1		Level 2			Level 3
September 30, 2014
Assets:
Equity securities	$	15.1		$	15.1	$	—		$	—
Government bonds	68.4			68.4		—			—
Total assets at fair value	$	83.5		$	83.5	$	—		$	—

Liabilities:
Derivative instruments	$	(45.1	)	$	—	$	(45.1	)	$	—

December 31, 2013
Assets:
Equity securities	$	19.6		$	19.6	$	—		$	—
Government bonds	72.1			72.1		—			—
Total assets at fair value	$	91.7		$	91.7	$	—		$	—

Liabilities:
Derivative instruments	$	(165.9	)	$	—	$	(165.9	)	$	—

Investments

Investments consist of equity and debt securities that are traded in active markets, have readily determined market values and have maturity dates of greater than three months from the date of purchase. A portion of these investments is included in prepayments and other current assets while the majority is in deferred charges and other in our Consolidated Condensed Balance Sheets. Gross unrealized gains and losses on marketable securities at September 30, 2014 and December 31, 2013 were not material.

Derivative Instruments

The estimated fair values of our derivative instruments are derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. Our derivatives are recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative is an asset, or adjusted for the credit rating of the Company if the derivative is a liability. As of September 30, 2014, derivative instruments are included in accrued expenses in our Consolidated Condensed Balance Sheets. As of December 31, 2013, derivative instruments were included in deferred credits and other.

Interest Rate Swap Agreements

We use interest rate swaps to manage the mix of our debt between fixed and variable rate instruments. As of September 30, 2014, we had eight interest rate swap agreements outstanding with notional amounts totaling $5,750.0 million that were not designated as accounting hedges. These interest rate swaps reset monthly or quarterly and expire on January 25, 2015. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt. Changes in the variable interest rates to be paid or received pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows. Changes in the fair value of the swap agreements are recognized in interest expense.

Impact on Consolidated Condensed Financial Statements

None of our derivative instruments are offset, and the fair values of assets and liabilities are recognized in the Consolidated Condensed Balance Sheets. As of September 30, 2014 and December 31, 2013, none of our derivative instruments were designated as accounting hedges.

During the nine months ended September 30, 2013, we reclassified $3.9 million from AOCL as an increase to interest expense related to derivatives designated as hedging instruments.

Effect of Non-designated Derivative Instruments on Net Loss

(In millions)		Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives not designated as hedging instruments	Location of Loss Recognized in Net Loss	2014		2013		2014		2013
Net periodic cash settlements and accrued interest ⁽¹⁾	Interest expense	$	44.8	$	43.4	$	132.5	$	128.3
Total expense related to derivatives	Interest expense	2.9		9.3		11.8		27.7

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⁽¹⁾	The derivative settlements under the terms of the interest rate swap agreements are recognized as interest expense and are paid monthly or quarterly.

Items Measured at Fair Value on a Non-recurring Basis

As of September 30, 2014, the total of our intangible and tangible assets measured at fair value was $1,135.8 million, and we recorded impairments charges related to these assets totaling $524.5 million for the nine months ended September 30, 2014. Market and income approaches were used to value the intangible and tangible assets. Inputs included an expected range of market values, probability estimated by management that each value could be achieved, expected cash flows, recent comparable transactions, discounted cash flows, discounted cash flows, discount rate, royalty rate, growth rate, and tax rate.

We have contingent earnout liabilities primarily related to the CIE acquisitions of Pacific Interactive. As of September 30, 2014, the total fair value of these liabilities was $67.3 million, and the fair value of these liabilities increased by $31.5 million for the nine months ended September 30, 2014.

We classify the items measured at fair value on a non-recurring basis within level 3 in the fair value hierarchy.