Fair Value Measurements

3 Months Ended

Mar. 31, 2016

FAIR VALUE MEASUREMENTS

The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s financial assets and liabilities as of March 31, 2016 that are measured at fair value on a recurring basis were as follows (in thousands):



	Level 1		Level 2		Level 3
ASSETS
Marketable securities⁽¹⁾	$	110,894	$	—	$	—
Derivative instruments (included in other receivables)	199		228		—
Construction reserve funds	255,350		—		—
LIABILITIES
Short sale of marketable securities⁽¹⁾ (included in other current liabilities)	5,053		—		—
Derivative instruments (included in other current liabilities)	1,663		212		—
Exchange option liability on subsidiary convertible senior notes	—		—		5,747

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(1)	Marketable security losses, net include unrealized losses of $24.5 million and $0.2 million for the three months ended March 31, 2016 and 2015, respectively, related to marketable security positions held by the Company as of March 31, 2016.

Level 3 Inputs. The fair value of the exchange option liability on subsidiary convertible senior notes is estimated with significant inputs that are both observable and unobservable in the market and therefore is considered a Level 3 fair value measurement. Observable inputs include market quotes, current interest rates, benchmark yield curves, volatility, quoted prices of securities with similar characteristics and historical dividends. The significant unobservable input used in the fair value measurement is the probability assessment of a SMH Spin-off. In the fair value measurement, holding the observable inputs constant, a significant increase in the probability of a SMH Spin-off would result in a significantly lower exchange option liability.

The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2016 were as follows (in thousands):



			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3
ASSETS
Cash and cash equivalents	$	496,473	$	496,473	$	—	$	—
Investments, at cost, in 50% or less owned companies (included in other assets)	16,045		see below
Notes receivable from third parties (included in other receivables and other assets)	22,574		see below
LIABILITIES
Long-term debt, including current portion⁽¹⁾	1,054,019		—		1,019,076		—

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(1)	The estimated fair value includes the embedded conversion options on the Company's 2.5% and 3.0% Convertible Senior Notes.

The carrying value of cash and cash equivalents approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was not practicable to estimate the fair value of the Company’s notes receivable from third parties as the overall returns are uncertain due to certain provisions for additional payments contingent upon future events. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The Company’s financial assets and liabilities as of March 31, 2016 that are measured at fair value on a recurring basis were as follows (in thousands):



	Level 1		Level 2		Level 3
ASSETS
Marketable securities⁽¹⁾	$	110,894	$	—	$	—
Derivative instruments (included in other receivables)	199		228		—
Construction reserve funds	255,350		—		—
LIABILITIES
Short sale of marketable securities⁽¹⁾ (included in other current liabilities)	5,053		—		—
Derivative instruments (included in other current liabilities)	1,663		212		—
Exchange option liability on subsidiary convertible senior notes	—		—		5,747

______________________


(1)	Marketable security losses, net include unrealized losses of $24.5 million and $0.2 million for the three months ended March 31, 2016 and 2015, respectively, related to marketable security positions held by the Company as of March 31, 2016.

Estimated Fair Value Of Other Financial Assets And Liabilities

The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2016 were as follows (in thousands):



			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3
ASSETS
Cash and cash equivalents	$	496,473	$	496,473	$	—	$	—
Investments, at cost, in 50% or less owned companies (included in other assets)	16,045		see below
Notes receivable from third parties (included in other receivables and other assets)	22,574		see below
LIABILITIES
Long-term debt, including current portion⁽¹⁾	1,054,019		—		1,019,076		—

______________________


(1)	The estimated fair value includes the embedded conversion options on the Company's 2.5% and 3.0% Convertible Senior Notes.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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