XML 22 R12.htm IDEA: XBRL DOCUMENT

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2020

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Marketable Securities

At March 31, 2020 and December 31, 2019, the fair value of marketable securities are as follows:



	March 31, 2020		December 31, 2019
	(In thousands)
Available-for-sale marketable debt securities	$	49,912	$	19,993
Total marketable securities	$	49,912	$	19,993

At March 31, 2020, current available-for-sale marketable debt securities are as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Treasury discount notes	$	49,924	$	—	$	(12	)	$	49,912
Total available-for-sale marketable debt securities	$	49,924	$	—	$	(12	)	$	49,912

The contractual maturities of debt securities classified as current available-for-sale at March 31, 2020 are within one year. There are no investments in available-for-sale marketable debt securities that have been in a continuous unrealized loss position for longer than twelve months as of March 31, 2020 and December 31, 2019.

At December 31, 2019, current available-for-sale marketable debt securities were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
Commercial paper	19,993		—		—		19,993
Total available-for-sale marketable debt securities	$	19,993	$	—	$	—	$	19,993

Equity Securities Without Readily Determinable Fair Values

At March 31, 2020 and December 31, 2019, the carrying values of the Company's investments in equity securities without readily determinable fair values totaled $301.6 million and $353.1 million, respectively, and are included in "Long-term investments" in the accompanying consolidated balance sheet. During the first quarter of 2020, the Company recorded unrealized impairments of $51.5 million related to certain equity securities without readily determinable fair values due to the impact of COVID-19. All gains and losses on equity securities without readily determinable fair values, realized and unrealized, are recognized in "Other (expense) income, net" in the accompanying consolidated statement of operations.

The following table presents a summary of unrealized gains and losses recorded in "Other (expense) income, net," as adjustments to the carrying value of equity securities without readily determinable fair values held as of March 31, 2020 and 2019.



	Three Months Ended March 31,
	2020			2019
	(In thousands)
Upward adjustments (gross unrealized gains)	$	—		$	—
Downward adjustments including impairment (gross unrealized losses)	(51,484		)	(150		)
Total	$	(51,484	)	$	(150	)

The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at March 31, 2020 were $19.9 million and $58.1 million, respectively.

Realized and unrealized gains and losses for the Company's marketable equity securities and investments without readily determinable fair values for the three months ended March 31, 2020 and 2019 are as follows:



	Three Months Ended March 31,
	2020			2019
	(In thousands)
Realized gains, net, for equity securities sold	$	12		$	78
Unrealized losses, net, on equity securities held	(51,484		)	(122		)
Total losses, net recognized in other (expense) income, net	$	(51,472	)	$	(44	)

Fair Value Measurements

The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in pricing the asset or liability. The three levels of the fair value hierarchy are:


•	Level 1: Observable inputs obtained from independent sources, such as quoted market prices for identical assets and liabilities in active markets.

•

Level 2: Other inputs, which are observable directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets, quoted market prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair values of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.


•	Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities.

The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:



	March 31, 2020
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	2,007,519	$	—	$	—		$	2,007,519
Treasury discount notes	—		99,882		—			99,882
Time deposits	—		72,809		—			72,809
Short-term investments	—		20,000		—			20,000
Marketable securities:
Treasury discount notes	—		49,912		—			49,912
Other non-current assets:
Warrant	—		—		6,489			6,489
Total	$	2,007,519	$	242,603	$	6,489		$	2,256,611

Liabilities:
Contingent consideration arrangement	$	—	$	—	$	(636	)	$	(636	)



	December 31, 2019
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	2,164,576	$	—	$	—		$	2,164,576
Treasury discount notes	—		199,896		—			199,896
Time deposits	—		128,075		—			128,075
Commercial paper	—		29,960		—			29,960
Marketable securities:
Commercial paper	—		19,993		—			19,993
Other non-current assets:
Warrant	—		—		8,495			8,495
Total	$	2,164,576	$	377,924	$	8,495		$	2,550,995

Liabilities:
Contingent consideration arrangement	$	—	$	—	$	(6,918	)	$	(6,918	)

The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



	Three Months Ended March 31,
	2020						2019
	Warrant			Contingent Consideration Arrangements			Contingent Consideration Arrangement
	(In thousands)
Balance at January 1	$	8,495		$	(6,918	)	$	(28,631	)
Total net (losses) gains:
Included in earnings:
Fair value adjustments	(2,006		)	6,282			(1,529		)
Included in other comprehensive loss	—			—			(14		)
Fair value at date of acquisition	—			(1,000		)	—
Settlements	—			1,000			1,988
Balance at March 31	$	6,489		$	(636	)	$	(28,186	)

Warrant

As part of the Company’s investment in Turo, a peer-to-peer car sharing marketplace, the Company received a warrant that is net settleable at the Company's option and is recorded at fair value each reporting period with any change included in "Other (expense) income, net" in the accompanying consolidated statement of operations. The warrant is measured using significant unobservable inputs and is classified in the fair value hierarchy table as Level 3. The warrant is included in "Other non-current assets" in the accompanying consolidated balance sheet.

Contingent Consideration Arrangements

At March 31, 2020, the Company has one outstanding contingent consideration arrangement related to a business acquisition. The arrangement has a remaining total maximum contingent payment of $30.0 million. At March 31, 2020, the gross fair value of this arrangement, before unamortized discount, is $1.3 million. In connection with the Care.com acquisition on February 11, 2020, the Company assumed a contingent consideration arrangement liability of $1.0 million, which was subsequently paid during the first quarter of 2020. During the first quarter of 2019, the Company paid $2.0 million to settle a contingent consideration arrangement that was outstanding at December 31, 2018.

Generally, the Company's contingent consideration arrangements are based upon financial performance and/or operating metric targets and the Company generally determines the fair value of the contingent consideration arrangements by using probability-weighted analyses to determine the amounts of the gross liability, and, if the arrangements are initially long-term in nature, applying a discount rate that appropriately captures the risks associated with the obligations to determine the net amount reflected in the consolidated financial statements. The fair values of the contingent consideration arrangement at March 31, 2020 and December 31, 2019 reflect a discount rate of 25%.

The fair value of contingent consideration arrangements is sensitive to changes in the expected achievement of the applicable targets and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, including the accretion of the discount, if applicable, and changes are recognized in "General and administrative expense" in the accompanying consolidated statement of operations. The contingent consideration arrangement liability at March 31, 2020 and December 31, 2019 includes a non-current portion of $0.6 million and $6.9 million, respectively. The non-current portion of the contingent consideration liability is included in “Other long-term liabilities” in the accompanying consolidated balance sheet.

Assets measured at fair value on a nonrecurring basis

The Company's non-financial assets, such as goodwill, intangible assets, ROU assets and property, capitalized software and equipment, are adjusted to fair value only when an impairment is recognized. The Company's financial assets, comprising equity securities without readily determinable fair values, are adjusted to fair value when observable price changes are identified or an impairment is recognized. Such fair value measurements are based predominantly on Level 3 inputs. See "Note 3—Goodwill and Intangible Assets" for a detailed description of the Desktop goodwill and indefinite-lived intangible asset impairments recorded in the quarter ended March 31, 2020.

Financial instruments measured at fair value only for disclosure purposes

The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:



	March 31, 2020						December 31, 2019
	Carrying Value			Fair Value			Carrying Value			Fair Value
	(In thousands)
Current portion of long-term debt	$	(13,750	)	$	(13,750	)	$	(13,750	)	$	(13,681	)
Long-term debt, net^(a)	(3,625,008		)	(4,017,844		)	(3,121,572		)	(4,136,988		)

_____________________


^(a)	At March 31, 2020 and December 31, 2019, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $397.8 million and $404.7 million, respectively.

At March 31, 2020 and December 31, 2019, the fair value of long-term debt is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs.

- 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.

+ References + Details