XML 14 R13.htm IDEA: XBRL DOCUMENT v3.19.3
FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
FINANCIAL INSTRUMENTS FINANCIAL INSTRUMENTS
Marketable Securities
At September 30, 2019 and December 31, 2018, the fair value of marketable securities are as follows:
 
September 30, 2019
 
December 31, 2018
 
(In thousands)
Marketable equity securities
$
157,174

 
$
419

Available-for-sale marketable debt securities
—

 
123,246

     Total marketable securities
$
157,174

 
$
123,665


The Company has an investment in Pinterest, which is carried at fair value following its initial public offering in April 2019. Prior to this, the Company accounted for its investment in Pinterest as an equity security without a readily determinable fair value.  Unrealized gains or losses related to the Company's investment in Pinterest is included in "Other income, net" in the accompanying consolidated statement of operations. For the three and nine months ended September 30, 2019, the Company recognized an unrealized loss of $4.6 million and an unrealized gain of $25.3 million, respectively.
At December 31, 2018, current available-for-sale marketable debt securities were as follows:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
(In thousands)
Treasury discount notes
$
112,291

 
$
3

 
$
(3
)
 
$
112,291

Commercial paper
10,955

 
—

 
—

 
10,955

Total available-for-sale marketable debt securities
$
123,246

 
$
3

 
$
(3
)
 
$
123,246


The following table presents the proceeds from maturities of available-for-sale marketable debt securities:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Proceeds from maturities of available-for-sale marketable debt securities
$
—

 
$
115,000

 
$
163,500

 
$
125,000


The specific-identification method is used to determine the cost of available-for-sale marketable debt securities sold and the amount of unrealized gains and losses reclassified out of accumulated other comprehensive income (loss) into earnings. There were no gross realized gains or losses from the sales of available-for-sale marketable debt securities for the three and nine months ended September 30, 2019 and 2018.
Equity securities without readily determinable fair values
At September 30, 2019 and December 31, 2018, the carrying values of the Company's investments in equity securities without readily determinable fair values totaled $334.0 million and $235.1 million, respectively, and are included in "Long-term investments" in the accompanying consolidated balance sheet. All gains and losses on equity securities without readily
determinable fair values, realized and unrealized, are recognized in "Other income, net" in the accompanying consolidated statement of operations.
In the third quarter of 2019, the Company made a $250 million investment in Turo, a peer-to-peer car sharing marketplace. As part of its investment, 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 income, net" in the accompany consolidated statement of operations. The warrant is measured using significant unobservable inputs and is classified in the fair value hierarchy table below as Level 3. The warrant is included in "Other non-current assets" in the accompanying consolidated balance sheet.
The following table presents a summary of realized and unrealized gains and losses recorded in other income (expense), net, as adjustments to the carrying value of equity securities without readily determinable fair values held as of September 30, 2019 and 2018.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Upward adjustments (gross unrealized gains)
$
53

 
$
—

 
$
53

 
$
128,786

Downward adjustments including impairment (gross unrealized losses)
(543
)
 
—

 
(1,193
)
 
(2,588
)
Total
$
(490
)
 
$
—

 
$
(1,140
)
 
$
126,198


The cumulative upward and downward adjustments (including impairments) to the carrying value of equity securities without readily determinable fair values held at September 30, 2019 were $0.3 million and $3.0 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 and nine months ended September 30, 2019 and 2018 are as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Realized (losses) gains, net, for equity securities sold
$
(8
)
 
$
702

 
$
2,136

 
$
27,874

Unrealized (losses) gains, net, on equity securities held
(5,066
)
 
(115
)
 
24,181

 
126,444

Total (losses) gains recognized, net, in other income, net
$
(5,074
)
 
$
587

 
$
26,317

 
$
154,318


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:
 
September 30, 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
$
818,158

 
$
—

 
$
—

 
$
818,158

Treasury discount notes
—

 
1,349,257

 
—

 
1,349,257

Time deposits
—

 
145,035

 
—

 
145,035

Marketable securities:
 
 
 
 
 
 
 
Marketable equity security
157,174

 
—

 
—

 
157,174

Other non-current assets:
 
 
 
 
 
 
 
Warrant
—

 
—

 
8,929

 
8,929

Total
$
975,332

 
$
1,494,292

 
$
8,929

 
$
2,478,553

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Contingent consideration arrangement
$
—

 
$
—

 
$
(13,664
)
 
$
(13,664
)
 
December 31, 2018
 
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
$
880,815

 
$
—

 
$
—

 
$
880,815

Treasury discount notes
—

 
561,733

 
—

 
561,733

Commercial paper
—

 
162,417

 
—

 
162,417

Time deposits
—

 
90,036

 
—

 
90,036

Marketable securities:
 
 
 
 
 
 
 
  Treasury discount notes
—

 
112,291

 
—

 
112,291

  Commercial paper
—

 
10,955

 
—

 
10,955

Marketable equity security
419

 
—

 
—

 
419

Total
$
881,234

 
$
937,432

 
$
—

 
$
1,818,666

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Contingent consideration arrangements
$
—

 
$
—

 
$
(28,631
)
 
$
(28,631
)

The following tables present 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 September 30,
 
2019
 
2018
 
Warrant
 
Contingent
Consideration
Arrangements
 
Contingent
Consideration
Arrangements
 
(In thousands)
Balance at July 1
$
—

 
$
(29,803
)
 
$
(1,910
)
Total net (losses) gains:
 
 
 
 
 
Included in earnings:
 
 
 
 
 
Fair value adjustments
(8,689
)
 
16,139

 
(55
)
Included in other comprehensive loss
—

 
—

 
(15
)
Fair value date of acquisition
17,618

 
—

 
—

Balance at September 30
$
8,929

 
$
(13,664
)
 
$
(1,980
)


 
Nine Months Ended September 30,
 
2019
 
2018
 
Warrant
 
Contingent
Consideration
Arrangements
 
Contingent
Consideration
Arrangements
 
(In thousands)
Balance at January 1
$
—

 
$
(28,631
)
 
$
(2,647
)
Total net (losses) gains:
 
 
 
 
 
Included in earnings:
 
 
 
 
 
Fair value adjustments
(8,689
)
 
12,993

 
(265
)
Included in other comprehensive loss
—

 
(14
)
 
(16
)
Fair value at date of acquisition
17,618

 
—

 
—

Settlements
—

 
1,988

 
948

Balance at September 30
$
8,929

 
$
(13,664
)
 
$
(1,980
)

Contingent Consideration Arrangements
At September 30, 2019, the Company has one outstanding contingent consideration arrangement related to a business acquisition. The arrangement has a total maximum contingent payment of $45.0 million. At September 30, 2019, the gross fair value of this arrangement, before unamortized discount, is $22.3 million. 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, our 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 value of the contingent consideration arrangement at September 30, 2019 reflects a discount rate of 25%. The fair values of the contingent consideration arrangements at December 31, 2018 reflect discount rates ranging from 12% to 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 September 30, 2019 and December 31, 2018 includes a current portion of $2.0 million and $2.0 million, respectively, and a non-current portion of $11.7 million and $26.6 million, respectively. The current and non-current portions of the contingent consideration liability are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, 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 and property 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.
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:
 
September 30, 2019
 
December 31, 2018
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
(In thousands)
Current portion of long-term debt
$
(13,750
)
 
$
(13,681
)
 
$
(13,750
)
 
$
(12,753
)
Long-term debt, net(a)
(3,111,882
)
 
(3,934,574
)
 
(2,245,548
)
 
(2,460,204
)

_____________________
(a) 
At September 30, 2019 and December 31, 2018, the carrying value of long-term debt, net includes unamortized original issue discount and debt issuance costs of $417.8 million and $88.9 million, respectively.
At September 30, 2019 and December 31, 2018, the fair value of long-term debt is estimated using observable market prices or indices for similar liabilities, which are Level 2 inputs. At December 31, 2018, the Company considered the outstanding borrowings under the MTCH's $500 million revolving credit facility ("MTCH Credit Facility"), which has a variable interest rate, to have a fair value equal to its carrying value. The outstanding borrowings under the MTCH Credit Facility were repaid with a portion of the net proceeds from MTCH's $350 million aggregate principal amount of its 5.625% Senior Notes issued on February 15, 2019. See "Note 5—Long-term Debt" for additional information on the repayment of the MTCH Credit Facility.