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Risk Management and Fair Value of Financial Instruments (Notes) | 12 Months Ended
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Dec. 31, 2015
Risk Management and Fair Value of Financial Instruments [Abstract] |
Risk Management and Fair Value of Financial Instruments | RISK MANAGEMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
RISK | MANAGEMENT
The following is a description of the Company’s risk management policies. Interest Rate Risk The Company is exposed to market risk from changes in interest rates primarily through senior secured debt. At December 31, 2015, the Company's primary interest rate exposure was to interest rate fluctuations, specifically LIBOR, due to its impact on variable rate borrowings under the revolving and term loan facilities under the Senior Secured Credit Agreement and Term Loan A Facility. Given that borrowings under the Senior Secured Credit Agreement and Term Loan A Facility are generally based upon LIBOR, this rate will be the Company's primary market risk exposure for the foreseeable future. At December 31, 2015, the Company had variable interest rate long-term debt, which was based on LIBOR from the outstanding term loans and revolver of $2,502 million, excluding $247 million of securitization obligations. The Company has interest rate swaps with an aggregate notional value of $1,475 million to manage a portion of the Company's exposure to changes in interest rate associated with variable rate borrowings. The fixed interest rates on the swaps range from 2.07% to 2.89%. Although we have entered into these interest rate swaps, involving the exchange of floating for fixed rate interest payments, such interest rate swaps do not eliminate interest rate volatility for all of our variable rate indebtedness at December 31, 2015. In addition, the fair value of the interest rate swaps is also subject to movements in LIBOR and will fluctuate in future periods. The Company has recognized a liability of $47 million for the fair value of the interest rate swaps at December 31, 2015. Therefore, an increase in the LIBOR yield curve could increase the fair value of the interest rate swaps and decrease interest expense. In the normal course of business, the Company borrows funds under its securitization facilities and utilizes such funds to generate assets on which it generally earns interest income. The Company does not believe it is exposed to significant interest rate risk in connection with these activities as the rate it incurs on such borrowings and the rate it earns on such assets are generally based on similar variable indices, thereby providing a natural hedge. Credit Risk and Exposure The Company is exposed to counterparty credit risk in the event of nonperformance by counterparties to various agreements and sales transactions. The Company manages such risk by evaluating the financial position and creditworthiness of such counterparties and by requiring collateral in instances in which financing is provided. The Company mitigates counterparty credit risk associated with its derivative contracts by monitoring the amounts at risk with each counterparty to such contracts, periodically evaluating counterparty creditworthiness and financial position, and where possible, dispersing its risk among multiple counterparties. As of December 31, 2015, there were no significant concentrations of credit risk with any individual counterparty or a group of counterparties. The Company actively monitors the credit risk associated with the Company’s receivables. Market Risk Exposure The Company Owned Real Estate Brokerage Services segment, NRT, owns real estate brokerage offices located in and around large metropolitan areas in the U.S. NRT has more offices and realizes more of its revenues in California, Florida and the New York metropolitan area than any other regions of the country. For the year ended December 31, 2015, NRT generated approximately 27% of its revenues from California, 23% from the New York metropolitan area and 10% from Florida. For the year ended December 31, 2014, NRT generated approximately 28% of its revenues from California, 24% from the New York metropolitan area and 10% from Florida. For the year ended December 31, 2013, NRT generated approximately 28% of its revenues from California, 24% from the New York metropolitan area and 10% from Florida. Derivative Instruments The Company uses foreign currency forward contracts largely to manage its exposure to changes in foreign currency exchange rates associated with its foreign currency denominated receivables and payables. The Company primarily manages its foreign currency exposure to the Euro, Swiss Franc, Canadian Dollar and British Pound. The Company has elected not to utilize hedge accounting for these forward contracts; therefore, any change in fair value is recorded in the Consolidated Statements of Operations. However, the fluctuations in the value of these forward contracts generally offset the impact of changes in the value of the underlying risk that they are intended to economically hedge. As of December 31, 2015, the Company had outstanding foreign currency forward contracts with a fair value of less than $1 million and a notional value of $33 million. As of December 31, 2014, the Company had outstanding foreign currency forward contracts with a fair value of less than $1 million and a notional value of $27 million. The Company also enters into interest rate swaps to manage its exposure to changes in interest rates associated with its variable rate borrowings. The Company has interest rate swaps with an aggregate notional value of $1,475 million to offset the variability in cash flows resulting from the term loan facilities as follows:
Notional Value (in millions) | Commencement Date | Expiration Date
$225 | July 2012 | February 2018
$200 | January 2013 | February 2018
$600 | August 2015 | August 2020
$450 | November 2017 | November 2022
The swaps help to protect our outstanding variable rate borrowings from future interest rate volatility. The Company has not elected to utilize hedge accounting for these interest rate swaps; therefore, any change in fair value is recorded in the Consolidated Statements of Operations. The fair value of derivative instruments was as follows:
Liability Derivatives |  | Fair Value
Not Designated as Hedging Instruments |  | Balance Sheet Location |  | December 31, 2015 |  | December 31, 2014
Interest rate swap contracts |  | Other non-current liabilities |  | $ | 47 |  |  | $ | 40 |
The effect of derivative instruments on earnings is as follows:
Derivative Instruments Not Designated as Hedging Instruments |  | Location of (Gain) or Loss Recognized for Derivative Instruments |  | (Gain) or Loss Recognized on Derivatives
Year Ended December 31,
2015 |  | 2014 |  | 2013
Interest rate swap contracts |  | Interest expense |  | $ | 20 |  |  | $ | 32 |  |  | $ | (4 | )
Foreign exchange contracts |  | Operating expense |  | (2 | ) |  | (3 | ) |  | — |
Financial Instruments The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.
Level Input: |  | Input Definitions:
Level I |  | Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II |  | Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III |  | Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The availability of observable inputs can vary from asset to asset and is affected by a wide variety of factors including, for example, the type of asset, whether the asset is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level III. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The fair value of financial instruments is generally determined by reference to quoted market values. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques, as appropriate. The fair value of interest rate swaps is determined based upon a discounted cash flow approach. The following table summarizes fair value measurements by level at December 31, 2015 for assets/liabilities measured at fair value on a recurring basis:
| Level I |  | Level II |  | Level III |  | Total
Interest rate swaps (included in other non-current liabilities) | $ | — |  |  | $ | 47 |  |  | $ | — |  |  | $ | 47 |
Deferred compensation plan assets (included in other non-current assets) | 3 |  |  | — |  |  | — |  |  | 3 |
The following table summarizes fair value measurements by level at December 31, 2014 for assets/liabilities measured at fair value on a recurring basis:
| Level I |  | Level II |  | Level III |  | Total
Interest rate swaps (included in other non-current liabilities) | $ | — |  |  | $ | 40 |  |  | $ | — |  |  | $ | 40 |
Deferred compensation plan assets (included in other non-current assets) | 2 |  |  | — |  |  | — |  |  | 2 |
The following table summarizes the principal amount of the Company’s indebtedness compared to the estimated fair value, primarily determined by quoted market values, at:
| December 31, 2015 |  | December 31, 2014
| Principal Amount |  | Estimated Fair Value (a) |  | Principal Amount |  | Estimated Fair Value (a)
Senior Secured Credit Facility: |  |  |  |  |  |  |
Revolving Credit Facility | $ | 200 |  |  | $ | 200 |  |  | $ | — |  |  | $ | — |
Term Loan B Facility | 1,867 |  |  | 1,849 |  |  | 1,887 |  |  | 1,834 |
Term Loan A Facility | 435 |  |  | 426 |  |  | — |  |  | — |
7.625% First Lien Notes | — |  |  | — |  |  | 593 |  |  | 633 |
9.00% First and a Half Lien Notes | — |  |  | — |  |  | 196 |  |  | 215 |
3.375% Senior Notes | 500 |  |  | 500 |  |  | 500 |  |  | 500 |
4.50% Senior Notes | 450 |  |  | 464 |  |  | 450 |  |  | 449 |
5.25% Senior Notes | 300 |  |  | 308 |  |  | 300 |  |  | 291 |
Securitization obligations | 247 |  |  | 247 |  |  | 269 |  |  | 269 |
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(a) | The fair value of the Company's indebtedness is categorized as Level I.

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- 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13433-108611 + Details
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