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The fair value of our Level 2 securities is calculated using a weighted average market price for each security. Market prices are obtained from a variety of industry standard data providers, security master files from large financial institutions, and other third-party sources. These multiple market prices are used as inputs into a distribution-curve-based algorithm to determine the daily market value of each security. 

Our municipal variable rate demand notes have a structure that implies a standard expected market price. The frequent interest rate resets make it reasonable to expect the price to stay at par. These securities are priced at the expected market price. 

## 5 Derivative Instruments and Hedging Activities 

We have certain international customers who are billed in their local currency. Changes in the monetary exchange rates may adversely affect our results of operations and financial condition. When appropriate, we enter into various derivative transactions to enhance our ability to manage the volatility relating to these typical business exposures. We do not hold or issue derivative instruments for trading or other speculative purposes. Our derivative instruments are recorded in the Consolidated Balance Sheets at their fair values. Our derivative instruments do not qualify for hedge accounting, and accordingly, all changes in the fair value of the instruments are recognized as other income (expense) in the Consolidated Statements of Income. The maximum contractual period for our derivatives is currently less than twelve months. Our derivative instruments are not subject to master netting arrangements and are not offset in the Consolidated Balance Sheets. 

As of December 31, 2013, we had forward contracts outstanding with notional amounts totaling €18.5 million ($25.5 million), which mature through 2014. 

The fair values of our derivative instruments recorded in the Consolidated Balance Sheet as of December 31, 2013 were as follows: 

(In thousands) 

<img src='content_image/268040.jpg'>

The change in the fair values of our derivative instruments recorded in the Consolidated Statements of Income during the year ended December 31, 2013 were as follows: 

<img src='content_image/268039.jpg'>

## 6 Inventory 

At December 31, 2013 and 2012, inventory was comprised of the following: 

<img src='content_image/268038.jpg'>

We establish reserves for estimated excess, obsolete, or unmarketable inventory equal to the difference between the cost of the inventory and the estimated fair value of the inventory based upon assumptions about future demand and market conditions. At December 31, 2013 and 2012, raw materials reserves totaled $16.9 million and $9.9 million, respectively, and finished goods inventory reserves totaled $6.1 million and $2.1 million, respectively. 

