FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2020

FAIR VALUE MEASUREMENTS:

Accounting guidance provides for valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). A fair value hierarchy using three broad levels prioritizes the inputs to valuation techniques used to measure fair value. The following is a brief description of those three levels:


•	Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.


•	Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.


•	Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table sets forth the carrying value and fair value of our financial assets and liabilities for the periods presented (in millions):



	As of March 31, 2020				As of December 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
Level 1:
STG:
Money market funds	$	826	$	826	$	354	$	354
Deferred compensation assets	33		33		36		36
Deferred compensation liabilities	28		28		33		33
DSG:
Money market funds	256		256		559		559

Level 2 (a):
STG:
5.875% Senior Unsecured Notes due 2026	350		310		350		368
5.625% Senior Unsecured Notes due 2024	550		507		550		566
5.500% Senior Unsecured Notes due 2030	500		414		500		511
5.125% Senior Unsecured Notes due 2027	400		338		400		411
Term Loan B	1,325		1,259		1,329		1,326
Term Loan B-2	1,294		1,216		1,297		1,300
Revolving Credit Facility (b)	648		648		—		—
DSG:
6.625% Senior Unsecured Notes due 2027	1,820		1,217		1,825		1,775
5.375% Senior Secured Notes due 2026	3,050		2,478		3,050		3,085
Term Loan	3,284		2,528		3,292		3,284
Revolving Credit Facility (b)	225		225		—		—
Debt of variable interest entities	20		20		21		21
Debt of non-media subsidiaries	18		18		18		18

Level 3
DSG:
Variable payment obligations (c)	235		235		239		239


(a)	Amounts are carried in our consolidated balance sheets net of debt discount and deferred financing cost, which are excluded in the above table, of $223 million and $231 million as of March 31, 2020 and December 31, 2019, respectively.


(b)	On March 17, 2020, we drew down $648 million and $225 million under the STG Revolving Credit Facility and DSG Revolving Credit Facility, respectively. See Note 3. Notes Payable and Commercial Bank Financing for further information.

(c)

The Company records its variable payment obligations at fair value on a recurring basis. These liabilities are further described in Other Liabilities within Note 5. Commitments and Contingencies. Significant unobservable inputs used in the fair value measurement are projected future operating income before depreciation and amortization; and weighted average discount rate of 9%. Significant increases (decreases) in projected future operating income would generally result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in discount rates, would result in a significantly (lower) higher fair value measurement.

The following table summarizes the changes in financial liabilities measured at fair value on a recurring basis and categorized as Level 3 under the fair value hierarchy (in millions):



	Variable Payment Obligations
Fair value at December 31, 2019	$	239
Payments	(7		)
Measurement adjustments	3
Fair value at March 31, 2020	$	235

- 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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