FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2023

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 face value and fair value of our financial assets and liabilities for the periods presented (in millions):


	As of March 31, 2023			As of December 31, 2022
	Face Value	Fair Value		Face Value	Fair Value
Level 1:
Investments in equity securities	N/A	$	5	N/A	$	6
Money market funds	N/A	450		N/A	741
Deferred compensation assets	42	42		41	41
Deferred compensation liabilities	37	37		35	35

Level 2:
Investments in equity securities (a)	N/A	154		N/A	153
Interest rate swap (b)	N/A	3		N/A	—
STG (c):
5.500% Senior Notes due 2030	500	399		500	347
5.125% Senior Notes due 2027	282	244		282	230
4.125% Senior Secured Notes due 2030	750	608		750	560
Term Loan B-2, due September 30, 2026	1,255	1,148		1,258	1,198
Term Loan B-3, due April 1, 2028	727	656		729	692
Term Loan B-4, due April 21, 2029	744	676		746	709

Debt of variable interest entities (c)	8	8		8	8
Debt of non-media subsidiaries (c)	16	16		16	16

Level 3:
Investments in equity securities (d)	N/A	75		N/A	75

N/A - Not applicable

(a)Consists of unrestricted warrants to acquire marketable common equity securities. The fair value of the warrants are derived from the quoted trading prices of the underlying common equity securities less the exercise price.

(b)We entered into an interest rate swap effective February 7, 2023 and terminating on February 28, 2026 in order to manage a portion of our exposure to variable interest rates. The swap agreement has a notional amount of $600 million, bears a fixed interest rate of 3.9%, and we receive a floating rate of interest based on SOFR. The fair value of the interest rate swap was a liability as of March 31, 2023. See Hedge Accounting within Note 1. Nature of Operations and Summary of Significant Accounting Policies and Interest Rate Swap within Note 3. Notes Payable, Finance Leases, and Commercial Bank Financing.

(c)Amounts are carried in our consolidated balance sheets net of debt discount, premium, and deferred financing cost, which are excluded in the above table, of $54 million and $56 million as of March 31, 2023 and December 31, 2022, respectively.

(d)On November 18, 2020, we entered into a commercial agreement with Bally's Corporation ("Bally's") and received warrants and options to acquire common equity in the business. During the three months ended March 31, 2022 we recorded a fair value adjustment loss of $56 million related to these interests. The fair value of the warrants is primarily derived from the quoted trading prices of the underlying common equity. The fair value of the options is derived utilizing the Black Scholes valuation model. The most significant inputs include the trading price of the underlying common stock and the exercise price of the options, which range from $30 to $45 per share.

The following table summarizes the changes in financial assets measured at fair value on a recurring basis and categorized as Level 3 under the fair value hierarchy for the three months ended March 31, 2023 and 2022 (in millions):


Options and Warrants
Three Months Ended March 31, 2023
Fair value at December 31, 2022	$	75


Measurement adjustments	—
Fair value at March 31, 2023	$	75


Options and Warrants
Three Months Ended March 31, 2022
Fair value at December 31, 2021	$	282


Measurement adjustments	(56)
Fair value at March 31, 2022	$	226

- 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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