Financial Instruments and Fair Value Measurements

3 Months Ended

Mar. 31, 2021

FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Fair Value of Financial Instruments

We use an independent pricing source to determine the fair value of our securities. The independent pricing source utilizes various pricing models for each asset class, including the market approach. The inputs and assumptions for the pricing models are market observable inputs including trades of comparable securities, dealer quotes, credit spreads, yield curves and other market-related data.

We have not adjusted the prices obtained from the independent pricing service and we believe the prices received from the independent pricing service are representative of the prices that would be received to sell the assets at the measurement date (exit price).

The carrying value of the Company's cash equivalents and restricted cash equivalents approximate their fair values due to their short-term maturities.

We did not have any Level 3 financial instruments recognized in our balance sheet as of March 31, 2021 and December 31, 2020. There were no transfers between levels as of March 31, 2021 and December 31, 2020.

Fair Value Measurements on a Recurring Basis

The following tables summarize our financial instruments by significant categories and fair value measurement on a recurring basis as of March 31, 2021 and December 31, 2020.


(in millions)	Level 1		Level 2		Total
March 31, 2021
Cash equivalents:
Money market mutual funds	$	127	$	—	127

Total cash equivalents	127		—		127
Investments:
Asset-backed securities	—		25		25
Corporate bonds	—		89		89
U.S. government agencies and government-sponsored agencies	—		5		5
U.S. treasuries	—		77		77
Other debt securities	—		6		6
Total investments	—		202		202
Restricted cash equivalents:
Money market mutual funds	95		—		95
Certificate of deposit	—		1		1
Commercial paper	—		—		—
Total restricted cash equivalents	95		1		96
Restricted investments:
Corporate bonds	—		34		34
U.S. government agencies and government-sponsored agencies	—		18		18

U.S. treasuries	—		182		182
Certificate of deposit	—		9		9
Total restricted investments	—		243		243
Total cash equivalents and investments and restricted cash equivalents and investments	$	222	$	446	$	668


(in millions)	Level 1		Level 2		Total
December 31, 2020
Cash equivalents
Money market mutual funds	$	2	$	—	$	2
U.S. treasuries	—		11		11
Total cash equivalents	2		11		13
Investments
Asset-backed securities	—		24		24
Corporate bonds	—		93		93
U.S. government agencies and government-sponsored agencies	—		5		5
U.S. treasuries	—		67		67
Other debt securities	—		6		6
Total investments	—		195		195
Restricted cash equivalents:
Money market mutual funds	99		—		99



Total restricted cash equivalents	99		—		99
Restricted investments:
Corporate bonds	—		35		35
U.S. government agencies and government-sponsored agencies	—		23		23
U.S. treasuries	—		198		198

Total restricted investments	—		256		256
Total investments and restricted cash equivalents and investments	$	101	$	462	$	563

Fair Value of Financial Instruments Disclosure

Long-Term Debt

As of December 31, 2020, our long-term debt was floating rate debt and the fair value approximated its carrying value (exclusive of issuance costs). The fair value of our floating rate debt was estimated based on a discounted cash flow, which incorporated credit spreads and market interest rates to estimate the fair value and was considered Level 3 in the hierarchy for fair value measurement.

The fair value of our 2029 Notes was obtained from a third-party pricing service and is based on observable market inputs. As such, the fair value of the senior notes is considered Level 2 in the hierarchy for fair value measurement. As of March 31, 2021, our 2029 Notes were carried at their cost, net of issuance costs, and had a fair value of $491 million.

Derivative Instruments

As of December 31, 2020, the fair value of the interest rate collar derivative, included in accounts payable and other current liabilities, was $1 million and was classified as Level 2 in the fair value hierarchy. In conjunction with the repayment and termination of our 2018 Term Loan, the interest rate collar derivative was terminated and settled and a realized loss of $1 million was recognized in net income for the three months ended March 31, 2021.