Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Investments

The Company's investment assets are carried at fair value on the consolidated balance sheet in accordance with the Fair Value Measurements and Disclosures Topic in the ASC. They are valued with assistance from a third-party trustee and consist of fixed income mutual funds, corporate bonds and government securities. The fixed income mutual funds are valued at the net asset value of shares held based on quoted market prices determined in an active market, which are Level 1 inputs. The corporate bonds and government securities are valued using broker quotes that utilize observable market inputs, which are Level 2 inputs. Unrealized losses as of March 31, 2024, and March 31, 2023, were not material. The Company believes any impairment of investments held with gross unrealized losses to be temporary and not the result of credit risk.

The Company's investment assets are carried at fair value on the consolidated balance sheets as summarized in the following table.


	March 31, 2024						December 31, 2023
(Dollars in Millions)	Level 1		Level 2		Total			Level 1		Level 2		Total
Fixed Income Mutual Funds	$	—	$	—	$	—		$	80	$	—	$	80
Corporate Bonds	—		72		72			—		60		60
Government Securities	—		49		49			—		41		41

Total Investments at Fair Value	$	—	$	121	$	121		$	80	$	101	$	181

Total Investments at Amortized Cost					$	124						$	184

These investments have the following maturities:


(Dollars in Millions)	March 31, 2024		December 31, 2023
Less than 1 year	$	2	$	83
1 - 5 years	54		37
5 - 10 years	16		17
Greater than 10 years	49		44
Total Investments at Fair Value	$	121	$	181

NOTE 9. Fair Value Measurements, continued

Long-term Debt

Long-term debt is reported at carrying amount on the consolidated balance sheets and is the Company's only financial instrument with fair values significantly different from their carrying amounts. The fair value of a company's debt is a measure of its current value under present market conditions. It does not impact the financial statements under current accounting rules. The majority of the Company's long-term debt is valued with assistance from a third party that utilizes closing transactions, market quotes or market values of comparable debt. For those instruments not valued by the third party, the fair value has been estimated by applying market rates of similar instruments to the scheduled contractual debt payments and maturities. These market rates are provided by the same third party. All of the inputs used to determine the fair value of the Company's long-term debt are Level 2 inputs.

The fair value and carrying value of the Company's long-term debt is as follows:


(Dollars in Millions)	March 31, 2024		December 31, 2023
Long-term Debt (Including Current Maturities):
Fair Value	$	16,892	$	17,528
Carrying Value	18,501		18,533

Interest Rate Derivatives

The Company’s fixed-to-floating and forward starting interest rate swaps are carried at their respective fair values, which are determined with assistance from a third party based upon pricing models using inputs observed from actively quoted markets. All of the inputs used to determine the fair value of the swaps are Level 2 inputs. The fair value of the Company’s fixed-to-floating interest rate swaps was an asset of $11 million and $19 million (for swaps entered in 2023), and a liability of $131 million and $107 million (for swaps entered in 2022) as of March 31, 2024, and December 31, 2023, respectively. The fair value of the Company’s forward starting interest rate swap asset was $51 million and $48 million as of March 31, 2024, and December 31, 2023, respectively. See Note 7, Debt and Credit Agreements, for further information.

- 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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