Quarterly report pursuant to Section 13 or 15(d)

Assets and Liabilities Measured at Fair Value

v3.20.2
Assets and Liabilities Measured at Fair Value
9 Months Ended
Sep. 30, 2020
Assets and Liabilities Measured at Fair Value  
Assets and Liabilities Measured at Fair Value

(3) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

The Company’s assets and (liabilities) measured at fair value are as follows:

September 30, 2020

December 31, 2019

 

Quoted prices

Significant

Quoted prices

Significant

 

in active

other

in active

other

 

markets for

observable

markets for

observable

 

identical assets

inputs

identical assets

inputs

 

Description

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

 

(amounts in thousands)

 

Cash equivalents

$

375,615

375,615

48,174

48,174

Exchangeable senior debentures

$

621,000

 

 

621,000

 

 

 

The Company’s exchangeable senior debentures are debt instruments with quoted market value prices that are not considered to be traded on “active markets”, as defined in GAAP, and are reported in the foregoing table as Level 2 fair value.

Other Financial Instruments

The carrying amounts of other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, and accrued and other current liabilities, which approximate fair value due to the short maturity

of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt under the Margin Loan Facility (as defined in note 5 to the accompanying condensed consolidated financial statements) bears interest at a variable rate and therefore is also considered to approximate fair value.

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

Three months ended

Nine months ended

 

September 30,

September 30,

 

2020

2019

2020

2019

 

(amounts in thousands)

 

Derivative instruments (1)

$

(433)

(433)

Exchangeable senior debentures (2)

(39,324)

NA

(39,324)

NA

$

(39,324)

(433)

(39,324)

 

(433)

(1) In September 2019, the Company entered into a zero-strike call option on 460,675 shares of Liberty Broadband Series C common stock and prepaid a premium of $46.3 million.
(2) The Company has elected to account for its exchangeable senior debentures entered into in August 2020 using the fair value option.  Changes in the fair value of the exchangeable senior debentures recognized in the condensed consolidated statements of operations are primarily due to market factors driven by changes in the fair value of the underlying shares into which debt is exchangeable. The Company isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive income. The change in the fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk before tax was a loss of $15.3 million for the three and nine months ended September 30, 2020.