Fair Value Measurements

We consider the carrying amounts of cash and cash equivalents and other current assets and current liabilities (not including derivatives and the current portion of long-term debt) to approximate their fair values because of the relatively short period of time between the origination of these instruments and their expected realization or payment. For our financial instruments measured at fair value on a recurring basis, we prioritize the inputs used in measuring fair value according to a three-tier fair value hierarchy as follows:

Level 1 — Observable Inputs. Level 1 financial instruments are actively traded and therefore the fair value for these securities is based on quoted market prices on one or more securities exchanges.

Level 2 — Directly or Indirectly Observable Inputs. Level 2 financial instruments are traded frequently though not necessarily daily. Fair value for these investments is determined using a market approach based on quoted prices for similar securities in active markets or quoted prices for identical securities in inactive markets.

Level 3 — Unobservable Inputs. Level 3 financial instruments are valued using unobservable inputs that represent management’s best estimate of what market participants would use in pricing the financial instrument at the measurement date. Our Level 3 financial instruments include derivative financial instruments.

Derivative financial instruments include the 1.125% Call Option derivative asset and the 1.125% Conversion Option derivative liability. These derivatives are not actively traded and are valued based on an option pricing model that uses observable and unobservable market data for inputs. Significant market data inputs used to determine fair value as of December 31, 2017, included the price of our common stock, the time to maturity of the derivative instruments, the risk-free interest rate, and the implied volatility of our common stock. As described further in Note 12, “Derivatives,” the 1.125% Call Option asset and the 1.125% Conversion Option liability were designed such that changes in their fair values offset, with minimal impact to the consolidated statements of operations. Therefore, the sensitivity of changes in the unobservable inputs to the option pricing model for such instruments is mitigated.

The net changes in fair value of Level 3 financial instruments were insignificant to our results of operations for the years ended December 31, 2017, and 2016.

Our financial instruments measured at fair value on a recurring basis at December 31, 2017, were as follows:



	Total		Level 1		Level 2		Level 3
	(In millions)
Corporate debt securities	$	1,588	$	—	$	1,588	$	—
U.S. treasury notes	388		388		—		—
Government-sponsored enterprise securities (GSEs)	253		253		—		—
Municipal securities	141		—		141		—
Asset-backed securities	117		—		117		—
Certificates of deposit	37		—		37		—
Subtotal - current investments	2,524		641		1,883		—
Corporate debt securities	101		—		101		—
U.S. treasury notes	68		68		—		—
Subtotal - current restricted investments	169		68		101		—
1.125% Call Option derivative asset	522		—		—		522
Total assets measured at fair value on a recurring basis	$	3,215	$	709	$	1,984	$	522

1.125% Conversion Option derivative liability	$	522	$	—	$	—	$	522
Total liabilities measured at fair value on a recurring basis	$	522	$	—	$	—	$	522

Our financial instruments measured at fair value on a recurring basis at December 31, 2016, were as follows:



	Total		Level 1		Level 2		Level 3
	(In millions)
Corporate debt securities	$	1,179	$	—	$	1,179	$	—
U.S. treasury notes	84		84		—		—
GSEs	231		231		—		—
Municipal securities	142		—		142		—
Asset-backed securities	69		—		69		—
Certificates of deposit	53		—		53		—
Subtotal - current investments	1,758		315		1,443		—
1.125% Call Option derivative asset	267		—		—		267
Total assets measured at fair value on a recurring basis	$	2,025	$	315	$	1,443	$	267

1.125% Conversion Option derivative liability	$	267	$	—	$	—	$	267
Total liabilities measured at fair value on a recurring basis	$	267	$	—	$	—	$	267

There were no current restricted investments as of December 31, 2016.

Fair Value Measurements – Disclosure Only

The carrying amounts and estimated fair values of our senior notes are classified as Level 2 financial instruments. Fair value for these securities is determined using a market approach based on quoted market prices for similar securities in active markets or quoted prices for identical securities in inactive markets. The carrying amount and estimated fair value of the amount due under our Credit Facility is classified as a Level 3 financial instrument, because certain inputs used to determine its fair value are not observable. As of December 31, 2017, the carrying value of the amount due under the Credit Facility approximates it fair value because of the recency of this borrowing during the third quarter of 2017.



	December 31, 2017				December 31, 2016
	Carrying		Fair Value		Carrying		Fair Value
	Value		Fair Value		Value		Fair Value
	(In millions)
5.375% Notes	$	692	$	730	$	691	$	714
1.125% Convertible Notes	496		1,052		471		792
4.875% Notes	325		329		—		—
Credit Facility	300		300		—		—
1.625% Convertible Notes	157		220		284		344
	$	1,970	$	2,631	$	1,446	$	1,850