NOTE 9—FAIR VALUE MEASUREMENTS

Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts business. The inputs used to develop these fair value measurements are established in a hierarchy, which ranks the quality and reliability of the information used to determine the fair values. The fair value classification is based on levels of inputs. Assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:

Level 1:	Quoted market prices in active markets for identical assets or liabilities.
Level 2:	Observable market based inputs or unobservable inputs that are corroborated by market data.
Level 3:	Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements. The following table summarizes the fair value hierarchy of the Company’s financial assets and liabilities carried at fair value on a recurring basis as of September 30, 2018:


			Fair Value Measurements at September 30, 2018 Using
							Significant
	Total Carrying		Quoted prices in		Significant other		unobservable
	Value at		active market		observable inputs		inputs
(In millions)	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Other long-term assets:
Money market mutual funds	$	0.5	$	0.5	$	—	$	—
Equity securities, available-for-sale:
Investments measured at net asset value (1)		10.8		—		—		—
Total assets at fair value	$	11.3	$	0.5	$	—	$	—

Other long-term liabilities:
Derivative liability	$	144.5	$	—	$	—	$	144.5
Total liabilities at fair value	$	144.5	$	—	$	—	$	144.5

(1)

The investments relate to a non-qualified deferred compensation arrangement on behalf of certain members of management. The Company has an equivalent liability for this related-party transaction recorded in other long-term liabilities for the deferred compensation obligation.

Valuation Techniques. The Company’s money market mutual funds are invested in funds that seek to preserve principal, are highly liquid, and therefore are recorded on the balance sheet at the principal amounts deposited, which equals fair value. See Note 11—Accumulated Other Comprehensive Income for the unrealized gain on the equity securities recorded in accumulated other comprehensive income.

On September 14, 2018, the Company issued Convertible Notes due 2024 with a conversion feature that gave rise to an embedded derivative instrument (See Note 6 – Corporate Borrowings). The derivative feature has been valued using a Monte Carlo simulation approach. The Monte Carlo simulation approach consists of simulated common stock prices from the valuation date to the maturity of the Convertible Notes. Increases or decreases in the Company’s share price, the volatility of the share price, the passage of time, risk-free interest rate, discount yield, and dividend yield will all impact the value of the derivative instrument. The Company re-values the derivative instrument at the end of each reporting period and any changes are recorded in other expense (income) in the consolidated statements of operations.

Other Fair Value Measurement Disclosures. The Company is required to disclose the fair value of financial instruments that are not recognized at fair value in the statement of financial position for which it is practicable to estimate that value:


			Fair Value Measurements at September 30, 2018 Using
					Significant other		Significant
	Total Carrying		Quoted prices in		observable		unobservable
	Value at		active market		inputs		inputs
(In millions)	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
Current maturities of corporate borrowings	$	15.2	$	—	$	14.0	$	1.4
Corporate borrowings		4,833.6		—		4,298.1		510.2

Valuation Technique. Quoted market prices and observable market based inputs were used to estimate fair value for Level 2 inputs. The Level 3 fair value measurement represents the transaction price of the corporate borrowings under market conditions. On September 14, 2018, the Company issued $600.0 million of Convertible Notes due 2024. These notes were issued by private placement, as such there is no observable market for these Convertible Notes. The Company valued these notes at principal value less a discount reflecting a market yield to maturity. See Note 6 – Corporate Borrowings for further information.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments.