Investments

We record investments in fixed income and equity securities, classified as available-for-sale investments or trading investments, at fair value.

Available-for-sale Investments

We invest in certificates of deposit, time deposits, commercial paper and other fixed income securities which were classified as available-for-sale as of June 30, 2018, and September 30, 2017. Unrealized gains and losses on available-for-sale investments are included in our Condensed Consolidated Balance Sheet as a component of accumulated other comprehensive loss, net of any deferred taxes. Realized gains and losses are included in net income.

Our available-for-sale investments consist of (in millions):



	June 30, 2018		September 30, 2017
Certificates of deposit and time deposits	$	477.9	$	1,005.3
Commercial paper	—		20.3
Corporate debt securities	160.3		199.4
Government securities	65.8		116.8
Asset-backed securities	30.0		45.8
Total	$	734.0	$	1,387.6

Pre-tax gross unrealized gains and losses on available-for-sale investments were not material as of June 30, 2018. Pre-tax gross realized gains and losses on available-for-sale investments were not material for the three and nine months ended June 30, 2018. At June 30, 2018, there were no outstanding purchases of available-for-sale investments recorded in accounts payable.

We evaluated all available-for-sale investments for which the fair value was less than amortized cost for impairment on an individual security basis at June 30, 2018. This assessment included consideration of our intent and ability to hold the security and the credit risks specific to each security. We determined that the declines in fair value of these investments were not other than temporary as of June 30, 2018, and accordingly we did not recognize any impairment charges in net income.

The table below summarizes the contractual maturities of our investments as of June 30, 2018 (in millions). Actual maturities may differ from the contractual maturities below as borrowers may have the right to prepay certain obligations.



	Fair Value
Less than one year	$	548.6
Due in one to five years	185.4
Total	$	734.0

Classification of our available-for-sale investments as current or noncurrent is based on the nature of the investment and when the investment is reasonably expected to be realized. These investments were included in the following line items within the Condensed Consolidated Balance Sheet (in millions):



	June 30, 2018		September 30, 2017
Short-term investments	$	548.6	$	1,124.6
Other assets	185.4		263.0
Total	$	734.0	$	1,387.6

8. Investments (continued)

Trading Investments

On June 11, 2018, we entered into a Securities Purchase Agreement (the "Purchase Agreement") with PTC. PTC agreed to sell 10,582,010 shares of its common stock (the "Shares") to us in a private placement at a purchase price of $94.50 per share for an aggregate purchase price of approximately $1.0 billion. For a period of approximately 3 years after the closing of the Purchase Agreement transaction ("Closing") we are subject to entity-specific transfer restrictions subject to certain exceptions. Following the first anniversary of the Closing, the Company will be allowed to transfer Shares not exceeding, in the aggregate in any 90-day period, a number of Shares equal to up to 1.0% of PTC's total outstanding shares of common stock as of the first day in such 90-day period, but no more than 2.0% of PTC's total outstanding shares of common stock in each of the second year and the third year after the Closing.

The Purchase Agreement, which was a firm commitment as of June 11, 2018, was determined to be a forward contract which was recorded at fair value and designated as a trading security. For the three months ended June 30, 2018, losses of $76.8 million related to this forward contract were recorded in other (expense) income in the Condensed Consolidated Statement of Operations. The forward contract was valued using the difference between the purchase price of $94.50 per share of PTC common stock and the most recent closing price of PTC common stock quoted on Nasdaq, resulting in losses of $7.3 million, less a temporary discount for lack of marketability calculated using a put-option model, resulting in losses of $69.5 million. The discount is due to an instrument-specific restriction as the Shares will be issued as private placements but are contractually required to be registered by PTC under the Securities Act of 1933 within one year, at which time the discount will be reversed. As of June 30, 2018, a corresponding liability is recorded in other current liabilities in the Condensed Consolidated Balance Sheet.

On July 19, 2018, we completed the purchase of the Shares. The investment maintains the same classification as the forward contract, a trading security, and will be recorded at fair value, less a discount for lack of marketability, with any changes in fair value recorded to earnings.

Fair Value of Investments

U.S. GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. U.S. GAAP also classifies the inputs used to measure fair value into the following hierarchy:



Level 1:		Quoted prices in active markets for identical assets or liabilities.



Level 2:		Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.



Level 3:		Unobservable inputs for the asset or liability.

We recognize all available-for-sale and trading investments at fair value in the Condensed Consolidated Balance Sheet. The valuation methodologies used for our investments measured at fair value are described as follows.

Certificates of deposit and time deposits — These investments are stated at cost, which approximates fair value.

Commercial paper — These investments are stated at amortized cost, which approximates fair value.

Corporate debt securities — Valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that maximizes observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

Government securities — Valued at the most recent closing price on the active market on which the individual securities are traded or, absent an active market, utilizing observable inputs such as closing prices in less frequently traded markets.

Asset-backed securities — Valued using a discounted cash flow approach that maximizes observable inputs, such as current yields of benchmark instruments, but includes adjustments for certain risks that may not be observable such as credit and liquidity risks.

8. Investments (continued)

Forward contract — Valued using the difference between the PTC purchase price of $94.50 per share of PTC common stock and the most recent closing price of PTC common stock quoted on Nasdaq, less a temporary discount for lack of marketability. The discount for lack of marketability, which will reverse upon registration of the PTC securities, is calculated using a put-option model which includes observable and unobservable inputs and is categorized as Level 3 in the fair value hierarchy. The primary inputs include historical and implied PTC common stock volatility and the restriction term.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. We did not have any transfers between levels of fair value measurements during the periods presented.

Fair values of our investments were (in millions):



	June 30, 2018
	Level 1		Level 2		Level 3		Total
Assets
Certificates of deposit and time deposits	$	—	$	477.9	$	—	$	477.9
Commercial paper	—		—		—		—
Corporate debt securities	—		160.3		—		160.3
Government securities	55.7		10.1		—		65.8
Asset-backed securities	—		30.0		—		30.0
Total assets	$	55.7	$	678.3	$	—	$	734.0
Other current liabilities
Forward contract	$	—	$	—	$	76.8	$	76.8
Total liabilities	$	—	$	—	$	76.8	$	76.8



	September 30, 2017
	Level 1		Level 2		Level 3		Total
Certificates of deposit and time deposits	$	—	$	1,005.3	$	—	$	1,005.3
Commercial paper	—		20.3		—		20.3
Corporate debt securities	—		199.4		—		199.4
Government securities	98.9		17.9		—		116.8
Asset-backed securities	—		45.8		—		45.8
Total	$	98.9	$	1,288.7	$	—	$	1,387.6

The table below sets forth a summary of changes in the fair value of our Level 3 investment liability (in millions):



	Fair Value
Agreement commencement June 11, 2018	$	(96.1	)
Unrealized gains	19.3
Balance June 30, 2018	$	(76.8	)

The loss of $96.1 million upon the agreement commencement date includes a loss of $28.1 million, resulting from the difference between the purchase price of $94.50 per share of PTC common stock and the June 11, 2018 closing price of PTC common stock, and a $68.0 million valuation adjustment pending registration of the PTC securities. The unrealized gain of $19.3 million includes a gain of $20.8 million, resulting from the appreciation of PTC common stock between the agreement commencement date and the end of the quarter, partially offset by a $1.5 million increase in the valuation adjustment associated with the appreciation of PTC’s common stock. The unrealized loss of $76.8 million at June 30, 2018 includes a $7.3 million loss on investment and a $69.5 million valuation adjustment.