FAIR VALUE

Assets/Liabilities Measured at Fair Value on a Recurring Basis

In the tables below, the Company has segregated all assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.



	Fair Value Measurement Using
Type of Instruments	Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Balance
(In millions)
Assets at September 28, 2018:
Cash equivalents:
Money market funds	$	44.1	$	—	$	—		$	44.1
Available-for- sale securities:
MPTC Series B-1 Bonds	—		25.1		—			25.1
MPTC Series B-2 Bonds	—		23.1		—			23.1
APTC securities	—		6.4		—			6.4
GPTC securities	—		7.9		—			7.9
Total assets measured at fair value	$	44.1	$	62.5	$	—		$	106.6

Liabilities at September 28, 2018:
Contingent consideration	$	—	$	—	$	(24.4	)	$	(24.4	)
Total liabilities measured at fair value	$	—	$	—	$	(24.4	)	$	(24.4	)

Assets at September 29, 2017:
Available-for- sale securities:
Original CPTC loans	$	—	$	—	$	47.4		$	47.4
DRTC securities	—		8.3		—			8.3
GPTC securities	—		4.4		—			4.4
Total assets measured at fair value	$	—	$	12.7	$	47.4		$	60.1

The Company classifies its money market funds as Level 1 because they have daily liquidity, quoted prices for the underlying investments can be obtained, and there are active markets for the underlying investments. The Company's Level 2 available-for-sale securities consist of bonds for MPTC, APTC, GPTC, and DRTC. The observable inputs for these securities are comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs such as yields, credit risks, default rates, and volatility. As of September 28, 2018, and September 29, 2017, the carrying amount of the Level 2 available-for-sale securities approximated their fair value. See Note 16, "Proton Solutions Loans and Investment" for more information about these bonds.

As of September 28, 2018, and September 29, 2017, the fair value of the Company's derivative instruments was not material. The Company has elected to use the income approach to value its derivative instruments using standard valuation techniques and Level 2 inputs, such as currency spot rates, forward points and credit default swap spreads. The Company’s derivative instruments are generally short-term in nature, typically one month to thirteen months in duration.

The Company measures the fair value of its Level 3 contingent consideration liabilities based on the income approach by using a discounted cash flow model with key assumptions that include estimated sales units or revenues of the acquired business or completion of certain milestone targets during the earn-out period, volatility, and estimated discount rates corresponding to the periods of expected payments. If the estimated sales units, revenues or probability of completing certain milestones were to increase or decrease during the respective earn-out period, the fair value of the contingent consideration would increase or decrease, respectively. If the estimated discount rates were to increase or decrease, the fair value of contingent consideration would decrease or increase, respectively. Changes in volatility may result in an increase or decrease in the fair value of contingent consideration. The Company's contingent consideration are from its business combinations in fiscal year 2018 and is included in accrued liabilities and other long-term liabilities on the Consolidated Balance Sheets.

In December 2017, the Original CPTC loans were modified and partially satisfied resulting in a Term Loan of $53.5 million, as defined in Note 16, "Proton Solutions Loans and Investment". One of the modifications was that the loan agent no longer has the option to purchase these loans from the Company; therefore, the Original CPTC loans are no longer classified as an available-for-sale security. The Company had no unrealized gains or unrealized losses associated with the Original CPTC loans recorded in its other comprehensive earnings. The modification to the Original CPTC Loans had no impact on the Company's Consolidated Statements of Earnings. As of September 29, 2017, the Company classified the Original CPTC loans as available-for-sale securities, the fair value of which was based on the income approach by using the discounted cash flow model with key assumptions that include discount rates corresponding to the terms and risks associated with the loans as well as underlying cash flow assumptions. However, the Company did not increase the fair value of the Original CPTC loans above their par values as ORIX Capital Markets, LLC (“ORIX”), the loan agent, had the option to purchase these loans from the Company under the original terms and conditions at par value.

The following table presents the reconciliation for all assets and liabilities measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3):



(In millions)	Available-for-sale Securities			Contingent Consideration
Balance at September 30, 2016	$	95.3		$	(1.3	)
Additions ⁽¹⁾	3.3			—
Settlements ⁽²⁾	—			1.6
Change in fair value recognized in earnings	(51.2		)	(0.3		)
Balance at September 29, 2017	47.4			—
Additions ⁽²⁾	—			(24.9		)
Reclassification of Original CPTC Loans to Term Loan	(47.4		)	—
Settlements ⁽²⁾	—			0.5
Balance at September 28, 2018	$	—		$	(24.4	)


⁽¹⁾	Amounts reported under available-for-sale securities represent additional investments and accrued interest.


⁽²⁾	Amounts reported under contingent consideration represent cash payments to settle contingent consideration liabilities or additional liabilities from business acquisitions.

There were no transfers of assets or liabilities between fair value measurement levels during fiscal years 2018, 2017 and 2016. Transfers between fair value measurement levels are recognized at the end of the reporting period.

Fair Value of Other Financial Instruments

The fair values of certain of the Company’s financial instruments, including bank deposits included in cash equivalents, trade and unbilled receivables, net of allowance for doubtful accounts, short-term notes receivable, revolving loan to CPTC, RPTC senior secured debt, accounts payable, and short-term borrowings approximate their carrying amounts due to their short maturities.

As of September 28, 2018, the fair value of the Term Loan with CPTC approximated its carrying value of $44.0 million. See Note 16, "Proton Solutions Loans and Investment" for further information. The carrying value is based on the present value of expected future cash payments discounted at a rate reflecting the nature and duration of the loans, risks involved with CPTC, and its industry. As a result, the Term Loan is categorized as Level 3 in the fair value hierarchy.

The fair value of the outstanding long-term notes receivable, including accrued interest, approximated their carrying value of $29.7 million and $100.2 million at September 28, 2018 and September 29, 2017, respectively, because it is based on terms of recent comparable transactions and is categorized as Level 3 in the fair value hierarchy. The fair value is based on the income approach by using the discounted cash flow model with key assumptions that include discount rates corresponding to the terms and risks as well as underlying cash flow assumptions. See Note 16, "Proton Solutions Loans and Investment" for more information on the long-term notes receivable.