Financial Instruments and Fair Value Measurement

3 Months Ended

Dec. 31, 2015

Financial Instruments and Fair Value Measurement

Financial Instruments and Fair Value Measurement

4.Financial Instruments and Fair Value Measurement

The estimated fair value of our available-for-sale securities, reflected on our Consolidated Condensed Balance Sheets as Investments, is based on market quotes.  The following is a summary of available-for-sale securities, which excludes assets held in a Non-qualified Supplemental Savings Plan:

			Gross		Gross		Estimated
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(in thousands)
Equity securities December 31, 2015	$	64,462	$	28,895	$	19,829	$	73,528
Equity securities September 30, 2015	$	64,462	$	28,530	$	1,509	$	91,483

On an ongoing basis we evaluate the marketable equity securities to determine if any decline in fair value below cost is other-than-temporary.  If a decline in fair value below cost is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established.  We review several factors to determine whether a loss is other-than-temporary.  These factors include, but are not limited to, (i) the length of time a security is in an unrealized loss position, (ii) the extent to which fair value is less than cost, (iii) the financial condition and near-term prospects of the issuer and (iv) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The cost of securities used in determining realized gains and losses is based on the average cost basis of the security sold.  The security in an unrealized loss position was below cost for under 30 days at both December 31, 2015 and September 30, 2015.  The security is in the international offshore drilling industry and has been impacted by the downturn in the energy sector.  Considering the factors above including the limited time that the security was in an unrealized position, impairment was not considered other-than-temporary at December 31, 2015.

The assets held in the Non-qualified Supplemental Savings Plan are carried at fair value which totaled $11.7 million at December 31, 2015 and $12.9 million at September 30, 2015.  The assets are comprised of mutual funds that are measured using Level 1 inputs.

The majority of cash equivalents are invested in highly liquid money-market mutual funds invested primarily in direct or indirect obligations of the U.S. Government.  The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.  We use the fair value hierarchy established in ASC 820-10 to measure fair value to prioritize the inputs:

· Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

· Level 2 — Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

· Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  This includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

At December 31, 2015, our financial instruments utilizing Level 1 inputs include cash equivalents, equity securities with active markets, money market funds we have elected to classify as restricted assets that are included in other current assets and other assets.  Also included is cash denominated in a foreign currency that we have elected to classify as restricted to be used to settle the remaining liabilities of discontinued operations.  For these items, quoted current market prices are readily available.

At December 31, 2015, financial instruments utilizing level 2 inputs include a bank certificate of deposit included in other current assets.

Currently, we do not have any financial instruments utilizing Level 3 inputs.

The following table summarizes our assets measured at fair value on a recurring basis presented in our Consolidated Condensed Balance Sheet as of December 31, 2015:

	Total		Level 1		Level 2		Level 3
	(in thousands)
Short-term investments:
Certificate of deposit	$	2,100	$	—	$	2,100	$	—
Corporate debt securities	25,450		—		25,450		—
U.S. government and federal agency securities	20,158		8,716		11,442		—
Total short-term investments	47,708		8,716		38,992		—
Cash and cash equivalents	848,230		848,230		—
Investments	73,528		73,528		—		—
Other current assets	37,255		37,005		250		—
Other assets	2,000		2,000		—		—
Total assets measured at fair value	$	1,008,721	$	969,479	$	39,242	$	—

The following information presents the supplemental fair value information about long-term fixed-rate debt at December 31, 2015 and September 30, 2015:

	December 31,		September 30,
	2015		2015
	(in millions)
Carrying value of long-term fixed-rate debt	$	531.8	$	531.5
Fair value of long-term fixed-rate debt	$	540.4	$	553.5

The fair value at December 31, 2015 for the $40 million fixed-rate debt was estimated using discounted cash flows at rates reflecting current interest rates at similar maturities plus a credit spread which was estimated using the outstanding market information on debt instruments with a similar credit profile to us.  The debt was valued using a Level 2 input.

The fair value for the $500 million fixed-rate debt was based on broker quotes at December 31, 2015.  The notes are classified within Level 2 as they are not actively traded in markets.