Financial Instruments and Fair Value Measurement

9 Months Ended

Jun. 30, 2013

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 June 30, 2013	$	68,434	$	209,097	$	—	$	277,531
Equity securities September 30, 2012	$	129,183	$	304,396	$	—	$	433,579

On an ongoing basis, we evaluate the marketable equity securities to determine if a 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.

During the third quarter ended June 30, 2013, we sold shares in an available-for-sale security realizing a gain of $153.4 million that is included in gain from sale of investment securities in the Consolidated Condensed Statements of Income.  Net income includes after-tax gains from the sale of available-for-sale securities as follows:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
	(in thousands, except per share amounts)
After-tax gain	$	92,449	$	—	$	92,449	$	—
Earnings per diluted share	$	0.86	$	—	$	0.86	$	—

During the first quarter ended December 31, 2012, we sold our shares in three limited partnerships that were primarily invested in international equities, realizing a gain of $8.8 million that is included in gain from sale of investment securities in the Consolidated Condensed Statements of Income.

Assets held in the Non-qualified Supplemental Savings Plan are carried at fair market value which totaled $10.1 million at June 30, 2013 and $8.2 million at September 30, 2012.

The majority of cash equivalents are invested in taxable and non-taxable money-market mutual funds. 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 June 30, 2013, our financial instruments utilizing Level 1 inputs include cash equivalents, equity securities with active markets and 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, which is included in current assets of discontinued operations and limited to remaining liabilities of discontinued operations.  For these items, quoted current market prices are readily available.

At June 30, 2013, 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 June 30, 2013:

			Quoted Prices
	Total		in Active		Significant
	Measure		Markets for		Other		Significant
	at		Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(in thousands )
Assets:
Cash and cash equivalents	$	480,480	$	480,480	$	—	$	—
Equity securities	277,531		277,531		—		—
Other current assets	24,414		24,164		250		—
Other assets	2,000		2,000		—		—
Total assets measured at fair value	$	784,425	$	784,175	$	250	$	—

The following information presents the supplemental fair value information about fixed-rate debt at June 30, 2013 and September 30, 2012:

	June 30,		September 30,
	2013		2012
	(in thousands)
Carrying value of fixed-rate debt	$	235.0	$	235.0
Fair value of fixed-rate debt	$	243.2	$	252.7

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