Fair Value

6 Months Ended

Jun. 30, 2019

FAIR VALUE

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs, which are used to measure fair value, are prioritized through the fair value hierarchy. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Descriptions of the three levels of the fair value hierarchy are discussed in Note 9. Fair Value to the Consolidated Financial Statements in our 2018 Form 10-K.

NOTE 5. FAIR VALUE (Continued)

The following tables set forth, by level within the fair value hierarchy, our assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2019, and December 31, 2018. Each asset and liability is classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of these assets and liabilities and their placement within the fair value hierarchy levels. The estimated fair value of Cash and Cash Equivalents listed on the Consolidated Balance Sheet approximates the carrying amount and therefore is excluded from the recurring fair value measures in the following tables.



	Fair Value as of June 30, 2019
Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total
Millions
Assets
Investments (a)
Available-for-sale – Equity Securities		$10.9	—		—			$10.9
Available-for-sale – Corporate and Governmental Debt Securities (b)	—			$9.5	—		9.5
Cash Equivalents	1.1		—		—		1.1
Total Fair Value of Assets		$12.0		$9.5	—			$21.5

Liabilities
Deferred Compensation (c)	—			$21.7	—			$21.7
Total Fair Value of Liabilities	—			$21.7	—			$21.7
Total Net Fair Value of Assets (Liabilities)		$12.0	$(12.2)		—		$(0.2)


	Fair Value as of December 31, 2018
Recurring Fair Value Measures	Level 1		Level 2		Level 3		Total
Millions
Assets
Investments (a)
Available-for-sale – Equity Securities		$12.2	—		—			$12.2
Available-for-sale – Corporate and Governmental Debt Securities	—			$8.0	—		8.0
Cash Equivalents	1.0		—		—		1.0
Total Fair Value of Assets		$13.2		$8.0	—			$21.2

Liabilities
Deferred Compensation (c)	—			$19.8	—			$19.8
U.S. Water Services Contingent Consideration (d)	—		—			$3.8	3.8
Total Fair Value of Liabilities	—			$19.8		$3.8		$23.6
Total Net Fair Value of Assets (Liabilities)		$13.2	$(11.8)		$(3.8)		$(2.4)


(a)	Included in Other Non-Current Assets on the Consolidated Balance Sheet.


(b)	As of June 30, 2019, the aggregate amount of available-for-sale corporate and governmental debt securities maturing in one year or less was $3.1 million, in one year to less than three years was $3.9 million, in three years to less than five years was $1.6 million and in five or more years was $0.9 million.


(c)	Included in Other Non-Current Liabilities on the Consolidated Balance Sheet.


(d)	Included in Other Current Liabilities on the Consolidated Balance Sheet.

The Level 3 liability in the preceding table is related to the contingent consideration liability that resulted from the 2015 acquisition of U.S. Water Services. Based on the terms and conditions of the acquisition agreement, a final payout of $3.8 million was made in the first quarter of 2019 for the remaining outstanding shares.

Fair Value of Financial Instruments. With the exception of the item listed in the following table, the estimated fair value of all financial instruments approximates the carrying amount. The fair value for the item listed in the following table was based on quoted market prices for the same or similar instruments (Level 2).

NOTE 5. FAIR VALUE (Continued)



Financial Instruments	Carrying Amount	Fair Value
Millions
Long-Term Debt, Including Long-Term Debt Due Within One Year
June 30, 2019	$1,543.0	$1,684.3
December 31, 2018	$1,495.2	$1,534.6

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis. Non-financial assets such as equity method investments, land inventory, and property, plant and equipment are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment is recognized. For the quarter and six months ended June 30, 2019, and the year ended December 31, 2018, there were no triggering events or indicators of impairment for these non-financial assets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details