Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

4. Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs include quoted prices for similar instruments in active markets and/or quoted prices for identical or similar instruments in markets that are not active near the measurement date; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

We classify our cash equivalents and available-for-sale investments within Level 1 or Level 2. The fair value of our investment grade corporate debt securities is determined using proprietary valuation models and analytical tools, which utilize market pricing or prices for similar instruments that are both objective and publicly available, such as matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, and offers.

The fair value of our investments in restricted equity securities is determined using an option pricing valuation model and classified as Level 3 within the fair value hierarchy. The most significant assumptions within the option pricing valuation model are the term of the restrictions and the stock price volatility, which is based upon the historical volatility of similar companies. Significant changes in any of those inputs in isolation would result in a significantly higher or lower fair value measurement.

The $517.5 million of 2.25% convertible senior notes due May 15, 2024 (2024 Notes) were recorded at the estimated value of a similar non-convertible instrument on the date of issuance and accretes to the face value of the 2024 Notes over their 7-year term. The fair value of the 2024 Notes, estimated utilizing market quotations from an over-the-counter trading market (Level 2), was $700.9 million as of March 31, 2019 and $616.1 million as of December 31, 2018. Refer to Note 7 for more information.

We did not reclassify any investments between levels in the fair value hierarchy during the first quarter of 2019 or 2018.

Investments, which were measured at fair value on a recurring basis using the inputs described above, consisted of the following:

	blank			Fair Value Measurements Using
(in millions)	Carrying Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2019:
Classified as current assets:
Cash and money market funds	$	72.8		$	72.8		$	—	$	—
Commercial paper		97.5			—			97.5		—
Securities of government-sponsored entities		45.8			—			45.8		—
Corporate debt securities		308.0			—			308.0		—
Subtotal		524.1			72.8			451.3		—
Classified as long-term assets:
Cash and money market funds		1.5			1.5			—		—
Certificates of deposit		4.0			4.0			—		—
Securities of government-sponsored entities		43.1			—			43.1		—
Corporate debt securities		133.6			—			133.6		—
Restricted equity securities		56.4			—			—		56.4
Total		762.7			78.3			628.0		56.4
Less cash and cash equivalents and restricted cash		(78.3	)		(78.3	)		—		—
Total investments	$	684.4		$	—		$	628.0	$	56.4
blank
December 31, 2018:
Classified as current assets:
Cash and money market funds	$	141.7		$	141.7		$	—	$	—
Commercial paper		94.6			—			94.6		—
Securities of government-sponsored entities		20.8			—			20.8		—
Corporate debt securities		393.8			—			393.8		—
Subtotal		650.9			141.7			509.2		—
Classified as long-term assets:
Cash and money market funds		1.5			1.5			—		—
Certificates of deposit		4.0			4.0			—		—
Securities of government-sponsored entities		64.8			—			64.8		—
Corporate debt securities		151.2			—			151.2		—
Total		872.4			147.2			725.2		—
Less cash and cash equivalents and restricted cash		(147.2	)		(147.2	)		—		—
Total investments	$	725.2		$	—		$	725.2	$	—

The following table presents a reconciliation of our investment in restricted equity securities measured at fair value on a quarterly basis using significant unobservable inputs (Level 3):

(in millions)
Balance at December 31, 2018	$	—
Investment in restricted equity securities		54.7
Unrealized gain recognized on restricted equity securities still held at March 31, 2019		1.7
Balance at March 31, 2019	$	56.4