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FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
 12 Months Ended
Sep. 30, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
NOTE 13 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

We have certain assets and liabilities that are required to be measured and disclosed at fair value. 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.
The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Recurring Fair Value Measurements
The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which we classify the fair value measurement.
September 30, 2022
(in thousands)Fair Value    Level 1    Level 2    Level 3
Assets
Short-term investments:
Corporate debt securities$98,264 — 98,264 — 
U.S. government and federal agency securities 18,837 18,837 — — 
Total short-term investments117,101 18,837 98,264 — 
Investments:
Non-qualified supplemental savings plan14,301 14,301 — — 
Equity investment in ADNOC Drilling147,370 147,370 — — 
Debt security investment in Galileo33,000 — — 33,000 
Other debt securities565 — — 565 
Total investments195,236 161,671 — 33,565 
Liabilities
Contingent consideration$4,022 $— $— $4,022 
September 30, 2021
(in thousands)Fair Value    Level 1    Level 2    Level 3
Assets
Short-term investments:
Corporate debt securities$192,950 $— $192,950 $— 
U.S. government and federal agency securities 5,750 5,750 — — 
Total short-term investments198,700 5,750 192,950 — 
Investments:
Non-qualified supplemental savings plan18,221 18,221 — — 
Equity and debt securities14,358 13,858 — 500 
Cornerstone investment in ADNOC Drilling100,000 100,000 — — 
Total investments132,579 132,079 — 500 
Liabilities
Contingent consideration$2,996 $— $— $2,996 
Short-term Investments Short-term investments primarily include securities classified as trading securities. Both realized and unrealized gains and losses on trading securities are included in other income (expense) in the Consolidated Statements of Operations. These securities are recorded at fair value. Level 1 inputs include U.S. agency issued debt securities with active markets and money market funds. For these items, quoted current market prices are readily available. Level 2 inputs include corporate bonds measured using broker quotations that utilize observable market inputs.
Long-term Investments Our long-term investments include debt and equity securities and assets held in a Non-Qualified Supplemental Savings Plan ("Savings Plan") and are recorded within Investments on our Consolidated Balance Sheets. Our assets that we hold in the Savings Plan are comprised of mutual funds that are measured using Level 1 inputs.
During September 2021, the Company made a $100.0 million cornerstone investment in ADNOC Drilling in advance of its announced IPO, representing 159.7 million shares of ADNOC Drilling, equivalent to a one percent ownership stake and subject to a three-year lockup period. ADNOC Drilling’s IPO was completed on October 3, 2021, and its shares are listed and traded on the Abu Dhabi Securities Exchange. Our investment is classified as a long-term equity investment within Investments in our Consolidated Balance Sheets. We have applied the guidance in Topic 820, Fair Value Measurement, in the initial accounting of the transaction and the subsequent revaluation of the investment balance, concluding that the contractual restriction on the sale of an equity security that is publicly traded is not considered in measuring fair value. During the fiscal year ended September 30, 2022, we recognized a gain of $47.4 million on our Consolidated Statements of Operations, as a result of the change in fair value of the investment during the period. As of September 30, 2022, this investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.
During the fiscal year ended September 30, 2022, the Company made a $33.0 million cornerstone investment in Galileo Holdco 2 Limited Technologies ("Galileo Holdco 2"), part of the group of companies known as Galileo Technologies (“Galileo”) in the form of a convertible note. Galileo specializes in liquification, natural gas compression and re-gasification modular systems and technologies to make the production, transportation, and consumption of natural gas, biomethane, and hydrogen more economically viable. The convertible note bears interest at 5.0 percent per annum with a maturity date of the earlier of April 2027 or an exit event (as defined in the agreement as either an initial public offering or a sale of Galileo). If the conversion option is exercised, the note would convert into common shares of the parent of Galileo Holdco 2 ("Galileo Parent"). We do not intend to sell this investment prior to its maturity date or an exit event. As of September 30, 2022, the fair value of the convertible note was approximately equal to the cost basis.
All of our long-term debt securities, including our investment in Galileo, are classified as available-for-sale and are measured using Level 3 unobservable inputs based on the absence of market activity. The following table reconciles changes in the fair value of our Level 3 assets for the periods presented below:
Year Ended
(in thousands)20222021
Assets at beginning of period$500 $500 
Purchases36,065 — 
Transfers out1
(3,000)— 
Assets at end of period$33,565 $500 
(1)Conversion from debt to equity security
The following table provides quantitative information (in thousands) about our Level 3 unobservable significant inputs related to our debt security investment with Galileo at September 30, 2022:
Fair ValueValuation TechniqueUnobservable Inputs
$33,000 Black-Scholes-Merton modelDiscount rate22.4 %
Risk-free rate4.0 %
Equity volatility92.5 %
The above significant unobservable inputs are subject to change based on changes in economic and market conditions. The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. Significant increases or decreases in the discount rate, risk-free rate, and equity volatility in isolation would result in a significantly lower or higher fair value measurement. It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values.
During the fiscal year ended September 30, 2022, we sold our remaining equity securities of approximately 467.5 thousand shares in Schlumberger, Ltd. and received proceeds of approximately $22.0 million. For the fiscal year ended September 30, 2022, we recorded a total gain of $8.2 million related to this investment, which included a $0.5 million gain recognized upon the sale of our investment and a $7.7 million gain as a result of the change in fair value of the investment during the period. This activity is reported in Gain (Loss) on Investment Securities in our Consolidated Statements of Operations. This investment was classified as Level 1 and based on the quoted stock price.
Contingent Consideration
Other financial instruments measured using Level 3 unobservable inputs primarily consist of potential earnout payments associated with our business acquisitions in fiscal year 2019 and certain consulting services. Contingent consideration is recorded in Accrued Liabilities and Other Noncurrent Liabilities on the Consolidated Balance Sheets based on the expected timing of milestone achievements. The following table reconciles changes in the fair value of our Level 3 liabilities for the periods presented below:
(in thousands)20222021
Liabilities at beginning of period$2,996 $9,123 
Additions1,500 — 
Total gains or losses:
Included in earnings(224)1,123 
Settlements1
(250)(7,250)
Liabilities at end of period$4,022 $2,996 
(1)Settlements represent earnout payments that have been paid or earned during the period.
Nonrecurring Fair Value Measurements
We have certain assets that are subject to measurement at fair value on a nonrecurring basis. For these nonfinancial assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired. These assets generally include property, plant and equipment, goodwill, intangible assets, and operating lease right-of-use assets. If measured at fair value in the Consolidated Balance Sheets, these would generally be classified within Level 2 or 3 of the fair value hierarchy. Further details on any changes in valuation of these assets is provided in their respective footnotes.
Other Equity Securities
We also hold various other equity securities without readily determinable fair values. These equity securities are measured at cost, less any impairments, and recorded within Investments on our Consolidated Balance Sheets. As of September 30, 2022 and 2021, the aggregate balance of these equity securities was $23.7 million and $2.9 million, respectively. During the fiscal year ended September 30, 2022 and 2021, we did not record any impairments on these investments.
The following table reconciles changes in the balance of our equity securities, without readily determinable fair values, for the periods presented below:
Year Ended
September 30,
(in thousands)
2022
2021
Assets at beginning of period$2,865 $— 
Purchases15,177 2,865 
Transfers in1
3,000 — 
Unrealized gain included in earnings2,703 — 
Assets at end of period$23,745 $2,865 
(1)Conversion from debt to equity security
Geothermal Investments
As of September 30, 2022 and 2021 the aggregate balance of our debt and equity security investments in geothermal energy was $23.7 million and $2.7 million, respectively. All of our geothermal investments are considered a Level 3 input based on the absence of market activity. These investments include assets measured on both a recurring and nonrecurring basis (discussed in the subsections above).
Other Financial Instruments
The carrying amount of cash and cash equivalents and restricted cash approximates fair value due to the short-term nature of these items. The majority of cash equivalents are invested in highly liquid money-market mutual funds invested primarily in direct or indirect obligations of the U.S. Government and in federally insured deposit accounts. The carrying value of accounts receivable, other current and noncurrent assets, accounts payable, accrued liabilities and other liabilities approximated fair value at September 30, 2022 and 2021.
The following information presents the supplemental fair value information for our current and long-term fixed-rate debt at September 30, 2022 and 2021:
September 30,
(in millions)2022    
2021
Current portion of long-term debt, net1
Carrying value$— $483.5 
Fair value — 541.6 
Long-term debt, net
Carrying value542.6 542.0 
Fair value430.7 554.3 
(1)On October 27, 2021 we redeemed the outstanding 2025 Notes. See Note 7—Debt to our Consolidated Financial Statements.

The fair values of the current and long-term fixed-rate debt is based on broker quotes at September 30, 2022 and 2021.  The notes are classified within Level 2 of the fair value hierarchy as they are not actively traded in markets.