Fair Value Measurements and Other Financial Instruments

Fair Value Measurements

The fair value of our financial instruments, using the fair value hierarchy under U.S. GAAP are included in the table below.



	December 31, 2018
(In millions)	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	38.6	$	38.6	$	—	$	—
Derivative financial and hedging instruments net asset (liability):
Foreign currency forward and option contracts	$	0.6	$	—	$	0.6	$	—



	December 31, 2017
(In millions)	Total Fair Value			Level 1		Level 2			Level 3
Cash equivalents	$	297.5		$	297.5	$	—		$	—
Derivative financial and hedging instruments net asset (liability):
Foreign currency forward contracts	$	(1.6	)	$	—	$	(1.6	)	$	—

Cash Equivalents

Our cash equivalents consist of commercial paper (fair value determined using Level 2 inputs) and bank time deposits (Level 1). Since these are short-term highly liquid investments with remaining maturities of 3 months or less, they present negligible risk of changes in fair value due to changes in interest rates. The amount of cash equivalents decreased from 2017, primarily due to utilization of proceeds from the sale of Diversey.

Derivative Financial Instruments

Our foreign currency forward contracts, foreign currency options, interest rate swaps and cross-currency swaps are recorded at fair value on our Consolidated Balance Sheets using a discounted cash flow analysis that incorporates observable market inputs. These market inputs include foreign currency spot and forward rates, and various interest rate curves, and are obtained from pricing data quoted by various banks, third-party sources and foreign currency dealers involving identical or comparable instruments (Level 2).

Counterparties to these foreign currency forward contracts have at least an investment grade rating. Credit ratings on some of our counterparties may change during the term of our financial instruments. We closely monitor our counterparties’ credit ratings and, if necessary, will make any appropriate changes to our financial instruments. The fair value generally reflects the estimated amounts that we would receive or pay to terminate the contracts at the reporting date.

Other Financial Instruments

The following financial instruments are recorded at fair value or at amounts that approximate fair value: (1) trade receivables, net, (2) certain other current assets, (3) accounts payable and (4) other current liabilities. The carrying amounts reported on our Consolidated Balance Sheets for the above financial instruments closely approximate their fair value due to the short-term nature of these assets and liabilities.

Other liabilities that are recorded at carrying value on our Consolidated Balance Sheets include our credit facilities and senior notes. We utilize a market approach to calculate the fair value of our senior notes. Due to their limited investor base and the face value of some of our senior notes, they may not be actively traded on the date we calculate their fair value. Therefore, we may utilize prices and other relevant information generated by market transactions involving similar securities, reflecting U.S. Treasury yields to calculate the yield to maturity and the price on some of our senior notes. These inputs are provided by an independent third party and are considered to be Level 2 inputs.

We derive our fair value estimates of our various other debt instruments by evaluating the nature and terms of each instrument, considering prevailing economic and market conditions, and examining the cost of similar debt offered at the balance sheet date. We also incorporated our credit default swap rates and currency specific swap rates in the valuation of each debt instrument, as applicable.

These estimates are subjective and involve uncertainties and matters of significant judgment, and therefore we cannot determine them with precision. Changes in assumptions could significantly affect our estimates.

The table below shows the carrying amounts and estimated fair values of our total debt:



	December 31, 2018				December 31, 2017
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan A Facility due July 2023^{(1) (2)}	$	222.2	$	222.2	$	222.7	$	222.7
6.50% Senior Notes due December 2020	424.0		440.1		423.6		465.1
4.875% Senior Notes due December 2022	421.1		421.2		420.4		451.0
5.25% Senior Notes due April 2023	421.2		424.5		420.4		455.6
4.50% Senior Notes due September 2023⁽¹⁾	454.9		489.9		474.3		544.4
5.125% Senior Notes due December 2024	421.3		419.8		420.7		456.2
5.50% Senior Notes due September 2025	397.1		394.8		396.7		439.9
6.875% Senior Notes due July 2033	445.5		453.4		445.4		527.3
Other foreign borrowings⁽¹⁾	98.5		99.2		30.2		30.4
Other domestic borrowings	168.4		170.0		3.6		3.6
Total debt	$	3,474.2	$	3,535.1	$	3,258.0	$	3,596.2


⁽¹⁾	Includes borrowings denominated in currencies other than U.S. dollars.


⁽²⁾	On July 12, 2018, the Company entered into a third amended and restated credit agreement, which included the refinancing of the term loan A facilities and revolving credit facilities.

In addition to the table above, the Company remeasures amounts related to contingent consideration liabilities related to acquisitions and certain equity compensation, that were carried at fair value on a recurring basis in the Consolidated Financial Statements or for which a fair value measurement was required. Refer to Note 4 “Discontinued Operations, Divestitures and Acquisitions,” of the Notes to Consolidated Financial Statements for information regarding contingent consideration and Note 19 “Stockholders’ Equity (Deficit),” of the Notes to Consolidated Financial Statements for share based compensation in the Notes to Consolidated Financial Statements. Included among our non-financial assets and liabilities that are not required to be measured at fair value on a recurring basis are inventories, net property and equipment, goodwill, intangible assets and asset retirement obligations.

Credit and Market Risk

Financial instruments, including derivatives, expose us to counterparty credit risk for nonperformance and to market risk related to changes in interest or currency exchange rates. We manage our exposure to counterparty credit risk through specific minimum credit standards, establishing credit limits, diversification of counterparties, and procedures to monitor concentrations of credit risk.

We do not expect any of our counterparties in derivative transactions to fail to perform as it is our policy to have counterparties to these contracts that have at least an investment grade rating. Nevertheless, there is a risk that our exposure to losses arising out of derivative contracts could be material if the counterparties to these agreements fail to perform their obligations. We will replace counterparties if a credit downgrade is deemed to increase our risk to unacceptable levels.

We regularly monitor the impact of market risk on the fair value and cash flows of our derivative and other financial instruments considering reasonably possible changes in interest and currency exchange rates and restrict the use of derivative financial instruments to hedging activities. We do not use derivative financial instruments for trading or other speculative purposes and do not use leveraged derivative financial instruments.

We continually monitor the creditworthiness of our diverse base of customers to which we grant credit terms in the normal course of business and generally do not require collateral. We consider the concentrations of credit risk associated with our trade accounts receivable to be commercially reasonable and believe that such concentrations do not leave us vulnerable to significant risks of near-term severe adverse impacts. The terms and conditions of our credit sales are designed to mitigate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers.