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Fair Value Measurements and Other Financial Instruments

3 Months Ended

Mar. 31, 2020

Fair Value Measurements and Other Financial Instruments

Fair Value Measurements

Fair value represents 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. There are three levels to the fair value hierarchy as follows:

Level 1 - observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets

Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly

Level 3 - unobservable inputs for which there is little or no market data, which may require the reporting entity to develop its own assumptions.

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


	March 31, 2020
(In millions)	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	42.6	$	42.6	$	—	$	—
Other current assets	$	1.4	$	1.4	$	—	$	—
Derivative financial and hedging instruments net asset (liability):
Foreign currency forward and option contracts	$	2.0	$	—	$	2.0	$	—


	December 31, 2019
(In millions)	Total Fair Value		Level 1		Level 2		Level 3
Cash equivalents	$	41.4	$	41.4	$	—	$	—
Other current assets	$	14.4	$	14.4	$	—	$	—
Derivative financial and hedging instruments net asset (liability):
Foreign currency forward and option contracts	$	(1.2)	$	—	$	(1.2)	$	—

Cash Equivalents

Our cash equivalents consisted of bank time deposits. 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 and are classified as Level 1 financial instruments.

Other current assets

Other current assets include primarily time deposits, greater than 90 days to maturity at time of purchase at our insurance captive and are classified as Level 1 financial instruments.

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 Condensed 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. Such financial instruments are classified as 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.

Foreign currency forward contracts and options are included in Prepaid expenses and other current assets and Other current liabilities on the Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019.

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 Condensed 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 Condensed 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 debt, excluding our lease liabilities.


			March 31, 2020						December 31, 2019
(In millions)	Interest rate		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan A Facility due August 2022			$	474.5	$	474.5	$	474.6	$	474.6
Term Loan A Facility due July 2023⁽¹⁾			221.8		221.8		223.8		223.8

Senior Notes due December 2022	4.875	%	422.2		429.0		421.9		450.1
Senior Notes due April 2023	5.250	%	422.2		435.0		422.0		454.1
Senior Notes due September 2023	4.500	%	439.7		463.4		445.6		509.5
Senior Notes due December 2024	5.125	%	422.1		423.8		421.9		458.9
Senior Notes due September 2025	5.500	%	397.5		403.8		397.4		441.2
Senior Notes due December 2027	4.000	%	420.5		389.7		420.4		431.5
Senior Notes due July 2033	6.875	%	445.7		450.1		445.7		528.8
Other foreign borrowings⁽¹⁾			163.4		163.5		12.1		12.4
Other domestic borrowings			5.0		5.0		89.0		89.0
Total debt⁽²⁾			$	3,834.6	$	3,859.6	$	3,774.4	$	4,073.9

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

⁽²⁾The carrying amount and estimated fair value of debt exclude lease liabilities.

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.

- 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.

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