Fair Value Measurement

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair value measurement

Fair Value Measurement

Fair Value Measurements-Recurring Basis

In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. Applicable accounting literature establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is based on observable or unobservable inputs to valuation techniques that are used to measure fair value. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. Applicable accounting literature defines levels within the hierarchy based on the reliability of inputs as follows:

•Level 1: Inputs are quoted prices in active markets for identical assets or liabilities.

• Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable and market-corroborated inputs, which are derived principally from or corroborated by observable market data.

• Level 3: Inputs that are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis and the basis of measurement at September 30, 2019 and December 31, 2018:

Fair Value Measurement
	September 30, 2019 (unaudited)							December 31, 2018
(millions)	Level 1		Level 2			Level 3		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	29.6	$	—		$	—	$	39.9	$	—	$	—
Liabilities
Accrued expenses
Interest rate collars	—		(1.2		)	—		—		—		—
Total	$	29.6	$	(1.2	)	$	—	$	39.9	$	—	$	—

Interest Rate Collars

The Company seeks to minimize risks from interest rate fluctuations through the use of interest rate collar contracts and hedge only exposures in the ordinary course of business. Interest rate collars are used to manage interest rate risk associated with our floating rate debt. Effective May 2019, the Company entered into three zero cost interest rate collar contracts with an aggregate notional amount of $222.3 million with maturity dates of April 2022. The notional amount amortizes consistent with the term loan portion of the Senior Credit Facility. See Note 10. Borrowing Arrangements for additional disclosure on interest rate collar contract transactions. The Company accounts for its derivative instruments at fair value. Derivatives held by the Company are designated as hedges of specific exposures at inception, with an expectation that changes in the fair value will essentially offset the change in the underlying exposure. Discontinuance of hedge accounting is required whenever it is subsequently determined that an underlying transaction is not going to occur, with any gains or losses recognized in the Consolidated Statements of Income at such time, with any subsequent changes in fair value recognized currently in earnings.

The fair value of interest rate collars is a Level 2 fair value measurement, based on quoted prices of similar items in active markets. The effective portion of the change in fair value of the interest rate collars is reported in Accumulated other comprehensive income, a component of Stockholders' equity, and is being recognized as an adjustment to interest expense or other (expense) income, respectively, over the same period the related expenses are recognized in earnings. Gains and losses from cash flow hedging instruments reclassified from Accumulated other comprehensive income to earnings are reported as Cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows. The Company did not enter into derivative transactions during the nine months ended September 30, 2018.

See Note 15. Comprehensive Income for amount of gain (loss) recognized in Other Comprehensive loss on the interest rate collars. No gain (loss) was reclassified from Accumulated Other Comprehensive loss during the three and nine months ended September 30, 2019. No gain (loss) was recognized in income on the interest rate collars resulting from hedge ineffectiveness or exclusion from the assessment of hedge effectiveness.

The following table presents summarized information about the Company's interest rate collars:

Interest Rate Collars
September 30, 2019 (unaudited)
		Interest Rate Parameters
(millions)	Maturity Date	Notional Amount		LIBOR Ceiling		LIBOR Floor
Collar 1	April 2022	$	74.1	2.5	%	1.2	%
Collar 2	April 2022	74.1		2.5	%	1.3	%
Collar 3	April 2022	74.1		2.5	%	1.4	%
Total		$	222.3

Nonrecurring Fair Value Measurements

Certain assets are measured at fair value on a nonrecurring basis; that is, the assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Non-financial assets such as goodwill, intangible assets, and leasehold improvements, equipment and construction in progress are subsequently measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized. The Company assesses the impairment of intangible assets annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The fair value of its goodwill and intangible assets is not estimated if there is no change in events or circumstances that indicate the carrying amount of an intangible asset may not be recoverable. There were no impairment charges for the nine months ended September 30, 2019 and 2018.

Financial Instruments Not Measured at Fair Value

The following table presents the carrying amounts and estimated fair values of financial instruments not measured at fair value in the Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018: 

	September 30, 2019 (unaudited)				December 31, 2018
(millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Credit Facility, net of original discount on borrowings and deferred financing costs	$	351.0	$	351.0	$	371.2	$	371.2
Other obligations	$	19.1	$	19.1	$	15.4	$	15.4

The fair value of the Restated Credit Facility and Other obligations approximates the carrying amount due to variable interest rates and would be classified as a Level 2. See Note 10. Borrowing Arrangements, for further information.