FAIR VALUE OF FINANCIAL INSTRUMENTS

Forward Foreign Exchange and Currency Option Contracts

The Corporation has foreign currency exposure primarily in the United Kingdom, Europe, and Canada. The Corporation uses financial instruments, such as forward and option contracts, to hedge a portion of existing and anticipated foreign currency denominated transactions. The purpose of the Corporation’s foreign currency risk management program is to reduce volatility in earnings caused by exchange rate fluctuations. Guidance on accounting for derivative instruments and hedging activities requires companies to recognize all of the derivative financial instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets based upon quoted market prices for comparable instruments.

Interest Rate Risks and Related Strategies

The Corporation’s primary interest rate exposure results from changes in U.S. dollar interest rates. The Corporation’s policy is to manage interest cost using a mix of fixed and variable rate debt. The Corporation periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Corporation exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount.

For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates.

On February 5, 2016, the Corporation terminated its March 2013 and January 2012 interest rate swap agreements. As a result of the termination, the Corporation received a cash payment of $20.4 million, representing the fair value of the interest rate swaps on the date of termination. In connection with the termination, the Corporation and the counterparties released each other from all obligations under the interest rate swaps agreement, including, without limitation, the obligation to make periodic payments under such agreements. The gain on termination is reflected as a bond premium to our notes' carrying value and amortized prospectively into interest expense over the remaining terms of the Senior Notes.

The fair value accounting guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities that the company has the ability to access.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data such as quoted prices, interest rates and yield curves.

Level 3: Inputs are unobservable data points that are not corroborated by market data.

Based upon the fair value hierarchy, all of the forward foreign exchange contracts and interest rate swaps are valued at a Level 2.

Effects on Consolidated Balance Sheets

The location and amounts of derivative instrument fair values in the condensed consolidated balance sheet are below.



(In thousands)	September 30, 2016		December 31, 2015
Assets
Designated for hedge accounting
Interest rate swaps	$	—	$	3,083
Undesignated for hedge accounting
Forward exchange contracts	$	25	$	223
Total asset derivatives (A)	$	25	$	3,306
Liabilities
Undesignated for hedge accounting
Forward exchange contracts	506		673
Total liability derivatives (B)	$	506	$	673

(A)Forward exchange derivatives are included in Other current assets and interest rate swap assets are included in Other assets.

(B)Forward exchange derivatives are included in Other current liabilities.

Effects on Condensed Consolidated Statements of Earnings

Fair value hedge

The location and amount of losses on the hedged fixed rate debt attributable to changes in the market interest rates and the offsetting gain on the related interest rate swaps for the three and nine months ended September 30, 2016 and 2015, were as follows:



	Three Months Ended					Nine Months Ended
(In thousands)	September 30,					September 30,
	2016		2015			2016		2015
Other income, net
Gain on interest rate swaps	$	—	$	16,954		$	—	$	12,632
Loss on hedged fixed rate debt	—		(16,954		)	—		(12,632		)
Total	$	—	$	—		$	—	$	—

Undesignated hedges

The location and amount of gains and (losses) recognized in income on forward exchange derivative contracts not designated for hedge accounting for the three and nine months ended September 30, were as follows:



	Three Months Ended						Nine Months Ended
(In thousands)	September 30,						September 30,
Derivatives not designated as hedging instrument	2016			2015			2016			2015
Forward exchange contracts:
General and administrative expenses	$	(3,596	)	$	(6,136	)	$	(8,632	)	$	(7,692	)

Debt

The estimated fair value amounts were determined by the Corporation using available market information that is primarily based on quoted market prices for the same or similar issues as of September 30, 2016. Accordingly, all of the Corporation’s debt is valued at a Level 2. The fair values described below may not be indicative of net realizable value or reflective of future fair values. Furthermore, the use of different methodologies to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.



	September 30, 2016						December 31, 2015
(In thousands)	Carrying Value			Estimated Fair Value			Carrying Value			Estimated Fair Value
5.51% Senior notes due 2017	150,000			155,759			150,000			158,024
3.84% Senior notes due 2021	100,000			104,804			100,307			100,307
3.70% Senior notes due 2023	225,000			233,284			225,000			224,322
3.85% Senior notes due 2025	100,000			104,138			100,450			100,450
4.24% Senior notes due 2026	200,000			212,880			201,422			201,422
4.05% Senior notes due 2028	75,000			78,294			75,904			75,904
4.11% Senior notes due 2028	100,000			104,931			100,000			99,720
Other debt	802			802			1,259			1,259
Total debt	950,802			994,892			954,342			961,408
Unamortized debt issuance costs (1)	(1,022		)	(1,022		)	(1,137		)	(1,137		)
Unamortized interest rate swap proceeds (2)	17,062			17,062			—			—
Total debt, net	$	966,842		$	1,010,932		$	953,205		$	960,271

⁽¹⁾ Effective for 2016, the Company adopted ASU 2015-03 - Simplifying the Presentation of Debt Issuance Costs requiring unamortized debt issuance costs to be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability. Prior year balances have been reclassified to reflect the current year presentation.

⁽²⁾ In February 2016, the Company terminated its interest rate swap agreements. Upon termination of the interest rate swaps, the Corporation received $20.4 million in cash and recorded a deferred gain of $18.3 million. As of September 30, 2016, the remaining benefit of $17.1 million was recorded as an increase in the long-term debt balance and will be recognized ratably as a reduction to future interest expense over the remaining life of the related debt.

Nonrecurring measurements

As discussed in Note 2, Discontinued Operations and Assets Held For Sale, the Corporation classified certain businesses as held for sale during 2014. In accordance with the provisions of the Impairment or Disposal of Long-Lived Assets guidance of FASB Codification Subtopic 360–10, the carrying amount of the disposal groups were written down to their estimated fair value, less costs to sell, resulting in an impairment charge of $40.8 million, which was included in the loss from discontinued operations before income taxes for the nine months ended September 30, 2015. The fair value of the disposal groups were determined primarily by using non-binding quotes. In accordance with the fair value hierarchy, the impairment charge is classified as a Level 3 measurement as it is based on significant other unobservable inputs.