Fair Value Measurement

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The FASB fair value measurement guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. The three broad levels of the fair value hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 – Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly

Level 3 – Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own assumptions

The following table shows, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis at March 31, 2015 and December 31, 2014 (in millions):



Asset (Liability)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Quoted Prices in Active Markets for Similar Assets (Level 2)		Total
March 31, 2015
Money market funds^(a)	$	166.6		$	—	$	166.6
Available for sale investments	—			45.4		45.4
Trading securities	9.7			—		9.7
Deferred compensation plan liabilities	(9.7		)	—		(9.7		)
Derivatives:
Forward exchange contracts	—			1.4		1.4
	$	166.6		$	46.8	$	213.4

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Quoted Prices in Active Markets for Similar Assets (Level 2)		Total
December 31, 2014
Money market funds^(a)	$	365.9		$	—	$	365.9
Available for sale investments	—			43.0		43.0
Trading securities	8.9			—		8.9
Deferred compensation plan liabilities	(8.9		)	—		(8.9		)
Derivatives:
Forward exchange contracts	—			0.7		0.7
	$	365.9		$	43.7	$	409.6

(a) Money market funds are reflected in Cash and cash equivalents in the Condensed Consolidated Balance Sheet.

The methods and assumptions used to estimate the Level 2 fair values were as follows:

Forward exchange contracts – The fair value of forward exchange contracts were based on quoted forward foreign exchange prices at the reporting date.

Municipal bonds – The fair value of available-for-sale investments in municipal bonds is based on observable market-based inputs, other than quoted prices in active markets for identical assets.

During the three months ended March 31, 2015 there were no transfers of financial assets or liabilities in or out of Level 1 or Level 2 of the fair value hierarchy. During the three months ended March 31, 2015 and as of December 31, 2014, the Company did not have any financial assets or liabilities that fell within the Level 3 hierarchy.

Investments

At March 31, 2015 and December 31, 2014, the Company had $45.4 million and $43.0 million, respectively, of municipal bonds classified as available-for-sale securities. The Company also had $9.7 million and $8.9 million of trading securities at March 31, 2015 and December 31, 2014, respectively. These investments are carried on the balance sheet at fair value. Unrealized gains and losses associated with available-for-sale securities are reflected in Accumulated other comprehensive loss, net of tax, while unrealized gains and losses associated with trading securities are reflected in the results of operations.

Deferred compensation plans

The Company offers certain employees the opportunity to participate in non-qualified deferred compensation plans. A participant’s deferrals are invested in a variety of participant-directed debt and equity mutual funds that are classified as trading securities. During the three months ended March 31, 2015 and 2014, the Company purchased $0.8 million and $1.1 million, respectively, of trading securities related to these deferred compensation plans. As a result of participant distributions, the Company sold $0.2 million of these trading securities during the three months ended March 31, 2015 and March 31, 2014. The unrealized gains and losses associated with these trading securities are directly offset by the changes in the fair value of the underlying deferred compensation plan obligation.

Derivatives

In order to limit financial risk in the management of its assets, liabilities and debt, the Company may use derivative financial instruments such as foreign currency hedges, commodity hedges, interest rate hedges and interest rate swaps. All derivative financial instruments are matched with an existing Company asset, liability or forecasted transaction. Market value gains or losses on the derivative financial instrument are recognized in income when the effects of the related price changes of the underlying asset, liability or forecasted transaction are recognized in income. Derivative assets and derivative liabilities are not offset in the Condensed Consolidated Balance Sheet.

The fair values of derivative instruments in the Condensed Consolidated Balance Sheet are as follows (in millions):



	Asset/(Liability) Derivatives
		Fair Value
Derivatives designated as hedges	Balance Sheet Location	March 31, 2015		December 31, 2014
Forward exchange contracts designated as cash flow hedges	Deferred taxes and other	$	1.4	$	0.7

Forward exchange contracts

In 2015 and 2014, the Company entered into a series of forward exchange contracts to purchase U.S. dollars in order to hedge its exposure to fluctuating rates of exchange on anticipated inventory purchases by one of its Canadian subsidiaries. As of March 31, 2015, the Company had 18 individual forward exchange contracts for a notional $1.0 million each, which have various expiration dates through March 2016. These contracts have been designated as cash flow hedges in accordance with the accounting guidance for derivatives.

Interest rate locks

Prior to the issuance of long-term notes in 2010 and 2008, the Company entered into forward interest rate locks to hedge its exposure to fluctuations in treasury rates. The 2010 interest rate lock resulted in a pretax $1.6 million loss while the 2008 interest rate lock resulted in a pretax $1.2 million gain. These amounts were recorded in Accumulated other comprehensive loss, net of tax, and are being amortized over the life of the respective notes. The amortization associated with these interest rate locks is reclassified from Accumulated other comprehensive loss to Interest expense, net in the Condensed Consolidated Statement of Income. The amortization reclassification for the three ended March 31, 2015 and 2014 was not material. As of both March 31, 2015 and December 31, 2014 there was $0.4 million of net unamortized losses reflected in Accumulated other comprehensive loss.

The following table summarizes the results of cash flow hedging relationships for the three months ended March 31, 2015 and 2014 (in millions):



	Derivative Gain/(Loss) Recognized in Accumulated Other Comprehensive Loss (net of tax)				Location of Gain/(Loss) Reclassified into Income	Gain/(Loss) Reclassified into Earnings (Effective Portion)
Derivative Instrument	2015		2014		(Effective Portion)	2015		2014
Forward exchange contract	$	1.2	$	0.5	Cost of goods sold	$	0.7	$	0.4

There was no hedge ineffectiveness with respect to the forward exchange cash flow hedges during the three months ended March 31, 2015 and 2014.

Long-term Debt

The total carrying value of long-term debt as of March 31, 2015 and December 31, 2014 was $597.7 million and $597.6 million, respectively, net of unamortized discount. As of March 31, 2015 and December 31, 2014, the estimated fair value of the long-term debt was $649.3 million and $645.1 million, respectively, using quoted market prices in active markets for similar liabilities (Level 2).