Fair Value Measurement

Investments

At March 31, 2019 and December 31, 2018, the Company had $49.8 million and $51.2 million, respectively, of available-for-sale securities, consisting of municipal bonds classified in Level 2 of the fair value hierarchy and an investment in the redeemable preferred stock of a privately-held electrical utility substation security provider classified in Level 3 of the fair value hierarchy. The Company also had $17.2 million of trading securities at March 31, 2019 and $14.3 million at December 31, 2018 that 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.

Fair value measurements

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, 2019 and December 31, 2018 (in millions):



Asset (Liability)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Quoted Prices in Active Markets for Similar Assets (Level 2)			Unobservable inputs for which little or no market data exists (Level 3)		Total
March 31, 2019
Money market funds^(a)	$	24.8		$	—		$	—	$	24.8
Time Deposits^(a)	—			21.3			—		21.3
Available for sale investments	—			47.3			2.5		49.8
Trading securities	17.2			—			—		17.2
Deferred compensation plan liabilities	(17.2		)	—			—		(17.2		)
Derivatives:
Forward exchange contracts-Assets^(b)	—			0.8			—		0.8
Forward exchange contracts-(Liabilities)^(c)	—			(0.1		)	—		(0.1		)
TOTAL	$	24.8		$	69.3		$	2.5	$	96.6

	Quoted Prices in Active Markets for Identical Assets (Level 1)			Quoted Prices in Active Markets for Similar Assets (Level 2)			Unobservable inputs for which little or no market data exists (Level 3)		Total
December 31, 2018
Money market funds^(a)	$	15.1		$	—		$	—	$	15.1
Time Deposits^(a)	—			20.9			—		20.9
Available for sale investments	—			48.9			2.3		51.2
Trading securities	14.3			—			—		14.3
Deferred compensation plan liabilities	(14.3		)	—			—		(14.3		)
Derivatives:
Forward exchange contracts-Assets^(b)	—			1.6			—		1.6
Forward exchange contracts-(Liabilities)^(c)	—			—			—		—
TOTAL	$	15.1		$	71.4		$	2.3	$	88.8

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

^(b) Forward exchange contracts-Assets are reflected in Other current assets in the Condensed Consolidated Balance Sheet.

^(c) Forward exchange contracts-(Liabilities) are reflected in Other accrued liabilities in the Condensed Consolidated Balance Sheet.

The methods and assumptions used to estimate the Level 2 and Level 3 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.

Available-for-sale municipal bonds classified in Level 2 – 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.

Available-for-sale redeemable preferred stock classified in Level 3 – The fair value of the available-for-sale investment in redeemable preferred stock is valued based on a discounted cash flow model, using significant unobservable inputs, including expected cash flows and the discount rate.

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. The Company purchased $2.2 million and $1.6 million of trading securities related to these deferred compensation plans during the three months ended March 31, 2019 and 2018. As a result of participant distributions, the Company sold $0.6 million of these trading securities during the three months ended March 31, 2019 and $0.4 million during the three months ended March 31, 2018. 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.

In 2019 and 2018, the Company entered into a series of forward exchange contracts to purchase U.S. dollars in order to hedge exposure to fluctuating rates of exchange for both anticipated inventory purchases and forecasted sales by its subsidiaries that transact business in Canada. As of March 31, 2019, the Company had 35 individual forward exchange contracts for an aggregate notional amount of $38.4 million, having various expiration dates through March 2020. These contracts have been designated as cash flow hedges in accordance with the accounting guidance for derivatives.

The following table summarizes the results of cash flow hedging relationships for the three months ended March 31, 2019 and 2018 (in millions):



	Derivative Gain/(Loss) Recognized in Accumulated Other Comprehensive Income (net of tax)					Location of Gain/(Loss) Reclassified into Income	Gain/(Loss) Reclassified into Earnings Effective Portion (net of tax)
Derivative Instrument	2019			2018		(Effective Portion)	2019		2018
Forward exchange contract	$	(0.3	)	$	0.4	Net sales	$	0.1	$	—
						Cost of goods sold	$	0.2	$	(0.2	)

Long Term Debt

As of March 31, 2019 and December 31, 2018, the carrying value of the long-term debt including the $25.0 million current portion of the Term Loan was $1,756.5 million and $1,762.1 million, respectively. The estimated fair value of the long-term debt as of March 31, 2019 and December 31, 2018 was $1,732.8 million and $1,688.1 million, respectively, using quoted market prices in active markets for similar liabilities (Level 2).