Fair value of financial instruments

9 Months Ended

Sep. 30, 2020

Investments in Marketable Securities

We have investments in mutual funds and equity securities that are carried at fair value in the financial statements. For these investments, fair value was based on quoted market prices, which we have categorized as a Level 1 valuation.

Fixed-Rate Debt

The fair value and carrying value of our material fixed-rate debt is as follows:


(In millions)	September 30, 2020		December 31, 2019

$600 million Senior unsecured notes
Carrying value	$	600.0	600.0
Fair value	611.7		624.7

$400 million Senior unsecured notes
Carrying value	400.0		—
Fair value	410.5		—

The fair value estimates of our senior unsecured notes was based on the present value of future cash flows, discounted at rates for similar instruments at the measurement date, which we have categorized as a Level 3 valuation.

Forward and Swap Contracts

We have outstanding foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies. At September 30, 2020, the notional value of our short term outstanding foreign currency forward and swap contracts was $282 million, with average maturities of approximately one month. These foreign currency forward and swap contracts primarily offset exposures in the euro and the British pound and are not designated as hedges for accounting purposes. Accordingly, changes in their fair value are recorded immediately in earnings. At September 30, 2020, the fair value of our short term foreign currency contracts was a net liability of approximately $0.7 million, of which $0.2 million was included in prepaid expenses and other and $0.9 million was included in accrued liabilities on the condensed consolidated balance sheet. At December 31, 2019, the fair value of these foreign currency contracts was a net asset of approximately $0.6 million, of which $0.8 million was included in prepaid expenses and other and $0.2 million was included in accrued liabilities on the condensed consolidated balance sheet.

Amounts under these contracts were recognized in other operating income (expense) and in interest and other nonoperating income and expense as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
(In millions)	2020		2019	2020		2019

Derivative instrument gains (losses) included in other operating income (expense)	$	(3.4)	5.8	$	0.5	8.3

Derivative instrument losses included in other nonoperating income (expense)(a)	(0.5)		—	(8.6)		—

(a)Represents losses on foreign currency forward contracts related to 2020 acquisition of business operations from G4S.

In the first quarter of 2019, we entered into a long term cross currency swap contract to hedge exposure in Brazilian real, which is designated as a cash flow hedge for accounting purposes. At September 30, 2020, the notional value of this long term contract was $104 million with a weighted-average maturity of 2.0 years. At September 30, 2020, the fair value of the long term cross currency swap contract was a $30.9 million net asset, of which $4.6 million is included in prepaid expenses and other and $26.3 million is included in other assets on the condensed consolidated balance sheet. At December 31, 2019, the fair value of the long term cross currency swap contract was a $2.1 million net asset, of which a $4.9 million asset is included in other assets and a $2.8 million liability is included in accrued liabilities on the condensed consolidated balance sheet.

Amounts under this contract were recognized in other operating income (expense) to offset transaction gains or losses and in interest expense as follows:


	Three Months Ended September 30,			Nine Months Ended September 30,
(In millions)	2020		2019	2020		2019

Derivative instrument gains included in other operating income (expense)	$	0.8	8.9	$	30.6	10.3

Offsetting transaction losses	(0.8)		(8.9)	(30.6)		(10.3)

Derivative instrument losses included in interest expense	(0.5)		(1.3)	(1.5)		(4.0)

Net derivative instrument gains	0.3		7.6	29.1		6.3

In the first quarter of 2016, we entered into two interest rate swaps to hedge cash flow risk associated with changes in variable interest rates and that are designated as cash flow hedges for accounting purposes. At September 30, 2020, the notional value of these contracts was $40 million with a remaining weighted-average maturity of 0.3 years. At September 30, 2020, the fair value of these interest rates swaps was a liability of $0.2 million and was included in accrued liabilities on the condensed consolidated balance sheet. At December 31, 2019, the fair value of these interest rate swaps was an asset of $0.2 million and was included in prepaid expenses and other on the condensed consolidated balance sheet. The effect of these swaps is included in interest expense and was not significant in the first nine months of 2020 or 2019.

In the first quarter of 2019, we entered into ten interest rate swaps that hedge cash flow risk associated with changes in variable interest rates and that are designated as cash flow hedges for accounting purposes. At September 30, 2020, the notional value of these contracts was $400 million with a remaining weighted-average maturity of 1.7 years. At September 30, 2020, the fair value of these interest rate swaps was a net liability of $31.8 million, of which $9.6 million was included in accrued liabilities and $22.2 million was included in other liabilities on the condensed consolidated balance sheet. At December 31, 2019, the fair value of these interest rate swaps was a net liability of $15.0 million, of which $3.6 million was included in accrued liabilities and $11.4 million was included in other liabilities on the condensed consolidated balance sheet.

The effect of these swaps is included in interest expense. The amounts recognized in the 2019 periods were not significant.


(In millions)	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020

Derivative instrument losses included in interest expense	$	2.3	5.2

The fair values of these forward and swap contracts are based on the present value of net future cash payments and receipts, which we have categorized as a Level 2 valuation.

Other Financial Instruments

Other financial instruments include cash and cash equivalents, accounts receivable, floating rate debt, accounts payable and accrued liabilities. The financial statement carrying amounts of these items approximate the fair value.

There were no transfers in or out of any of the levels of the valuation hierarchy in the first nine months of 2020.