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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2019

NOTE 8 – FAIR VALUE MEASUREMENTS

For its derivative financial instruments, the Company uses a market approach valuation technique based on observable market transactions of spot and forward rates.

As of December 31, 2018, the Company recognized an asset of $0.3 million, established using Level 2 inputs, related to the fair value of the U.S. dollar-Canadian dollar foreign currency swap which was classified within Other assets. As of June 30, 2019, this balance was fully amortized. The objective of the swap was to offset the foreign exchange risk to certain U.S. dollar equivalent cash outflows for the Company’s Canadian subsidiary.

The Company’s contingent consideration liabilities, recorded using Level 3 inputs, as of June 30, 2019 and December 31, 2018 were classified as follows:

In millions
	June 30, 2019		December 31, 2018
Other current liabilities	$	2.9	$	2.8
Other liabilities		7.4		7.5
Total contingent consideration	$	10.3	$	10.3

Contingent consideration represents amounts expected to be paid as part of acquisition consideration only if certain future events occur. These events are usually the achievement of targets for revenues, earnings, or other milestones related to the business acquired. The Company arrives at the fair value of contingent consideration by applying a weighted probability of potential payment outcomes. The calculation of these potential outcomes is dependent on both past financial performance and management assumptions about future performance. If the financial performance measures were all fully met, the Company’s maximum liability would be $13.5 million as of June 30, 2019. Contingent consideration liabilities are reassessed each reporting period.

Changes to contingent consideration were as follows:

In millions
Contingent consideration as of December 31, 2018		10.3
Changes due to foreign currency fluctuations		-
Contingent consideration as of June 30, 2019	$	10.3

In addition to assets and liabilities that are recorded at fair value on a recurring basis, the Company is required to record certain assets and liabilities at fair value on a nonrecurring basis, generally as a result of acquisitions or the remeasurement of assets resulting in impairment charges. See Note 4 – Goodwill And Other Intangibles for further discussion of impairment charges recognized during the periods presented.

Fair Value of Debt: The estimated fair value of the Company’s debt obligations, using Level 2 inputs, as compared to its carrying value was as follows:

In billions
	June 30, 2019		December 31, 2018
Fair value of debt obligations	$	2.85	$	2.75
Carrying value of debt obligations		2.83		2.78

Fair value was estimated using an income approach by applying market interest rates for comparable instruments.

Accounts receivable, accounts payable and accrued liabilities are financial assets and liabilities, respectively, with carrying values that approximate fair value using Level 3 inputs.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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