Fair Value Measurements (Notes)

6 Months Ended

Jun. 30, 2017

We measure certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, we use various valuation approaches. The hierarchy of those valuation approaches is broken down into three levels based on the reliability of inputs as follows:


•	Level 1 inputs are quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

•

Level 2 inputs are inputs, other than quoted prices, that are directly or indirectly observable for the asset or liability. Level 2 inputs include model-generated values that rely on inputs either directly observed or readily-derived from available market data sources, such as Bloomberg or other news and data vendors. They include quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves observable at commonly quoted intervals or current market) and contractual prices for the underlying financial instrument, as well as other relevant economic factors. As a practical expedient, we estimate the value of money market mutual funds by using a $1.00 per share multiplied by the number of shares in the fund as of the measurement date. We generate fair values for our commodity derivative contracts and foreign currency forward contracts from observable futures prices for the respective commodity or currency, from sources such as the New York Mercantile Exchange (NYMEX) or the London Metal Exchange (LME). We use the Black-Scholes option valuation model to value option contract derivatives (including caps, floors and collars). We use independent sources for implied volatilities, and we discount model-generated future values with discount factors that reflect the counterparty’s credit quality. We apply different discount rates to different contracts since the maturities and counterparties differ. As of June 30, 2017, a spread over benchmark rates of less than 1% was used for derivatives valued as assets and less than 2% for derivatives valued as liabilities. We have estimated the fair value of long-term debt based upon quoted market prices for the same or similar issues or on the current interest rates available to us for debt on similar terms and with similar maturities.


•	Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value if observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. This level of categorization is not applicable to our valuations on a normal recurring basis.

Assets and liabilities measured at fair value on a recurring basis are presented below:



	June 30, 2017								December 31, 2016
	Level 1		Level 2			Total			Level 1		Level 2			Total
Assets measured at fair value
Cash and cash equivalents (a)	$	91.3	$	45.0		$	136.3		$	48.2	$	125.0		$	173.2
Other current assets:
Foreign exchange contracts	—		—			—			—		0.1			0.1
Commodity hedge contracts	—		27.8			27.8			—		47.0			47.0
Other non-current assets:
Commodity hedge contracts	—		3.8			3.8			—		15.3			15.3
Assets measured at fair value	$	91.3	$	76.6		$	167.9		$	48.2	$	187.4		$	235.6

Liabilities measured at fair value
Accrued liabilities:
Foreign exchange contracts	$	—	$	(0.6	)	$	(0.6	)	$	—	$	—		$	—
Commodity hedge contracts	$	—	$	(3.3	)	$	(3.3	)	$	—	$	(1.8	)	$	(1.8	)
Other non-current liabilities:
Commodity hedge contracts	—		(0.7		)	(0.7		)	—		(0.6		)	(0.6		)
Liabilities measured at fair value	$	—	$	(4.6	)	$	(4.6	)	$	—	$	(2.4	)	$	(2.4	)

Liabilities measured at other than fair value
Long-term debt, including current portions:
Fair value	$	—	$	(1,893.3	)	$	(1,893.3	)	$	—	$	(2,123.2	)	$	(2,123.2	)
Carrying amount	—		(1,689.7		)	(1,689.7		)	—		(1,816.6		)	(1,816.6		)


(a)	Level 2 assets include money market mutual funds invested in U.S. Treasury obligations.

The carrying amounts of our other financial instruments do not differ materially from their estimated fair values at June 30, 2017 and December 31, 2016.