Fair Value Measurements and Derivative Instruments

Fair Market Value Measurements

Depending on the inputs, we classify each fair value measurement as follows:


•	Level 1 – based upon quoted prices for identical instruments in active markets,


•	Level 2 – based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations of all of whose significant inputs are observable, and


•	Level 3 – based upon one or more significant unobservable inputs.

The following section describes key inputs and assumptions used in valuation methodologies of our assets and liabilities measured at fair value on a recurring basis:

Cash and cash equivalents, short-term notes and accounts receivable, accounts payable and other current payables – The carrying amount approximates fair value because of the short maturity of these instruments.

Debt – Fair value of debt, which was determined using Level 2 inputs, as of December 31, 2014 was $473.3 million versus a book value of $529.7 million. As of December 31, 2015 the fair value was $273.4 million, versus a book value of $367.2 million.

Foreign currency derivatives – Foreign currency derivatives are carried at market value using Level 2 inputs. The outstanding contracts as of December 31, 2014 represented unrealized losses of $0.9 million, respectively. There were no outstanding gains or losses as of December 31, 2015.

Commodity derivative contracts – Commodity derivative contracts are carried at fair value. We determine the fair value using observable, quoted natural gas and refined oil product prices that are determined by active markets and therefore classify the commodity derivative contracts as Level 2. The outstanding commodity derivative contracts represented an unrealized loss of $7.1 million as of December 31, 2014. There were no outstanding gains or losses as of December 31, 2015.

Additional fair value information related to our Pension funds' assets can be found in Note 2 "Retirement Plans and Postretirement Benefits".

Derivative Instruments

We use derivative instruments as part of our overall foreign currency and commodity risk management strategies to manage the risk of exchange rate movements that would reduce the value of our foreign cash flows and to minimize commodity price volatility. Foreign currency exchange rate movements create a degree of risk by affecting the value of sales made and costs incurred in currencies other than the US Dollar.

Certain of our derivative contracts contain provisions that require us to provide collateral. Since the counterparties to these financial instruments are large commercial banks and similar financial institutions, we do not believe that we are exposed to material counterparty credit risk. We do not anticipate nonperformance by any of the counter-parties to our instruments.

Foreign currency derivatives

We enter into foreign currency derivatives from time to time to attempt to manage exposure to changes in currency exchange rates. These foreign currency instruments, which include, but are not limited to, forward exchange contracts and purchased currency options, attempt to hedge global currency exposures such as foreign currency denominated debt, sales, receivables, payables, and purchases. Forward exchange contracts are agreements to exchange different currencies at a specified future date and at a specified rate. There was no ineffectiveness on these contracts during the twelve months ended December 31, 2014 or 2015.

In 2014 and 2015, we entered into foreign forward currency derivatives as hedges of anticipated cash flows denominated in the Mexican peso, Brazilian real, South African rand, euro and Japanese yen. These derivatives were entered into to protect the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates between the US dollar and the Mexican peso, Brazilian real, South African rand, euro and Japanese yen. As of December 31, 2014, we had outstanding Mexican peso, Brazilian real, South African rand, euro, and Japanese yen currency contracts, with aggregate notional amounts of $95.2 million. As of December 31, 2015, we had outstanding Mexican peso, euro and Japanese yen currency contracts, with aggregate notional amounts of $18.7 million. The foreign currency derivatives outstanding as of December 31, 2015 have several maturity dates ranging from January 2016 to March 2016.

Commodity derivative contracts

We periodically enter into derivative contracts for natural gas and certain refined oil products. These contracts are entered into to protect against the risk that eventual cash flows related to these products will be adversely affected by future changes in prices. There was no ineffectiveness on these contracts during the twelve months ended December 31, 2014 or 2015. As of December 31, 2014 , we had outstanding derivative swap contracts for refined oil products with aggregate notional amounts of $17.8 million. We had no outstanding commodity derivative contracts as of December 31, 2015.

Net Investment Hedges

We use certain intercompany debt to hedge a portion of our net investment in our foreign operations against currency exposure (net investment hedge). Intercompany debt designated in foreign currency and designated as a non-derivative net investment hedging instrument was $15.8 million and $11.8 million as of December 31, 2014 and December 31, 2015, respectively. Within our currency translation adjustment portion of other comprehensive income, we recorded gains of $0.2 million and $1.4 million in the year ended December 31, 2014 and December 31, 2015, respectively, resulting from these net investment hedges.

The fair value of all derivatives is recorded as assets or liabilities on a gross basis in our Consolidated Balance Sheets. At December 31, 2014 and 2015, the fair value of our derivatives and their respective balance sheet locations are presented in the following table:



	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
As of December 31, 2014	(Dollars in Thousands)
Derivatives designated as cash flow hedges:
Foreign currency derivatives	Prepaid and other current assets	$	722	Other current liabilities	$	1,234
Commodity derivative contracts	Prepaid and other current assets	—		Other current liabilities	7,067
Total fair value		$	722		$	8,301

As of December 31, 2015
Derivatives designated as cash flow hedges:
Foreign currency derivatives	Prepaid and other current assets	$	—	Other current liabilities	$	—
Commodity derivative contracts	Prepaid and other current assets	—		Other current liabilities	1
Total fair value		$	—		$	1



	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
As of December 31, 2014	(Dollars in Thousands)
Derivatives not designated as hedges:
Foreign currency derivatives	Prepaid and other current assets	$	80	Other current liabilities	$	428
Total fair value		$	80		$	428

As of December 31, 2015
Derivatives not designated as hedges:
Foreign currency derivatives	Prepaid and other current assets	$	76	Other current liabilities	$	11
Total fair value		$	76		$	11

The location and amount of realized (gains) losses on derivatives are recognized in the Statements of Operations when the hedged item impacts earnings and are as follows for the years ended 2014 and 2015:



		Amount of (Gain)/Loss Recognized (Effective Portion)
	Location of (Gain)/Loss Reclassified from Other Comprehensive Income (Effective Portion)	2014			For the Period January 1 Through August 14, 2015			For the Period August 15 Through December 31, 2015
		(Dollars in Thousands)
Derivatives designated as cash flow hedges:
Foreign currency derivatives, excluding tax of $85 and $106 $17, respectively	Cost of goods sold Other expense / (income) / Revenue	$	(849	)	$	(1,062	)	$	(172	)
Commodity forward derivatives, excluding tax of $(120), $(424) and $0 respectively	Cost of goods sold / Revenue	$	328		$	1,161		$	—



		Amount of (Gain)/Loss Recognized
	Location of (Gain)/Loss Recognized in the Consolidated Statement of Income	2014		For the Period January 1 Through August 14, 2015		For the Period August 15 Through December 31, 2015
		(Dollars in thousands)
Derivatives not designated as hedges:
Foreign currency derivatives	Cost of goods sold/Other expense (income)	$	1,020	$	1,060	$	(560	)

Our foreign currency and commodity derivatives are treated as hedges and are required to be measured at fair value on a recurring basis. With respect to the inputs used to determine the fair value, we use observable, quoted rates that are determined by active markets and, therefore, classify the contracts as “Level 2”.