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FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended
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Mar. 31, 2024
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Abstract] |
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS U.S. GAAP defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance discusses valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. As the basis for evaluating such inputs, a three-tier value hierarchy prioritizes the inputs used in measuring fair value as follows: Level 1:Observable inputs such as quoted prices for identical assets or liabilities in active markets. Level 2:Observable inputs other than quoted prices that are directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets; quoted prices for similar or identical assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3:Unobservable inputs that reflect the Company's own assumptions. Recurring fair value measurements The Company’s financial assets and liabilities (adjusted to fair value at least quarterly) are derivative instruments and contingent consideration obligations. In the condensed consolidated balance sheets, derivative instruments are primarily included in other assets and other noncurrent liabilities, and contingent consideration obligations are primarily included in contingent consideration and compensation liabilities. The following tables summarize the fair values and levels within the fair value hierarchy in which the measurements fall for assets and liabilities measured on a recurring basis as of March 31, 2024 and December 31, 2023:
| Fair Value Measurements at March 31, 2024
Financial assets: | Level 1 |  | Level 2 |  | Level 3 |  | Total
Derivatives designated as hedge instruments |  |  |  |  |  |  |
Cash flow hedges - interest rate swaps | $ | — |  |  | $ | 22 |  |  | $ | — |  |  | $ | 22 |
Cash flow hedges - cross currency contracts | — |  |  | 11 |  |  | — |  |  | 11 |
Cash flow hedges - foreign currency forward contracts | — |  |  | — |  |  | — |  |  | — |
Net investment hedges - cross currency contracts | — |  |  | 22 |  |  | — |  |  | 22 |
Fair value hedges - cross currency contracts | — |  |  | 30 |  |  | — |  |  | 30 |
Derivatives not designated as hedge instruments |  |  |  |  |  |  |
Foreign currency forward contracts | — |  |  | — |  |  | — |  |  | — |
Total | $ | — |  |  | $ | 85 |  |  | $ | — |  |  | $ | 85 |
Financial liabilities: |  |  |  |  |  |  |
Derivatives not designated as hedge instruments |  |  |  |  |  |  |
Foreign currency forward contracts | — |  |  | — |  |  | — |  |  | — |
Contingent consideration obligations | — |  |  | — |  |  | (6) |  |  | (6) |
Total | $ | — |  |  | $ | — |  |  | $ | (6) |  |  | $ | (6) |
| Fair Value Measurements at December 31, 2023
Financial assets: | Level 1 |  | Level 2 |  | Level 3 |  | Total
Derivatives designated as hedge instruments |  |  |  |  |  |  |
Cash flow hedges - interest rate swaps | $ | — |  |  | $ | 7 |  |  | $ | — |  |  | $ | 7 |
Cash flow hedges - cross currency contracts | — |  |  | 10 |  |  | — |  |  | 10 |
Net investment hedges - cross currency contracts | — |  |  | 20 |  |  | — |  |  | 20 |
Fair value hedges - cross currency contracts | — |  |  | 17 |  |  | — |  |  | 17 |
Derivatives not designated as hedge instruments |  |  |  |  |  |  |
Foreign currency forward contracts | — |  |  | — |  |  | — |  |  | — |
Total | $ | — |  |  | $ | 54 |  |  | $ | — |  |  | $ | 54 |
Financial liabilities: |  |  |  |  |  |  |
Derivatives not designated as hedge instruments |  |  |  |  |  |  |
Foreign currency forward contracts | — |  |  | — |  |  | — |  |  | — |
Contingent consideration obligations | — |  |  | — |  |  | (6) |  |  | (6) |
Total | $ | — |  |  | $ | — |  |  | $ | (6) |  |  | $ | (6) |
The Company determines the fair value of its derivative instruments designated as hedge instruments using standard pricing models and market-based assumptions for all inputs such as yield curves and quoted spot and forward exchange rates. Accordingly, the Company’s derivative instruments are classified as Level 2. Contingent consideration obligations The value of the contingent consideration obligations is determined using a probability-weighted discounted cash flow method. This fair value measurement is based on unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. This analysis reflects the contractual terms of the purchase agreements (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts due) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows, and a discount rate. Depending on the contractual terms of the purchase agreement, the probabilities of achieving future cash flows or earnings generally represent the only significant unobservable inputs. The contingent consideration obligations are measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. The table below presents a reconciliation of the fair value of the Company’s contingent consideration obligations that use unobservable inputs (Level 3), as well as other information about the contingent consideration obligations:
| Three Months Ended March 31, 2024
Balance as of December 31, 2023 | $ | 6 |
Issuances | — |
Settlements | — |
Balance as of March 31, 2024 | $ | 6 |
Number of open contingent consideration arrangements at the end of the period | 2 |
Maximum potential payout at the end of the period | $ | 6 |
At March 31, 2024, the remaining open contingent consideration arrangements are set to expire at various dates through 2025. Level 3 unobservable inputs were used to calculate the fair value adjustments shown in the table above. The fair value adjustments and the related unobservable inputs were not considered significant for the three months ended March 31, 2024. Fair value estimates The following table presents the carrying amount and fair value of the Company’s variable and non-variable interest rate debt (instruments defined in Note 10 – “Debt”), including current portions and excluding unamortized debt issuance costs. Fair value is estimated by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy. The interest rates of the variable interest rate long-term debt instruments are generally reset monthly. During the three months ended March 31, 2024, the Company upsized the 2021 Term Loan by an aggregate principal amount equal to $300.
| March 31, 2024 |  | December 31, 2023
| Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
2019 Term Loan | $ | 330 |  |  | $ | 330 |  |  | $ | 330 |  |  | $ | 331 |
2021 Term Loan | 1,707 |  |  | 1,711 |  |  | 1,407 |  |  | 1,407 |
4.125% Senior Notes | 337 |  |  | 302 |  |  | 337 |  |  | 305 |
4.750% Senior Notes | 277 |  |  | 254 |  |  | 277 |  |  | 257 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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