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Financial Instruments and Fair Value Measurement | 12 Months Ended
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Dec. 31, 2019
Financial Instruments And Fair Value Measurement [Abstract] |
Financial Instruments and Fair Value Measurement | 3) FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT Fair Value Hedges: During 2019, 2018 and 2017, we had no fair value hedges outstanding. Cash Flow Hedges: We manage our ratio of fixed and floating rate debt with the objective of achieving a mix that management believes is appropriate. To manage this risk in a cost-effective manner, we, from time to time, enter into interest rate swap agreements in which we agree to exchange various combinations of fixed and/or variable interest rates based on agreed upon notional amounts. We account for our derivative and hedging activities using the Financial Accounting Standard Board’s guidance which requires all derivative instruments, including certain derivative instruments embedded in other contracts, to be carried at fair value on the balance sheet. For derivative transactions designated as hedges, we formally document all relationships between the hedging instrument and the related hedged item, as well as its risk-management objective and strategy for undertaking each hedge transaction. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Cash flow hedges are accounted for by recording the fair value of the derivative instrument on the balance sheet as either an asset or liability, with a corresponding amount recorded in accumulated other comprehensive income (“AOCI”) within shareholders’ equity. Amounts are reclassified from AOCI to the income statement in the period or periods the hedged transaction affects earnings. From time to time, we use interest rate derivatives in our cash flow hedge transactions. Such derivatives are designed to be highly effective in offsetting changes in the cash flows related to the hedged liability. For hedge transactions that do not qualify for the short-cut method, at the hedge’s inception and on a regular basis thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in cash flows of the hedged items and whether they are expected to be highly effective in the future. The fair value of interest rate swap agreements approximates the amount at which they could be settled, based on estimates obtained from the counterparties. We assess the effectiveness of our hedge instruments on a quarterly basis. We performed periodic assessments of the cash flow hedge instruments during the first nine months of 2019 and the full year of 2018 and determined the hedges to be highly effective. Although we do not anticipate nonperformance by our counterparties to interest rate swap agreements, the counterparties expose us to credit risk in the event of nonperformance. We do not hold or issue derivative financial instruments for trading purposes. During 2015, we entered into nine forward starting interest rate swaps whereby we paid a fixed rate on a total notional amount of $1.0 billion and received one-month LIBOR. The average fixed rate payable on these swaps, all of which matured on April 15, 2019, was 1.31%. When applicable, we measure our interest rate swaps at fair value on a recurring basis. The fair value of our interest rate swaps is based on quotes from our counterparties. We consider those inputs to be “level 2” in the fair value hierarchy as outlined in the authoritative guidance for disclosures in connection with derivative instruments and hedging activities. At December 31, 2018, the fair value of our interest rate swaps was a net asset of $4 million which is included in net accounts receivable on the accompanying balance sheet. Foreign Currency Forward Exchange Contracts: In August 2017, the FASB issued new guidance on hedge accounting (ASU 2017-12) that is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. The new guidance amends the presentation and disclosure requirements, and changes how companies assess effectiveness. We adopted this guidance as of January 1, 2019 and applied to all existing hedges as of the adoption date. We use forward exchange contracts to hedge our net investment in foreign operations against movements in exchange rates. The effective portion of the unrealized gains or losses on these contracts is recorded in foreign currency translation adjustment within accumulated other comprehensive income and remains there until either the sale or liquidation of the subsidiary. In conjunction with the January 1, 2019 adoption of ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities”, we reclassified our presentation of the net cash inflows or outflows, which were received or paid in connection with foreign exchange contracts that hedge our net investment in foreign operations against movements in exchange rates, to investing cash flows on the consolidated statements of cash flows. As previously disclosed within our footnotes, these cash flows were formerly reported as operating activities. Prior period amounts have been reclassified from net cash provided by operating activities to net cash used in investing activities to conform with the current year presentation on the consolidated statements of cash flows. In connection with these forward exchange contracts, we recorded net cash outflows of $20 million during 2019, net cash inflows of $66 million during 2018 and net cash outflows of $64 million during 2017. Derivatives Hedging Relationships: The following table presents the effects of our interest rate swap agreements and our foreign currency foreign exchange contracts on our results of operations for the three years ended December 31 (in thousands):
| Gain/(Loss) recognized in AOCI |
| December 31, |  |  | December 31, |  |  | December 31, |
| 2019 |  |  | 2018 |  |  | 2017 |
Cash Flow Hedge relationships |  |  |  |  |  |  |  |  |  |  |
Interest rate swap agreements (a) | $ | (3,925 | ) |  | $ | (2,805 | ) |  | $ | 6,679 |
Net Investment Hedge relationships |  |  |  |  |  |  |  |  |  |  |
Foreign currency foreign exchange contracts | $ | (18,328 | ) |  | $ | 75,059 |  |  | $ | (64,333 | )
(a) | The amount of gain (loss) reclassified out of AOCI into interest expense, net was $3.4 million, $6.7 million and $(2.4) million during 2019, 2018 and 2017, respectively.
No other gains or losses were recognized in income related to derivatives in Subtopic 815-20. Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The following fair value hierarchy classifies the inputs to valuation techniques used to measure fair value into one of three levels:
| • | Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
| • | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These included quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
| • | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables present the assets and liabilities recorded at fair value on a recurring basis:
| Balance at |  | Balance Sheet | Basis of Fair Value Measurement |
(in thousands) | December 31, 2019 |  | Location | Level 1 |  | Level 2 |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Money market mutual funds | $ | 60,175 |  | Other assets |  | 60,175 |  |  |  |  |  |  |
Certificates of deposit |  | 2,200 |  | Other assets |  | 2,200 |  |  |  |  |  |  |
Available for sale securities |  | 70,478 |  | Other assets |  | 70,478 |  |  |  |  |  |  |
Deferred compensation assets |  | 35,510 |  | Other assets |  | 35,510 |  |  |  |  |  |  |
Interest rate swap agreements |  | - |  | Accounts Receivable, net |  |  |  |  | - |  |  |  |
Foreign currency exchange contracts |  | 10,343 |  | Other current assets |  |  |  |  | 10,343 |  |  |  |
| $ | 178,706 |  |  |  | 168,363 |  |  | 10,343 |  |  | - |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation liability |  | 35,510 |  | Other noncurrent liabilities |  | 35,510 |  |  |  |  |  |  |
| $ | 35,510 |  |  |  | 35,510 |  |  | - |  |  | - |
| Balance at |  | Balance Sheet | Basis of Fair Value Measurement |
(in thousands) | December 31, 2018 |  | Location | Level 1 |  | Level 2 |  | Level 3 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Money market mutual funds | $ | 106,530 |  | Other assets |  | 106,530 |  |  |  |  |  |  |
Certificates of deposit |  | 5,415 |  | Other assets |  | 5,415 |  |  |  |  |  |  |
Available for sale securities |  | 55,594 |  | Other assets |  | 55,594 |  |  |  |  |  |  |
Deferred compensation assets |  | 32,998 |  | Other assets |  | 32,998 |  |  |  |  |  |  |
Interest rate swap agreements |  | 3,925 |  | Accounts Receivable, net |  |  |  |  | 3,925 |  |  |  |
Foreign currency exchange contracts |  | 8,908 |  | Other current assets |  |  |  |  | 8,908 |  |  |  |
| $ | 213,370 |  |  |  | 200,537 |  |  | 12,833 |  |  | - |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Deferred compensation liability | $ | 32,998 |  | Other noncurrent liabilities |  | 32,998 |  |  |  |  |  |  |
| $ | 32,998 |  |  |  | 32,998 |  |  | - |  |  | - |
The fair value of our money market mutual funds, certificates of deposit and available for sale securities are computed based upon quoted market prices in active market. The fair value of deferred compensation assets and offsetting liability are computed based on market prices in an active market held in a rabbi trust. The fair value of our interest rate swaps are based on quotes from our counter parties. The fair value of our foreign currency exchange contracts is valued using quoted forward exchange rates and spot rates at the reporting date.

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