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Financial Instruments | 12 Months Ended
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Dec. 31, 2020
Financial Instruments |
Financial Instruments and Derivative Instruments | (16) Financial Instruments ​ Fair Value ​ The carrying amounts of cash and cash equivalents, trade receivables and trade payable approximate fair value because of the short maturity of these financial instruments. The fair value of the Company’s variable rate debt under the Revolving Credit Facility approximates its carrying value. ​ Financial Instruments ​ The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred compensation plan assets and related liabilities, redeemable financial instruments, and derivatives. The fair values of these certain financial assets and liabilities were determined using the following inputs at December 31, 2020 and December 31, 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurement at December 31, 2020 Using:
​ | ​ | ​ | ​ | ​ | Quoted Prices in Active | ​ | Significant Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | Markets for Identical | ​ | Observable | ​ | Unobservable
​ | ​ | ​ | ​ | ​ | Assets | ​ | Inputs | ​ | Inputs
​ |  | Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
​ | ​ | (in millions)
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Plan asset for deferred compensation(1) | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | — | ​ | $ | —
Total assets | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | — | ​ | $ | —
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate swaps(3) | ​ | $ | 0.6 | ​ | $ | — | ​ | $ | 0.6 | ​ | $ | —
Plan liability for deferred compensation(2) | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | ​ | ​ | $ | —
Designated foreign currency hedges (3) | ​ | $ | 0.1 | ​ | $ | — | ​ | $ | 0.1 | ​ | $ | —
Contingent consideration(4) | ​ | $ | 3.2 | ​ | $ | — | ​ | $ | — | ​ | $ | 3.2
Total liabilities | ​ | $ | 6.4 | ​ | $ | 2.5 | ​ | $ | 0.7 | ​ | $ | 3.2
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements at December 31, 2019 Using:
​ | ​ | ​ | ​ | ​ | Quoted Prices in Active | ​ | Significant Other | ​ | Significant
​ | ​ | ​ | ​ | ​ | Markets for Identical | ​ | Observable | ​ | Unobservable
​ |  | ​ | ​ | ​ | Assets | ​ | Inputs | ​ | Inputs
​ | ​ | Total |  | (Level 1) |  | (Level 2) |  | (Level 3)
​ | ​ | (in millions)
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Plan asset for deferred compensation(1) | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | — | ​ | $ | —
Interest rate swaps (1) | ​ | $ | 1.2 | ​ | $ | — | ​ | $ | 1.2 | ​ | $ | —
Total assets | ​ | $ | 3.7 | ​ | $ | 2.5 | ​ | $ | 1.2 | ​ | $ | —
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Plan liability for deferred compensation(2) | ​ | $ | 2.5 | ​ | $ | 2.5 | ​ | $ | — | ​ | $ | —
Designated foreign currency hedge(3) | ​ | $ | 0.2 | ​ | $ | — | ​ | $ | 0.2 | ​ | $ | —
Total liabilities | ​ | $ | 2.7 | ​ | $ | 2.5 | ​ | $ | 0.2 | ​ | $ | —
(1) | Included on the Company’s consolidated balance sheet in other assets (other, net).
​
(2) | Included on the Company’s consolidated balance sheet in accrued compensation and benefits.
​
(3) | Included on the Company’s consolidated balance sheet in accrued expenses and other liabilities.
​
(4) | Included on the Company’s consolidated balance sheet in other noncurrent liabilities and relates to contingent consideration as part of the acquisition of Australian Valve Group Pty Ltd (“AVG”).
​ The table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period December 31, 2019 to December 31, 2020. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | Total realized and unrealized | ​ | ​ | ​
​ | ​ | Balance | ​ | ​ | ​ | ​ | ​ | ​ | (gains) losses included in: | ​ | Balance
​ | ​ | December 31, | ​ | ​ | ​ | ​ | ​ | ​ | Net earnings | ​ | Comprehensive | ​ | December 31,
​ |  | 2019 |  | Settlements |  | Purchases |  | adjustments |  | income |  | 2020
​ | ​ | (in millions)
Contingent consideration | ​ | $ | — | ​ | ​ | — | ​ | $ | 2.8 | ​ | ​ | — | ​ | $ | 0.4 | ​ | $ | 3.2
​ In connection with the immaterial acquisition of AVG completed during the third quarter of 2020, a contingent liability of $2.8 million was recognized as the estimate of the acquisition date fair value of the contingent consideration. This liability was classified as Level 3 under the fair value hierarchy as it was based on the probability of achievement of future performance metrics as of the date of the acquisition, which was not observable in the market. Failure to meet the performance metrics would reduce this liability to zero; while complete achievement would increase the liability to a maximum contingent consideration of $4.7 million. The liability as of December 31, 2020 was $3.2 million. ​ Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value. ​ The Company uses financial instruments from time to time to enhance its ability to manage risk, including foreign currency and commodity pricing exposures, which exist as part of its ongoing business operations. The use of derivatives exposes the Company to counterparty credit risk for nonperformance and to market risk related to changes in currency exchange rates and commodity prices. The Company manages its exposure to counterparty credit risk through diversification of counterparties. The Company’s counterparties in derivative transactions are substantial commercial banks with significant experience using such derivative instruments. The impact of market risk on the fair value and cash flows of the Company’s derivative instruments is monitored and the Company restricts the use of derivative financial instruments to hedging activities. The Company does not enter into contracts for trading purposes nor does the Company enter into any contracts for speculative purposes. The use of derivative instruments is approved by senior management under written guidelines. Interest Rate Swaps On February 12, 2016, the Company entered into a Credit Agreement (the “Prior Credit Agreement”) pursuant to which it received a funding commitment under a Term Loan of $300 million, and a Revolving Commitment (“Revolver”) of $500 million. For each facility, the Company could choose either an Adjusted LIBOR or Alternative Base Rate (“ABR”). Accordingly, the Company’s earnings and cash flows were exposed to interest rate risk from changes in Adjusted LIBOR. In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in LIBOR-indexed interest payments related to the Company’s floating rate debt, the Company entered into two interest rate swaps. For each interest rate swap, the Company received the three-month USD-LIBOR subject to a 0% floor, and paid a fixed rate of 1.31375% on a notional amount of $225.0 million. The swaps were expected to mature on the same date as the Prior Credit Agreement on February 12, 2021, and were designated as cash flow hedges. On April 24, 2020, the Company entered into a New Credit Agreement. The New Credit Agreement amends and restates the Prior Credit Agreement in its entirety while increasing the amount of revolving credit available from $500 million to $800 million, and extending the maturity by one additional year to February 2022. As part of the New Credit Agreement, the LIBOR rate is subject to a 1% floor as opposed to a 0% floor in the Prior Credit Agreement. The change in the LIBOR floor in the New Credit Agreement caused the interest rate swaps to no longer be considered highly effective in offsetting changes in the cash flow of the hedged item, as critical terms of the New Credit Agreement no longer match the hedged item. As a result, the cash flow hedges no longer qualified for hedge accounting as of the date of execution of the New Credit Agreement. The Company subsequently began recognizing the mark-to-market fair value adjustments on a monthly basis in the consolidated statement of operations and continued to do so through the expiration date of the swaps, which was February 12, 2021. The balance outstanding on the Company’s Revolving Credit Facility as of December 31, 2020 was below the notional amount of the interest rate swaps. Therefore, the balance of the previously effective portion of the fair value of the interest rate swaps recorded in other comprehensive income of $1.5 million was reclassified into earnings within interest expense as of December 31, 2020. For the year ended December 31, 2019, a loss of $3.9 million was recorded in Accumulated Other Comprehensive Loss to recognize the effective portion of the fair value of the interest rate swaps that qualified as a cash flow hedge. ​ Designated Foreign Currency Hedges The Company’s foreign subsidiaries transact most business, including certain intercompany transactions, in foreign currencies. Such transactions are principally purchases or sales of materials. The Company has exposure to a number of foreign currencies, including the Canadian dollar, the euro, and the Chinese yuan. The Company uses a layering methodology, whereby at the end of each quarter, the Company enters into forward exchange contracts hedging Canadian dollar to U.S. dollar, which hedge up to 85% of the forecasted intercompany purchase transactions between one of the Company’s Canadian subsidiaries and the Company’s U.S. operating subsidiaries for the next twelve months. The Company uses a similar layering methodology when entering into forward exchange contracts hedging U.S. dollar to the Chinese yuan, which hedge up to 60% of the forecasted intercompany sales transactions between one of the Company’s Chinese subsidiaries and one of the Company’s U.S. operating subsidiaries for the next twelve months. As of December 31, 2020, all designated foreign exchange hedge contracts were cash flow hedges under ASC 815, Derivatives and Hedging ("ASC 815"). The Company records the effective portion of the designated foreign currency hedge contracts in other comprehensive income until inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge are reclassified into earnings within cost of goods sold. In the event the notional amount of the derivatives exceeds the forecasted intercompany purchases for a given month, the excess hedge position will be attributed to the following month’s forecasted purchases. However, if the following month’s forecasted purchases cannot absorb the excess hedge position from the current month, the effective portion of the hedge recorded in other comprehensive income will be reclassified to earnings. ​ The notional amounts outstanding as of December 31, 2020 for the Canadian dollar to U.S. dollar contracts and the U.S. dollar to the Chinese yuan contracts were $14.3 million and $5.0 million, respectively. The combined fair value of the Company’s designated foreign currency hedge contracts outstanding as of December 31, 2020 was a liability balance of $0.1 million. As of December 31, 2020, the amount expected to be reclassified into cost of goods sold from other comprehensive income in the next twelve months for both programs is a loss of $0.1 million.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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