XML 112 R20.htm IDEA: XBRL DOCUMENT v2.4.0.8
Fair Value Measurements
 9 Months Ended
Sep. 30, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS

Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, consideration is given to the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The accounting guidance for fair value measurement also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

•
Level 1 – quoted prices in active markets for identical assets or liabilities.
•
Level 2 – inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
•
Level 3 – unobservable inputs in which little or no market data exists.

Financial Instruments Recorded at Fair Value
 
Fair Value Measurements
(in millions)
 
Successor
 
 
Predecessor
 
September 30, 2014
 
 
December 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents (a)
—

 
$
90.6

 
—

 
$
90.6

 
 
—

 
$
312.7

 
—

 
$
312.7

Deferred compensation asset (b)
—

 
3.1

 
—

 
3.1

 
 
—

 
3.1

 
—

 
3.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

 
 
 

 
 

 
 

 
 

Deferred compensation obligation (b)
—

 
2.9

 
—

 
2.9

 
 
—

 
3.0

 
—

 
3.0


 
(a)
Cash equivalents consist of funds invested in institutional money market funds. These investments are classified within Level 2 of the valuation hierarchy because the publicly reported Net Asset Value (“NAV”) of one dollar does not necessarily reflect the fair value of the underlying securities.
(b)
The deferred compensation obligation represents the balance of deferred compensation plus net investment earnings. The deferred compensation plan is informally funded through a rabbi trust using variable universal life insurance. The cash surrender value of the life insurance policies is designed to track the deemed investments of the plan participants. Investment crediting options consist of institutional and retail investment funds. The deemed investments are classified within Level 2 of the valuation hierarchy because (i) of the indirect method of investing and (ii) unit prices of institutional funds are not quoted in active markets.
 
Other Financial Instruments

As of September 30, 2014 and December 31, 2013, the balance sheet carrying amounts for accounts receivable, accounts payable and accrued liabilities (excluding the deferred compensation obligation described above), and payables under the commercial agreement (the "Russian Contract") with a Russian government entity known as Techsnabexport ("TENEX") approximate fair value because of the short-term nature of the instruments.

The balance sheet carrying amounts and estimated fair values of the Company’s New Notes and former Old Notes follow (in millions):
 
Successor
 
 
Predecessor
 
September 30, 2014
 
 
December 31, 2013
 
Carrying Value
 
Fair Value
 
 
Carrying Value
 
Fair Value
8% PIK toggle notes
$
240.4

 
$
240.4

 
 
-

 
-

Convertible senior notes, excluding accrued interest
-

 
-

 
 
$
530.0

 
$
184.1




As of September 30, 2014, Centrus estimates that the fair value of the 8% PIK toggle notes is equal to the face value resulting from the new capital structure under the Plan as negotiated with the creditors, as there are no observable publicly traded debt markets with similar terms and average maturities. Accordingly, the Company’s long-term debt is classified within Level 3 of the fair value hierarchy at emergence. No cash was received related to the issuance on September 30, 2014. The terms of the notes were negotiated based on arm's length negotiations with access to all relevant information necessary to provide knowledgeable, willing and unpressured participants to the transaction to reach a negotiated, consensual agreement on the terms of this new debt instrument. Given the access to information, management concludes that the face value of the new notes is a fair approximation of the fair value of such notes at emergence.

As of December 31, 2013, the estimated fair value of the convertible senior notes was based on the trading price as of the balance sheet date, and is classified as using Level 1 inputs in the fair value measurement.

Fresh Start Accounting

Upon the Company’s emergence from bankruptcy, Centrus applied the provisions of fresh start accounting to its financial statements, including the allocation of the reorganization value to its individual assets based on their estimated fair values. Details are provided in Note 3, "Fresh Start Accounting".