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Fair Value Measurements and Other Financial Instruments | 9 Months Ended
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Sep. 30, 2015
Fair Value Disclosures [Abstract] |
Fair Value Measurements and Other Financial Instruments | Note 12 Fair Value Measurements and Other Financial Instruments Fair Value Measurements In determining fair value of financial instruments, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty credit risk in our assessment of fair value. We determine fair value of our financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
| · | Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
| · | Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
| · | Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The following table details the fair value hierarchy of our financial instruments:
|  | September 30, 2015 |
(In millions) |  | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash equivalents |  | $ | 7.0 |  |  | $ | — |  |  | $ | 7.0 |  |  | $ | — |
Derivative financial and hedging instruments net asset (liability): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (2.4 | ) |  | $ | — |  |  | $ | (2.4 | ) |  | $ | — |
Foreign currency options |  | $ | 0.1 |  |  | $ | — |  |  | $ | 0.1 |  |  | $ | — |
Interest rate and currency swaps |  | $ | 40.9 |  |  | $ | — |  |  | $ | 40.9 |  |  | $ | — |
Cross-currency swaps |  | $ | (22.2 | ) |  | $ | — |  |  | $ | (22.2 | ) |  | $ | — |
|  | December 31, 2014 |
(In millions) |  | Total Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Cash equivalents |  | $ | 64.7 |  |  | $ | — |  |  | $ | 64.7 |  |  | $ | — |
Derivative financial instruments net asset (liability): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (22.4 | ) |  | $ | — |  |  | $ | (22.4 | ) |  | $ | — |
Interest rate and currency swaps |  | $ | 17.8 |  |  | $ | — |  |  | $ | 17.8 |  |  | $ | — |
Cash Equivalents Our cash equivalents at September 30, 2015 and December 31, 2014 consisted of commercial paper (fair value determined using Level 2 inputs) and bank time deposits. Since these are short-term highly liquid investments with original maturities of three months or less at the date of purchase, they present negligible risk of changes in fair value due to changes in interest rates. Derivative Financial Instruments Our foreign currency forward contracts, foreign currency options, euro-denominated debt, interest rate and currency swaps and cross-currency swaps are recorded at fair value on our condensed consolidated balance sheets using a discounted cash flow analysis that incorporates observable market inputs. These market inputs include foreign currency spot and forward rates, and various interest rate curves, and are obtained from pricing data quoted by various banks, third party sources and foreign currency dealers involving identical or comparable instruments (Level 2). Counterparties to these foreign currency forward contracts are rated at least A- by Standard & Poor’s and Baa2 by Moody’s. Credit ratings on some of our counterparties may change during the term of our financial instruments. We closely monitor our counterparties’ credit ratings and, if necessary, will make any appropriate changes to our financial instruments. The fair value generally reflects the estimated amounts that we would receive or pay to terminate the contracts at the reporting date. Other Financial Instruments The following financial instruments are recorded at fair value or at amounts that approximate fair value: (1) trade receivables, net, (2) certain other current assets, (3) accounts payable and (4) other current liabilities. The carrying amounts reported on our condensed consolidated balance sheets for the above financial instruments closely approximate their fair value due to the short-term nature of these assets and liabilities. Other liabilities that are recorded at carrying value on our condensed consolidated balance sheets include our senior notes. We utilize a market approach to calculate the fair value of our senior notes. Due to their limited investor base and the face value of some of our senior notes, they may not be actively traded on the date we calculate their fair value. Therefore, we may utilize prices and other relevant information generated by market transactions involving similar securities, reflecting U.S. Treasury yields to calculate the yield to maturity and the price on some of our senior notes. These inputs are provided by an independent third party and are considered to be Level 2 inputs. We derive our fair value estimates of our various other debt instruments by evaluating the nature and terms of each instrument, considering prevailing economic and market conditions, and examining the cost of similar debt offered at the balance sheet date. We also incorporated our credit default swap rates and currency specific swap rates in the valuation of each debt instrument, as applicable. These estimates are subjective and involve uncertainties and matters of significant judgment, and therefore we cannot determine them with precision. Changes in assumptions could significantly affect our estimates. The table below shows the carrying amounts and estimated fair values of our total debt:
|  | September 30, 2015 |  |  | December 31, 2014 |
|  | Carrying |  |  | Fair |  |  | Carrying |  |  | Fair |
(In millions) |  | Amount |  |  | Value |  |  | Amount |  |  | Value |
Term Loan A Facility due July 2017 |  | $ | 249.8 |  |  | $ | 249.7 |  |  | $ | 249.7 |  |  | $ | 249.7 |
Term Loan A Facility due July 2019(1) |  |  | 1,112.0 |  |  |  | 1,112.0 |  |  |  | 1,129.4 |  |  |  | 1,129.4 |
6.50% Senior Notes due December 2020 |  |  | 427.8 |  |  |  | 469.6 |  |  |  | 428.1 |  |  |  | 469.7 |
8.375% Senior Notes due September 2021 |  |  | — |  |  |  | — |  |  |  | 750.0 |  |  |  | 843.3 |
4.875% Senior Notes due December 2022 |  |  | 425.0 |  |  |  | 420.1 |  |  |  | 425.0 |  |  |  | 423.3 |
5.25% Senior Notes due April 2023 |  |  | 425.0 |  |  |  | 427.1 |  |  |  | 425.0 |  |  |  | 429.6 |
4.50% Senior Notes due September 2023(1) |  |  | 449.9 |  |  |  | 456.0 |  |  |  | — |  |  |  | — |
5.125% Senior Notes due December 2024 |  |  | 425.0 |  |  |  | 418.3 |  |  |  | 425.0 |  |  |  | 428.5 |
5.50% Senior Notes due September 2025 |  |  | 400.0 |  |  |  | 406.0 |  |  |  | — |  |  |  | — |
6.875% Senior Notes due July 2033 |  |  | 448.7 |  |  |  | 454.7 |  |  |  | 448.7 |  |  |  | 462.9 |
Other foreign loans(1) |  |  | 127.7 |  |  |  | 127.8 |  |  |  | 73.9 |  |  |  | 73.8 |
Other domestic loans |  |  | 159.2 |  |  |  | 159.5 |  |  |  | 59.2 |  |  |  | 59.2 |
Total debt |  | $ | 4,650.1 |  |  | $ | 4,700.8 |  |  | $ | 4,414.0 |  |  | $ | 4,569.4 |
(1) | Includes borrowings denominated in currencies other than U.S. dollars.
Credit and Market Risk Financial instruments, including derivatives, expose us to counterparty credit risk for nonperformance and to market risk related to changes in interest or currency exchange rates. We manage our exposure to counterparty credit risk through specific minimum credit standards, establishing credit limits, diversification of counterparties, and procedures to monitor concentrations of credit risk. We do not expect any of our counterparties in derivative transactions to fail to perform as it is our policy to have counterparties to these contracts that are rated at least BBB- or higher by Standard & Poor’s and Baa3 or higher by Moody’s. Nevertheless, there is a risk that our exposure to losses arising out of derivative contracts could be material if the counterparties to these agreements fail to perform their obligations. We will replace counterparties if a credit downgrade is deemed to increase our risk to unacceptable levels. We regularly monitor the impact of market risk on the fair value and cash flows of our derivative and other financial instruments considering reasonably possible changes in interest and currency exchange rates and restrict the use of derivative financial instruments to hedging activities. We do not use derivative financial instruments for trading or other speculative purposes and do not use leveraged derivative financial instruments. We continually monitor the creditworthiness of our diverse base of customers to which we grant credit terms in the normal course of business and generally do not require collateral. We consider the concentrations of credit risk associated with our trade accounts receivable to be commercially reasonable and believe that such concentrations do not leave us vulnerable to significant risks of near-term severe adverse impacts. The terms and conditions of our credit sales are designed to mitigate concentrations of credit risk with any single customer. Our sales are not materially dependent on a single customer or a small group of customers. Contingent Considerations During the first quarter of 2015, we acquired the business of Intellibot Robotics LLC, a U.S.-based privately owned company that has pioneered the development of robotic commercial floor cleaning machines. The purchase price was $18 million which included cash paid of $9 million and $9 million related to the fair value of contingent consideration. This contingent consideration, which is classified as a liability, includes earnout fees to be paid out in cash to the seller over a 10 year period based on various percentages of net sales over the 10 year period. Since it is classified as a liability, we must remeasure to fair value each reporting period. The fair value of the liability as of September 30, 2015 was $9.9 million of which $0.7 million was included in current liabilities and $9.2 million was included in non-current liabilities on the condensed consolidated balance sheet. The $0.9 million change in fair value was recognized in selling, general and administrative expenses. The valuation of the contingent consideration is based on a probability weighted projection of payments over the 10 year period using the deterministic method. These projections are based on our internal forecast of the business performance and since this is an unobservable input used in the fair value measurement it would be considered a Level 3 input (as defined above). In addition, the probability weighted earnout payments were present valued using factors to consider the risk associated with achievement of the sales forecast and the credit risk associated with the payments.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13504-108611 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13433-108611 + Details
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