Fair Value Measurements

12 Months Ended

Dec. 31, 2019

FAIR VALUE MEASUREMENTS

The following fair value hierarchy table categorizes information regarding our financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018 (in millions):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
As of December 31, 2019
Supplemental executive retirement plan assets	$	26.0	$	—		$	—	$	26.0
Derivatives, net	—		5.4			—		5.4
Total financial assets	$	26.0	$	5.4		$	—	$	31.4
As of December 31, 2018
Supplemental executive retirement plan assets	$	27.2	$	—		$	—	$	27.2
Total financial assets	27.2		—			—		27.2
Derivatives, net	—		(10.7		)	—		(10.7		)
Total financial liabilities	$	—	$	(10.7	)	$	—	$	(10.7	)

Supplemental Executive Retirement Plans

Our Valaris supplemental executive retirement plans (the "SERPs") are non-qualified plans that provide eligible employees an opportunity to defer a portion of their compensation for use after retirement. The SERPs were frozen to the entry of new participants in November 2019 and to future compensation deferrals as of January 1, 2020. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our consolidated balance sheets as of December 31, 2019 and 2018. The fair value measurements of assets held in the SERP were based on quoted market prices. Net unrealized gains of $5.0 million, losses of $700,000 and gains of $4.5 million from marketable securities held in our SERP were included in other, net, in our consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017, respectively.

Derivatives

Our derivatives were measured at fair value on a recurring basis using Level 2 inputs as of December 31, 2019 and 2018. See "Note 8 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurements of our derivatives were based on market prices that are generally observable for similar assets or liabilities at commonly quoted intervals.

Other Financial Instruments

The carrying values and estimated fair values of our debt instruments as of December 31, 2019 and 2018 were as follows (in millions):



	December 31, 2019				December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
6.875% Senior notes due 2020	$	124.8	$	117.3	$	127.5	$	121.6
4.70% Senior notes due 2021	113.2		95.5		112.7		101.8
4.875% Senior notes due 2022 ⁽²⁾	599.2		460.5		—		—
3.00% Exchangeable senior notes due 2024 ⁽¹⁾	699.0		607.4		666.8		575.5
4.50% Senior notes due 2024	302.0		167.2		619.8		405.2
4.75% Senior notes due 2024 ⁽²⁾	276.5		201.4		—		—
8.00% Senior notes due 2024	295.7		181.7		337.0		273.7
5.20% Senior notes due 2025	331.7		186.7		664.4		443.9
7.375% Senior notes due 2025 ⁽²⁾	329.2		218.6		—		—
7.75% Senior notes due 2026	987.1		575.1		985.0		725.5
7.20% Debentures due 2027	111.7		70.0		149.3		109.1
7.875% Senior notes due 2040	373.3		153.5		375.0		223.2
5.40% Senior notes due 2042 ⁽²⁾	262.8		194.4		—		—
5.75% Senior notes due 2044	973.3		450.0		972.9		566.3
5.85% Senior notes due 2044 ⁽²⁾	268.8		194.8		—		—
Total debt	$	6,048.3	$	3,874.1	$	5,010.4	$	3,545.8
Less: current maturities	124.8		—		—		—
Total long-term debt	$	5,923.5	$	3,874.1	$	5,010.4	$	3,545.8


⁽¹⁾	Our 2024 Convertible Notes were issued with a conversion feature. The 2024 Convertible Notes were separated into their liability and equity components on our consolidated balance sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount that will be amortized to interest expense over

the life of the instrument. Excluding the unamortized discount, the carrying value of the 2024 Convertible Notes was $838.3 million and $836.3 million as of December 31, 2019 and 2018, respectively. See "Note 7 - Debt" for additional information on this issuance.


⁽²⁾	These senior notes were assumed by Valaris as a result of the Rowan Transaction.

The estimated fair values of our senior notes and debentures were determined using quoted market prices, which are level 1 inputs. The estimated fair values of our cash and cash equivalents, short-term investments, accounts receivable, notes receivable, trade payables and other liabilities approximated their carrying values as of December 31, 2019 and 2018. Our short-term investments consisted of time deposits with initial maturities in excess of three months but less than one year as of December 31, 2018.

- 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.

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