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Fair Value Measurements and Financial Instruments | 3 Months Ended
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Mar. 31, 2016
Fair Value Disclosures [Abstract] |
Fair Value Measurements and Financial Instruments | Note 17—Fair value measurements and financial instruments: The following table summarizes the valuation of our marketable securities, financial instruments and other items recorded on a fair value basis as of:
| Fair Value Measurements |
| Total |  |  | Quoted Prices in Active Markets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |
| (In millions) |
Asset (liability) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2015: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current | $ | 2.0 |  |  | $ | — |  |  | $ | 2.0 |  |  | $ | — |
Noncurrent |  | 254.9 |  |  |  | 3.5 |  |  |  | 1.4 |  |  |  | 250.0 |
Currency forward contracts |  | (1.2 | ) |  |  | (1.2 | ) |  |  | — |  |  |  | — |
Interest rate swap |  | (3.5 | ) |  |  | — |  |  |  | (3.5 | ) |  |  | — |
March 31, 2016: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Marketable securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current | $ | 1.7 |  |  | $ | — |  |  | $ | 1.7 |  |  | $ | — |
Noncurrent |  | 254.6 |  |  |  | 3.2 |  |  |  | 1.4 |  |  |  | 250.0 |
Currency forward contracts |  | (.1 | ) |  |  | (.1 | ) |  |  | — |  |  |  | — |
Interest rate swap |  | (8.0 | ) |  |  | — |  |  |  | (8.0 | ) |  |  | — |
See Note 4 for information on how we determine fair value of our noncurrent marketable securities. Certain of our sales generated by Chemicals Segment’s non-U.S. operations are denominated in U.S. dollars. Our Chemicals Segment periodically uses currency forward contracts to manage a very nominal portion of currency exchange rate risk associated with trade receivables denominated in a currency other than the holder’s functional currency or similar exchange rate risk associated with future sales. Derivatives that we use are primarily currency forward contracts and interest rate swaps. We have not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future. Derivatives used to hedge forecasted transactions and specific cash flows associated with financial assets and liabilities denominated in currencies other than the U.S. dollar and which meet the criteria for hedge accounting are designated as cash flow hedges. Consequently, the effective portion of gains and losses is deferred as a component of accumulated other comprehensive income (loss) and is recognized in earnings at the time the hedged item affects earnings. Contracts that do not meet the criteria for hedge accounting are marked-to-market at each balance sheet date with any resulting gain or loss recognized in income currently as part of net currency transactions gains and losses. The fair value of the currency forward contracts is determined using Level 1 inputs based on the currency spot forward rates quoted by banks or currency dealers. At March 31, 2016, Kronos had currency forward contracts to exchange:
| · | an aggregate €14.6 million for an equivalent value of Norwegian kroner at exchange rates ranging from krone 9.41 to krone 9.47 per euro. These contracts with DnB Nor Bank ASA mature at a rate of €1.6 million per month from April 2016 through December 2016,
| · | an aggregate $19.4 million for an equivalent value of Norwegian kroner at exchange rates ranging from krone 8.31 to krone 8.33 per U.S. dollar. These contracts with DnB Nor Bank ASA mature at a rate of $2.2 million per month from April 2016 to December 2016, and
| · | an aggregate of $24.7 million for an equivalent value of Canadian dollars at an exchange rate of Cdn. $1.29 per U.S. dollar. These contracts with Wells Fargo Bank, N.A. mature from April 2016 through December 2016 at a rate of $3.1 million per month from April through July and $2.5 million per month from August through December.
The estimated fair value of such currency forward contracts at March 31, 2016 was a $.1 million net liability, of which $.1 million is recognized as a part of accounts and other receivables and $.2 million is recognized as part of accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheet. We also recognize a corresponding $.1 million currency transaction loss in our Condensed Consolidated Statement of Operations during the quarter ended March 31, 2016. We did not use hedge accounting for any of our contracts to the extent we held such contracts during 2015 and 2016. Accordingly, changes in the aggregate fair value of currency forward contracts we hold are recognized as a currency transaction gain or loss. Interest rate swap contract - As part of our interest rate risk management strategy, in August 2015 Kronos entered into a pay-fixed/receive-variable interest rate swap contract with Wells Fargo Bank, N.A. to minimize its exposure to volatility in LIBOR as it relates to Kronos' forecasted outstanding variable-rate indebtedness. Under this interest rate swap, Kronos will pay a fixed rate of 2.016% per annum, payable quarterly, and receive a variable rate of three-month LIBOR (subject to a 1.00% floor), also payable quarterly, in each case based on the notional amount of the swap then outstanding. The effective date of the swap contract was September 30, 2015. The notional amount of the swap started at $344.75 million and declines by $875,000 each quarter beginning December 31, 2015, with a final maturity of the swap contract in February 2020. The notional amount of the swap as of March 31, 2016 was $343.0 million. This swap contract has been designated as a cash flow hedge and qualified as an effective hedge at inception under ASC Topic 815. The effective portion of changes in fair value on this interest rate swap is recorded as a component of other comprehensive income (loss), net of deferred income taxes and noncontrolling interest. Commencing in the fourth quarter of 2015, as interest expense accrues on LIBOR-based variable rate debt, we classify the amount we pay under the pay-fixed leg of the swap and the amount we receive under the receive-variable leg of the swap as part of interest expense, with the net effect that the amount of interest expense we recognize on our LIBOR-based variable rate debt each quarter, as it relates to the notional amount of the swap outstanding each quarter, will be based on a fixed rate of 2.016% per annum in lieu of the level of LIBOR prevailing during the quarter. The amount of hedge ineffectiveness, if any, related to the swap will be recorded in earnings (also as part of interest expense). Since the inception of the swap through March 31, 2016, there have been no gains or losses recognized in earnings representing hedge ineffectiveness with respect to the interest rate swap. During the quarter ended March 31, 2016, the pretax amount recognized in other comprehensive income (loss) related to the interest rate swap contract was a $4.5 million loss. During the same period, $.9 million was reclassified from accumulated other comprehensive income (loss) into interest expense. During the next twelve months the amount of the March 31, 2016 accumulated other comprehensive income (loss) balance that is expected to be reclassified to interest expense is $3.5 million pre-tax. The fair value of the interest rate swap contract at March 31, 2016 was a liability of $8.0 million and is reflected in the Condensed Consolidated Balance Sheet as part of accounts payable and accrued liabilities of $3.4 million and other noncurrent liabilities of $4.6 million. See Notes 8 and 9. The fair value of the interest rate swap was estimated by a third party using inputs that are observable or that can be corroborated by observable market data such as interest rate yield curves, and therefore, is classified within Level 2 of the valuation hierarchy. The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure:
| December 31, 2015 |  |  | March 31, 2016 |
| Carrying amount |  |  | Fair value |  |  | Carrying amount |  |  | Fair value |
| (In millions) |
Cash, cash equivalents and restricted cash equivalents | $ | 229.1 |  |  | $ | 229.1 |  |  | $ | 190.2 |  |  | $ | 190.2 |
Deferred payment obligation |  | 8.8 |  |  |  | 8.8 |  |  |  | 8.8 |  |  |  | 8.8 |
Long-term debt (excluding capitalized leases): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Kronos term loan | $ | 338.0 |  |  | $ | 309.5 |  |  | $ | 337.5 |  |  | $ | 304.8 |
Snake River Sugar Company fixed rate loans |  | 250.0 |  |  |  | 250.0 |  |  |  | 250.0 |  |  |  | 250.0 |
WCS fixed rate debt |  | 65.6 |  |  |  | 65.6 |  |  |  | 65.2 |  |  |  | 65.2 |
Valhi credit facility with Contran |  | 263.8 |  |  |  | 263.8 |  |  |  | 276.5 |  |  |  | 276.5 |
Kronos North American credit facility |  | — |  |  |  | — |  |  |  | 9.2 |  |  |  | 9.2 |
Tremont promissory note payable |  | 17.1 |  |  |  | 17.1 |  |  |  | 17.1 |  |  |  | 17.1 |
BMI bank note payable |  | 9.3 |  |  |  | 9.4 |  |  |  | 9.1 |  |  |  | 9.2 |
LandWell note payable to the City of Henderson |  | 3.1 |  |  |  | 3.1 |  |  |  | 3.1 |  |  |  | 3.1 |
At December 31, 2015 and March 31, 2016, the estimated market price of Kronos’ term loan was $900 per $1,000 principal amount and $888.75 per $1,000 principal amount, respectively. The fair value of Kronos’ term loan was based on quoted market prices; however, these quoted market prices represent Level 2 inputs because the markets in which the term loan trades were not active. The fair value of our fixed-rate nonrecourse loans from Snake River Sugar Company is based upon the $250 million redemption price of our investment in Amalgamated, which collateralizes the nonrecourse loans (this is a Level 3 input). Fair value variable interest debt and other fixed-rate debt are deemed to approximate book value, which represents Level 2 inputs. Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value. See Notes 5 and 8.

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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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