Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2016

The following tables set forth the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.



	Fair Value as of September 30, 2016
(in millions)	Level 1		Level 2		Level 3		Total
Current Assets:
Foreign currency exchange contracts	$	—	$	0.2	$	—	$	0.2
Total current assets at fair value	$	—	$	0.2	$	—	$	0.2
Current Liabilities:
Foreign currency exchange contracts	$	—	$	5.8	$	—	$	5.8
Commodity contracts	—		0.2		—		0.2
Total current liabilities at fair value	$	—	$	6.0	$	—	$	6.0



	Fair Value as of December 31, 2015
(in millions)	Level 1		Level 2		Level 3		Total
Current Assets:
Foreign currency exchange contracts	$	—	$	0.3	$	—	$	0.3
Total current assets at fair value	$	—	$	0.3	$	—	$	0.3
Current Liabilities:
Foreign currency exchange contracts	$	—	$	1.1	$	—	$	1.1
Commodity contracts	—		0.7		—		0.7
Interest rate swap contracts: Float-to-fixed	—		1.7		—		1.7
Total current liabilities at fair value	$	—	$	3.5	$	—	$	3.5
Non-current Liabilities:
Interest rate swap contracts: Float-to-fixed	$	—	$	0.6	$	—	$	0.6
Foreign currency exchange contracts	—		0.1		—		0.1
Total non-current liabilities at fair value	$	—	$	0.7	$	—	$	0.7

The fair value of the Company's 12.750% Senior Secured Second Lien Notes due 2021 was $280.8 million as of September 30, 2016. The fair value of the Company’s 8.50% Senior Notes due 2020 was $623.1 million as of December 31, 2015 and the fair value of the Company’s 5.875% Senior Notes due 2022 was $310.6 million as of December 31, 2015; these Senior Notes were redeemed on March 3, 2016. The fair values of the Company’s previously outstanding Term Loans under its Prior Senior Credit Facility, which was replaced by the ABL Revolving Credit Facility (as defined in Note 10, “Debt”) on March 3, 2016, were as follows as of December 31, 2015: Term Loan A - $307.7 million and Term Loan B - $116.7 million. The Term Loans were repaid in conjunction with the Spin-Off. See Note 10, “Debt,” for a description of the debt instruments and their related carrying values.

ASC Topic 820-10, “Fair Value Measurement,” defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820-10 classifies the inputs used to measure fair value into the following hierarchy:



Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2	Unadjusted quoted prices in active markets for similar assets or liabilities, or

	Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or

	Inputs other than quoted prices that are observable for the asset or liability

Level 3	Unobservable inputs for the asset or liability

The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company estimates the fair value of its Senior Notes and estimated the fair value of its previously outstanding Term Loans based on quoted market prices of the instruments; because these markets are typically thinly traded, the assets and liabilities are classified as Level 2 within the valuation hierarchy. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, deferred purchase price notes on receivables sold (see Note 11, “Accounts Receivable Securitization”) and short-term variable debt, including any amounts outstanding under the ABL Revolving Credit Facility, approximate fair value, without being discounted as of September 30, 2016 and December 31, 2015, due to the short-term nature of these instruments.

As a result of its global operating and financing activities, the Company is exposed to market risks from changes in interest rates, foreign currency exchange rates and commodity prices, which may adversely affect the Company’s operating results and financial position. When deemed appropriate, the Company minimizes these risks through the use of derivative financial instruments. Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes, and the Company does not use leveraged derivative financial instruments. The foreign currency exchange, commodity and interest rate contracts are valued through an independent valuation source that uses an industry standard data provider, with resulting valuations periodically validated through third-party or counterparty quotes. As such, these derivative instruments are classified within Level 2.

- 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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