Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.19.1
Fair Value Measurements
6 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
 
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.  The authoritative guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are from sources independent of the Company.  Unobservable inputs reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability, developed based upon the best information available in the circumstances.  The categorization of financial assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The hierarchy is broken down into three levels:
 
Level 1:
Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2:
Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.
Level 3:
Inputs are unobservable for the asset or liability.
 
 
Carrying
 
 
 
 
 
 
 
Value at
March 31,
 
Fair Value at March 31, 2019
Using Inputs Considered as:
 
2019
 
Level 1
 
Level 2
 
Level 3
Assets:
 

 
 

 
 

 
 

Cash and cash equivalents
$
58.6

 
$
58.6

 
$

 
$

Investments in rabbi trust
4.0

 
4.0

 

 

Derivative instruments
2.2

 

 
2.2

 

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

$150 senior unsecured notes
149.8

 
154.0

 

 

Revolving credit facility
112.6

 

 
112.6

 

$100 Series A Notes
100.0

 

 
105.4

 

Derivative instruments
12.4

 

 
12.4

 


 
The fair value of the amounts outstanding under the revolving credit facility approximated carrying value at March 31, 2019.  The fair values of the revolving credit facility and Series A Notes were estimated based on internally developed models, using current market interest rate data for similar issues, as there is no active market for our revolving credit facility or Series A Notes.

Derivative instruments

The Company has hedging programs in place to manage its currency exposures. The objectives of our hedging programs are to mitigate exposures in gross margin and non-functional-currency-denominated assets and liabilities. Under these programs, we use derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates. These include foreign currency exchange forward contracts, which generally have terms up to 24 months. Additionally, the Company has derivative instruments in place to hedge the interest rate associated with $150.0 of ten-year, fixed-rate financing we expect to issue in the future. These derivative instruments terminate in December 2020, if not settled earlier in connection with the underlying expected future financing. Our objectives in using these derivatives are to reduce volatility in future interest expense and to manage our exposure to interest rate movements.

The fair values of the Company’s derivative instruments were based upon pricing models using inputs derived from third-party pricing services or observable market data such as currency spot and forward rates.  These values are periodically validated by comparing to third-party broker quotes.  The aggregate notional value of derivatives was $283.3 at March 31, 2019. The derivatives are included at fair value in Other current assets, Other current liabilities, and Other long-term liabilities on the Consolidated Balance Sheets.