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Fair Value Measurements and Risk
 9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements and Risk
Certain of Grace's assets and liabilities are reported at fair value on a gross basis. ASC 820 "Fair Value Measurements and Disclosures" defines fair value as the value that would be received at the measurement date in the principal or "most advantageous" market. Grace uses principal market data, whenever available, to value assets and liabilities that are required to be reported at fair value.
Grace has identified the following financial assets and liabilities that are subject to the fair value analysis required by ASC 820:
Fair Value of Debt and Other Financial Instruments    Debt payable is recorded at carrying value. Fair value is determined based on Level 2 inputs, including expected future cash flows (discounted at market interest rates), estimated current market prices and quotes from financial institutions.
At September 30, 2016, the carrying amounts and fair values of Grace's debt were as follows:
 
September 30, 2016
 
December 31, 2015
(In millions)
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
5.125% senior notes due 2021(1)
$
692.2

 
$
738.9

 
$
691.1

 
$
701.5

U.S. dollar term loan(2)
402.3

 
402.8

 
919.3

 
907.2

5.625% senior notes due 2024(1)
295.9

 
324.8

 
295.5

 
298.1

Euro term loan(2)
88.2

 
87.7

 
158.7

 
157.3

Other borrowings
111.6

 
111.6

 
108.2

 
108.2

Total debt
$
1,590.2

 
$
1,665.8

 
$
2,172.8

 
$
2,172.3

___________________________________________________________________________________________________________________
(1)
Carrying amounts are net of unamortized debt issuance costs of $7.8 million and $4.1 million as of September 30, 2016, and $8.9 million and $4.5 million as of December 31, 2015, related to the 5.125% senior notes due 2021 and 5.625% senior notes due 2024, respectively.
(2)
Carrying amounts are net of unamortized debt issuance costs and discounts of $6.1 million and $1.4 million as of September 30, 2016, and $15.6 million and $3.4 million as of December 31, 2015, related to the U.S. dollar term loan and euro term loan, respectively.
At September 30, 2016, the recorded values of other financial instruments such as cash equivalents and trade receivables and payables approximated their fair values, based on the short-term maturities and floating rate characteristics of these instruments.
Commodity Derivatives    From time to time, Grace enters into commodity derivatives such as fixed-rate swaps or options with financial institutions to mitigate the risk of volatility of prices of natural gas or other commodities. Under fixed-rate swaps, Grace locks in a fixed rate with a financial institution for future purchases, purchases its commodity from a supplier at the prevailing market rate, and then settles with the bank for any difference in the rates, thereby "swapping" a variable rate for a fixed rate.
The valuation of Grace's fixed-rate natural gas swaps was determined using a market approach, based on natural gas futures trading prices quoted on the New York Mercantile Exchange. Commodity fixed-rate swaps with maturities of not more than 15 months are used and designated as cash flow hedges of forecasted purchases of natural gas. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income (loss)" and reclassified into income in the same period or periods that the underlying commodity purchase affects income. At September 30, 2016, there were no open fixed-rate natural gas swaps.
The valuation of Grace's fixed-rate aluminum swaps was determined using a market approach, based on aluminum futures trading prices quoted on the London Metal Exchange. Commodity fixed-rate swaps with maturities of not more than 15 months are used and designated as cash flow hedges of forecasted purchases of aluminum. Current open contracts hedge forecasted transactions until May 2017. The effective portion of the gain or loss on the commodity contracts is recorded in "accumulated other comprehensive income (loss)" and reclassified into income in the same period or periods that the underlying commodity purchase affects income. At September 30, 2016, the contract volume, or notional amount, of the commodity contracts was 1.3 million pounds with a total contract value of $1.0 million.
Currency Derivatives    Because Grace conducts business in over 40 countries and in more than 30 currencies, results are exposed to fluctuations in currency exchange rates. Grace seeks to minimize exposure to these fluctuations by matching sales in volatile currencies with expenditures in the same currencies, but it is not always possible to do so. From time to time, Grace will use financial instruments such as currency forward contracts, options, swaps, or combinations thereof to reduce the risk of certain specific transactions. However, Grace does not have a policy of hedging all exposures, because management does not believe that such a level of hedging would be cost-effective.
The valuation of Grace's currency exchange rate forward contracts and swaps is determined using both a market approach and an income approach. Inputs used to value currency exchange rate forward contracts consist of: (1) spot rates, which are quoted by various financial institutions; (2) forward points, which are primarily affected by changes in interest rates; and (3) discount rates used to present value future cash flows, which are based on the London Interbank Offered Rate (LIBOR) curve or overnight indexed swap rates.
Debt and Interest Rate Swap Agreements    Grace uses interest rate swaps designated as cash flow hedges to manage fluctuations in interest rates on variable rate debt. The effective portion of gains and losses on these interest rate cash flow hedges is recorded in "accumulated other comprehensive income (loss)" and reclassified into "interest expense and related financing costs" during the hedged interest period.
In connection with its emergence financing, Grace entered into an interest rate swap beginning on February 3, 2015, and maturing on February 3, 2020, fixing the LIBOR component of the interest on $250 million of Grace's term debt at a rate of 2.393%. The valuation of this interest rate swap is determined using both a market approach and an income approach, using prevailing market interest rates and discount rates to present value future cash flows based on the forward LIBOR yield curves.
The following tables present the fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2016, and December 31, 2015:
 
Fair Value Measurements at September 30, 2016, Using

(In millions)
Total
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
2.9

 
$
—

 
$
2.9

 
$
—

Total Assets
$
2.9

 
$
—

 
$
2.9

 
$
—

Liabilities
 
 
 
 
 
 
 
Interest rate derivatives
$
10.6

 
$
—

 
$
10.6

 
$
—

Currency derivatives
6.0

 
—

 
6.0

 
—

Total Liabilities
$
16.6

 
$
—

 
$
16.6

 
$
—

 
Fair Value Measurements at December 31, 2015, Using

(In millions)
Total
 
Quoted Prices in Active Markets for Identical Assets or Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Currency derivatives
$
1.0

 
$
—

 
$
1.0

 
$
—

Commodity derivatives
0.6

 
—

 
0.6

 
—

Total Assets
$
1.6

 
$
—

 
$
1.6

 
$
—

Liabilities
 
 
 
 
 
 
 
Interest rate derivatives
$
7.9

 
$
—

 
$
7.9

 
$
—

Commodity derivatives
0.1

 
—

 
0.1

 
—

Currency derivatives
0.5

 
—

 
0.5

 
—

Total Liabilities
$
8.5

 
$
—

 
$
8.5

 
$
—


The following tables present the location and fair values of derivative instruments included in the Consolidated Balance Sheets as of September 30, 2016, and December 31, 2015:
September 30, 2016
(In millions)
Asset Derivatives
 
Liability Derivatives
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
$
2.8

 
Other current liabilities
 
$
0.4

Interest rate contracts
Other current assets
 
—

 
Other current liabilities
 
4.1

Currency contracts
Other assets
 
—

 
Other liabilities
 
5.4

Interest rate contracts
Other assets
 
—

 
Other liabilities
 
6.5

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
0.1

 
Other current liabilities
 
0.2

Total derivatives
 
 
$
2.9

 
 
 
$
16.6

December 31, 2015
(In millions)
Asset Derivatives
 
Liability Derivatives
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Derivatives designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Commodity contracts
Other current assets
 
$
0.6

 
Other current liabilities
 
$
0.1

Currency contracts
Other current assets
 
0.7

 
Other current liabilities
 
0.3

Interest rate contracts
Other current assets
 
—

 
Other current liabilities
 
4.1

Currency contracts
Other assets
 
0.2

 
Other liabilities
 
—

Interest rate contracts
Other assets
 
—

 
Other liabilities
 
3.8

Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
 
 
 
Currency contracts
Other current assets
 
0.1

 
Other current liabilities
 
0.2

Total derivatives
 
 
$
1.6

 
 
 
$
8.5


The following tables present the location and amount of gains and losses on derivative instruments included in the Consolidated Statements of Operations or, when applicable, gains and losses initially recognized in other comprehensive income (loss) ("OCI") for the three and nine months ended September 30, 2016 and 2015:
Three Months Ended September 30, 2016
(In millions)
Amount of Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Amount of Gain (Loss) Reclassified from OCI into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
Interest rate contracts
$
0.6

 
Interest expense
 
$
(1.0
)
Currency contracts
(0.4
)
 
Other expense
 
0.3

Commodity contracts
(0.1
)
 
Cost of goods sold
 
(0.1
)
Total derivatives
$
0.1

 
 
 
$
(0.8
)
 
 
 
 
 
 
 
 
Location of Gain (Loss) Recognized in Income on Derivatives
 
Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
0.1

Nine Months Ended September 30, 2016
(In millions)
Amount of Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Amount of Gain (Loss) Reclassified from OCI into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
Interest rate contracts
$
(5.8
)
 
Interest expense
 
$
(3.1
)
Currency contracts
(0.3
)
 
Other expense
 
0.7

Commodity contracts
(0.4
)
 
Cost of goods sold
 
0.1

Total derivatives
$
(6.5
)
 
 
 
$
(2.3
)
 
 
 
 
 
 
 
 
Location of Gain (Loss) Recognized in Income on Derivatives
 
Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(0.7
)
Three Months Ended September 30, 2015
(In millions)
Amount of Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Amount of Gain (Loss) Reclassified from OCI into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
Interest rate contracts
$
(4.1
)
 
Interest expense
 
$
(1.1
)
Currency contracts
(0.6
)
 
Other expense
 
(1.0
)
Commodity contracts
(0.6
)
 
Cost of goods sold
 
(0.9
)
Total derivatives
$
(5.3
)
 
 
 
$
(3.0
)
 
 
 
 
 
 
 
 
Location of Gain (Loss) Recognized in Income on Derivatives
 
Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
—


Nine Months Ended September 30, 2015
(In millions)
Amount of Gain (Loss) Recognized in OCI on Derivatives
(Effective Portion)
 
Location of Gain (Loss) Reclassified from Accumulated OCI into Income
(Effective Portion)
 
Amount of Gain (Loss) Reclassified from OCI into Income
(Effective Portion)
Derivatives in ASC 815 cash flow hedging relationships:
 
 
 
 
Interest rate contracts
$
(7.0
)
 
Interest expense
 
$
(2.8
)
Currency contracts
0.6

 
Other expense
 
0.2

Commodity contracts
(1.6
)
 
Cost of goods sold
 
(3.0
)
Total derivatives
$
(8.0
)
 
 
 
$
(5.6
)
 
 
 
 
 
 
 
 
Location of Gain (Loss) Recognized in Income on Derivatives
 
Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments under ASC 815:
 
 
 
 
Currency contracts
 
Other expense
 
$
(0.2
)
Net Investment Hedges    Grace uses foreign currency denominated debt as nonderivative hedging instruments in certain net investment hedges. The effective portion of gains and losses attributable to these net investment hedges is recorded to "currency translation adjustments" within "accumulated other comprehensive income (loss)." Recognition in earnings of amounts previously recorded to "currency translation adjustments" is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. At September 30, 2016, €80.1 million of Grace's term loan principal was designated as a hedging instrument of its net investment in European subsidiaries.
Grace also uses cross-currency swaps as derivative hedging instruments in certain net investment hedges of our non-U.S. subsidiaries. The effective portion of gains and losses attributable to these net investment hedges is recorded net of tax to "currency translation adjustments" within "accumulated other comprehensive income (loss)" to offset the change in the carrying value of the net investment being hedged. Recognition in earnings of amounts previously recorded to "currency translation adjustments" is limited to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. At September 30, 2016, the notional amount of €170.0 million of Grace's cross-currency swaps was designated as a hedging instrument of its net investment in European subsidiaries.
The following tables present the location and amount of gains and losses on nonderivative and derivative instruments designated as net investment hedges for the three and nine months ended September 30, 2016 and 2015. There were no reclassifications of the effective portion of net investment hedges out of OCI and into earnings for the periods presented in the tables below.
Three Months Ended September 30, 2016
(In millions)
Amount of Gain (Loss) Recognized in OCI in Currency Translation Adjustments
(Effective Portion)
Derivatives in ASC 815 net investment hedging relationships:
 
Cross-currency swap
$
(1.8
)
Total derivatives
$
(1.8
)
Nonderivatives in ASC 815 net investment hedging relationships:
 
Foreign currency denominated debt
$
(0.8
)
Total nonderivatives
$
(0.8
)
Nine Months Ended September 30, 2016
(In millions)
Amount of Gain (Loss) Recognized in OCI in Currency Translation Adjustments
(Effective Portion)
Derivatives in ASC 815 net investment hedging relationships:
 
Cross-currency swap
$
(1.7
)
Total derivatives
$
(1.7
)
Nonderivatives in ASC 815 net investment hedging relationships:
 
Foreign currency denominated debt
$
(1.2
)
Total nonderivatives
$
(1.2
)
Three Months Ended September 30, 2015
(In millions)
Amount of Gain (Loss) Recognized in OCI in Currency Translation Adjustments
(Effective Portion)
Nonderivatives in ASC 815 net investment hedging relationships:
 
Foreign currency denominated debt
$
0.1

Total nonderivatives
$
0.1

Nine Months Ended September 30, 2015
(In millions)
Amount of Gain (Loss) Recognized in OCI in Currency Translation Adjustments
(Effective Portion)
Nonderivatives in ASC 815 net investment hedging relationships:
 
Foreign currency denominated debt
$
15.3

Total nonderivatives
$
15.3

Credit Risk    Grace is exposed to credit risk in its trade accounts receivable. Customers in the petroleum refining industry represent the greatest exposure. Grace's credit evaluation policies and history of minimal credit losses mitigate credit risk exposures. Grace does not generally require collateral for its trade accounts receivable but may require a bank letter of credit in certain instances, particularly when selling to customers in cash-restricted countries.
Grace may also be exposed to credit risk in its derivatives contracts. Grace monitors counterparty credit risk and currently does not anticipate nonperformance by counterparties to its derivatives. Grace's derivative contracts are with internationally recognized commercial financial institutions.