Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements on a Recurring Basis

FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis were as follows:

	September 30, 2014								December 31, 2013
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Investments:
Equity securities	$	22.0	$	22.0	$	—	$	—	$	21.2	$	21.2	$	—	$	—
Fixed income	8.3		8.3		—		—		13.2		13.2		—		—
Money market fund	3.2		—		3.2		—		3.8		—		3.8		—
Stable value fund	0.6		—		0.6		—		1.0		—		1.0		—
Other	2.3		2.3		—		—		2.4		2.4		—		—
Derivative financial instruments:
Foreign exchange contracts	167.6		—		167.6		—		234.4		—		234.4		—
Total assets	$	204.0	$	32.6	$	171.4	$	—	$	276.0	$	36.8	$	239.2	$	—
Liabilities
Derivative financial instruments:
Foreign exchange contracts	203.9		—		203.9		—		218.4		—		218.4		—
Contingent earn-out consideration	1.6		—		—		1.6		70.1		—		—		70.1
Total liabilities	$	205.5	$	—	$	203.9	$	1.6	$	288.5	$	—	$	218.4	$	70.1

Investments—The fair value measurement of our equity securities, fixed income and other investment assets is based on quoted prices that we have the ability to access in public markets. Our stable value fund and money market fund are valued at the net asset value of the shares held at the end of the quarter, which is based on the fair value of the underlying investments using information reported by the investment advisor at quarter-end.

Derivative financial instruments—We use the income approach as the valuation technique to measure the fair value of foreign currency derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change from the derivative contract rate and the published market indicative currency rate, multiplied by the contract notional values. Credit risk is then incorporated by reducing the derivative’s fair value in asset positions by the result of multiplying the present value of the portfolio by the counterparty’s published credit spread. Portfolios in a liability position are adjusted by the same calculation; however, a spread representing our credit spread is used. Our credit spread, and the credit spread of other counterparties not publicly available are approximated by using the spread of similar companies in the same industry, of similar size and with the same credit rating.

At the present time, we have no credit-risk-related contingent features in our agreements with the financial institutions that would require us to post collateral for derivative positions in a liability position.

See Note 12 for additional disclosure related to derivative financial instruments.

Multi Phase Meters contingent earn-out consideration—We determined the fair value of the contingent earn-out consideration using a discounted cash flow model. The key assumptions used in applying the income approach were the expected profitability and debt, net of cash, of the acquired company during the earn-out period and the discount rate which approximates our debt credit rating. The fair value measurement was based upon significant inputs not observable in the market. Changes in the value of the contingent earn-out consideration were recorded as cost of service and other revenue in our condensed consolidated statements of income.

Changes in the fair value of our Level 3 contingent earn-out consideration obligation were as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2014			2013		2014			2013
Balance at beginning of period	$	0.7		$	50.5	$	70.1		$	105.3
Remeasurement adjustment	1.6			8.5		3.6			17.6
Payment	—			—		(72.5		)	(57.3		)
Foreign currency translation adjustment	(0.7		)	0.4		0.4			(6.2		)
Balance at end of period	$	1.6		$	59.4	$	1.6		$	59.4

Fair value of debt—The fair value, based on Level 1 quoted market rates, of our 2.00% Notes due 2017 and 3.45% Notes due 2022 (collectively, “Senior Notes”) was approximately $794.7 million at September 30, 2014 and approximately $767.6 million at December 31, 2013, as compared to the $800.0 million face value of the debt, net of issue discounts, recorded in the condensed consolidated balance sheets.

Other fair value disclosures—The carrying amounts of cash and cash equivalents, trade receivables, accounts payable, short-term debt, commercial paper, debt associated with our term loan, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value.

Credit risk—By their nature, financial instruments involve risk, including credit risk, for non-performance by counterparties. Financial instruments that potentially subject us to credit risk primarily consist of trade receivables and derivative contracts. We manage the credit risk on financial instruments by transacting only with what management believes are financially secure counterparties, requiring credit approvals and credit limits, and monitoring counterparties’ financial condition. Our maximum exposure to credit loss in the event of non-performance by the counterparty is limited to the amount drawn and outstanding on the financial instrument. Allowances for losses on trade receivables are established based on collectability assessments. We mitigate credit risk on derivative contracts by executing contracts only with counterparties that consent to a master netting agreement which permits the net settlement of gross derivative assets against gross derivative liabilities.