Fair Value Measurement of Assets and Liabilities

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

11. Fair Value Measurement of Assets and Liabilities

The following financial assets and liabilities related to continuing operations are recorded at fair value on a recurring basis (in millions):

	As of September 30, 2022
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	160.7	$	-	$	160.7	$	-
Cross-currency interest rate swaps		33.2		-		33.2		-
Derivatives not designated as hedges, current and long-term
Forward Exchange Agreement		3.0		-		3.0		-
Investment in ZimVie		48.1		48.1		-		-
Total Assets	$	245.0	$	48.1	$	196.9	$	-
Liabilities
Derivatives designated as hedges, current and long-term
Cross-currency interest rate swaps	$	2.4	$	-	$	2.4	$	-
Interest rate swaps		179.8		-		179.8		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		2.5		-		2.5		-
Contingent payments related to acquisitions		21.1		-		-		21.1
Total Liabilities	$	205.8	$	-	$	184.7	$	21.1

	As of December 31, 2021
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	52.4	$	-	$	52.4	$	-
Cross-currency interest rate swaps		23.0		-		23.0		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		1.1		-		1.1		-
Total Assets	$	76.5	$	-	$	76.5	$	-
Liabilities
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	0.3	$	-	$	0.3	$	-
Cross-currency interest rate swaps		3.4		-		3.4		-
Interest rate swaps		10.5		-		10.5		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		1.5		-		1.5		-
Contingent payments related to acquisitions		35.6		-		-		35.6
Total Liabilities	$	51.3	$	-	$	15.7	$	35.6

We value our foreign currency forward contracts using a market approach based on foreign currency exchange rates obtained from active markets, and we perform ongoing assessments of counterparty credit risk.

We value our interest rate swaps using a market approach based on publicly available market yield curves and the terms of our swaps, and we perform ongoing assessments of counterparty credit risk. The valuation of our cross-currency interest rate swaps also includes consideration of foreign currency exchange rates.

In connection with the spinoff, we retained approximately 5.1 million unregistered common shares of ZimVie, representing 19.7 percent of ZimVie's common stock on the separation date. At each reporting date, we value these shares based upon the market share price of ZimVie less a discount to reflect that the shares are not registered.

The value of the Forward Exchange Agreement is based upon the historical volume-weighted average price of ZimVie stock since the inception of the agreement with simulations of how the ZimVie stock might perform until the settlement date.

Contingent payments related to acquisitions consist of sales-based payments, and are valued using discounted cash flow techniques. The fair value of sales-based payments is based upon probability-weighted future revenue estimates, and increases as revenue estimates increase.

The following table provides a reconciliation of the beginning and ending balances of items related to continuing operations measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) (in millions):

	Level 3 - Liabilities
Contingent payments related to acquisitions
Beginning balance December 31, 2021	$	35.6
Change in estimates		(7.5	)
Settlements		(7.0	)
Ending balance September 30, 2022	$	21.1

Changes in estimates for contingent payments related to acquisitions included in continuing operations are recognized in the Acquisition, integration, divestiture and related line item on our condensed consolidated statements of earnings.