Fair Value Measurement

12 Months Ended

Dec. 31, 2020

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date. A three-level hierarchy is used for fair value measurements based upon the observability of the inputs to the valuation of an asset or liability as of the measurement date. Under the hierarchy, the highest priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1), followed by observable inputs (Level 2) and unobservable inputs (Level 3). A financial instrument's level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following is a description of the Company's valuation methodologies used to estimate the fair value for assets and liabilities:

Assets and liabilities that are measured at fair value on a recurring basis:

•Available-for-sale investments — For residential mortgage-backed securities issued by U.S. government agencies, fair value measures are obtained from an independent pricing service. As market quotes are generally not readily available or accessible for these specific securities, the pricing service measures fair value through the use of pricing models utilizing reported market quotes adjusted for observable inputs, such as market prices for comparable securities, spreads, prepayment speeds, yield curves and delinquency rates. Accordingly, these securities are classified as Level 2 financial instruments.

For asset-backed and other securities, which include investments in limited partnerships, market quotes are generally not available. The Company utilizes broker quotes to measure market value, if available. Because the inputs and assumptions that brokers use to develop prices are unobservable, valuations that are based on brokers' quotes are classified as Level 3. Also, the Company uses pricing services that utilize pricing models based on market observable and unobservable data. The observable inputs include quotes for comparable securities, yield curves, default indices, interest rates, historical prepayment speeds and delinquency rates. These pricing models also apply an inactive market adjustment as a significant unobservable input. Accordingly, asset-backed and other securities valued using third-party pricing models are classified as Level 3.

•Derivative financial instruments — Derivatives consist of forward contracts to manage income statement exposure to non-U.S. dollar exchange risk arising from the Company's assets and liabilities denominated in non-U.S. dollar currencies. The Company's forward contracts are well-established products, allowing the use of standardized models with market-based inputs. These models do not contain a high level of subjectivity, and the inputs are readily observable. Accordingly, the Company has classified its forward contracts as Level 2 financial instruments. See Note 7 — Derivative Financial Instruments for additional disclosure on the Company's forward contracts.

There were no transfers between Level 1 and Level 2, or transfers into or out of level 3 of the fair value hierarchy. The following table summarizes the Company's financial assets and liabilities measured at fair value by hierarchy level on a recurring basis:


(Amounts in millions)	Level 2		Level 3		Total
December 31, 2020
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities	$	3.0	$	—	$	3.0
Asset-backed and other securities	—		0.5		0.5
Forward contracts	0.1		—		0.1
Total financial assets	$	3.1	$	0.5	$	3.6
Financial liabilities:
Forward contracts	$	2.2	$	—	$	2.2

December 31, 2019
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities	$	3.6	$	—	$	3.6
Asset-backed and other securities	—		0.9		0.9
Forward contracts	—		—		—
Total financial assets	$	3.6	$	0.9	$	4.5
Financial liabilities:
Forward contracts	$	0.8	$	—	$	0.8

The following table provides a roll-forward of the asset-backed and other securities classified as Level 3, which are measured at fair value on a recurring basis for the years ended December 31:


(Amounts in millions)	2020		2019		2018
Beginning balance	$	0.9	$	1.2	$	1.4

Change in unrealized losses	(0.4)		(0.3)		(0.2)

Ending balance	$	0.5	$	0.9	$	1.2

Assets and liabilities that are disclosed at fair value — Debt and interest-bearing investments are carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The fair value of the first lien credit facility is estimated using an observable market quotation (Level 2). The fair value of the second lien credit facility is estimated using unobservable market inputs (Level 3), including broker quotes for comparable traded securities and yield curves.

The following table provides the carrying value and fair value for the first and second lien credit facilities for the years ended December 31:


(Amounts in millions)	2020		2019
	Carrying value	Fair value	Carrying value	Fair value
First lien credit facility	$635.3	$635.3	$641.8	$577.6
Second lien credit facility	$254.6	$254.3	$251.4	$236.7

The carrying amounts for the Company's cash and cash equivalents, settlement cash and cash equivalents, receivables, interest-bearing investments and payment service obligations approximate fair value as of December 31, 2020 and 2019.

The Company records the investments in its Pension Plan trust at fair value. The majority of the Pension Plan's investments is common/collective trusts held by the Pension Plan's trustee. The fair values of the Pension Plan's investments are determined based on the current market values of the underlying assets. See Note 1 1 — Pension and Other Benefits for additional disclosure of investments held by the Pension Plan.

Assets and liabilities measured at fair value on a non-recurring basis — Assets and liabilities that are measured at fair value on a non-recurring basis relate primarily to the Company's property and equipment, goodwill and other intangible assets, which are remeasured only in the event of an impairment.

Fair value remeasurements are normally based on significant unobservable inputs (Level 3). Tangible and intangible asset fair values are derived using accepted valuation methodologies. If it is determined an impairment has occurred, the carrying value of the asset is reduced to fair value with a corresponding charge to "Other expenses" in the Consolidated Statements of Operations.