Fair Value

3 Months Ended

Mar. 31, 2020

The following table summarizes financial instruments measured at fair value, on a recurring basis, as of March 31, 2020:



(in millions)	Total		Level 1		Level 2		Level 3
Assets
Available-for-sale debt securities (Note 3)	$	2.8	$	—	$	2.8	$	—
Total	$	2.8	$	—	$	2.8	$	—

Liabilities
Interest rate swaps and caps (Notes 7 and 8)	$	95.9	$	—	$	95.9	$	—
Contingent consideration (Note 6)	7.5		—		—		7.5
Total	$	103.4	$	—	$	95.9	$	7.5

Level 2 instruments consist of foreign exchange-traded corporate bonds, interest rate caps, and interest rate swaps. Foreign exchange-traded corporate bonds are available-for-sale securities valued at their current quoted prices. These securities mature between 2027 and 2033. The interest rate caps fair values are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps in conjunction with the cash payments related to financing the premium of the interest rate caps. The interest rate swaps fair values are determined using the market standard methodology of discounting the future expected net cash receipts or payments that would occur if variable interest rates rise above or fall below the fixed rates of the swaps. The variable interest rates used in the calculations of projected receipts on both the caps and swaps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

Unrealized gains and losses on available-for-sale debt securities are included in other comprehensive income. There were no significant realized or unrealized gains or losses on any of our securities for any of the periods presented.

Level 3 instruments consist of contingent consideration obligations related to companies we have acquired with remaining maximum payouts totaling $7.5 million. These obligations are contingent upon meeting certain quantitative or qualitative performance metrics through 2019, and are included in other current liabilities on our balance sheet. The fair values of the obligations are determined based on an income approach, using our expectations of the future expected earnings of the acquired entities. We assess the fair value of these obligations each reporting period with any changes reflected as gains or losses in selling, general and administrative expenses in the consolidated statements of income. During the three months ended March 31, 2020, we recorded additional expense of $0.3 million as a result of changes to the fair value of these obligations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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