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Fair Value Measurements

12 Months Ended

Dec. 31, 2020

2.	Fair Value Measurements

Fair Value Hierarchy

Accounting guidance on fair value measurements and disclosures establishes a hierarchy that prioritizes the inputs used to measure fair value (generally, assumptions that market participants would use in pricing an asset or liability) based on the quality and reliability of the information provided by the inputs, as follows:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Fair Values of Other Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s other financial instruments at December 31, 2020 and December 31, 2019:

		December 31, 2020						December 31, 2019
	Input	Carrying			Fair			Carrying			Fair
	Level	Amount			Value			Amount			Value
Financial Assets:
Cash equivalents	Level 1	$	73.7		$	73.7		$	65.3		$	65.3
Financial Liabilities:
Short-term borrowings	Level 2		351.4			351.4			252.9			252.9
Term loan due May 1, 2022	Level 2		300.0			300.0			300.0			300.0
2.45% Senior notes due August 1, 2022	Level 2		299.9			310.1			299.8			302.6
2.875% Senior notes due October 1, 2022	Level 2		399.9			416.6			399.9			408.2
3.15% Senior notes due August 1, 2027	Level 2		424.7			472.4			424.7			438.9
3.95% Senior notes due August 1, 2047	Level 2		397.4			502.2			397.3			427.1
Interest Rate Swap Lock Agreement asset (liability)	Level 2		(57.0	)		(57.0	)		(29.5	)		(29.5	)
Business Acquisition Liabilities	Level 3		118.0			118.0			206.2			206.2

The Company recognizes transfers between input levels as of the actual date of the event. There were no transfers between input levels during the twelve months ended December 31, 2020.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments reflected in the Consolidated Balance Sheets:

Cash Equivalents: Cash equivalents consist of highly liquid short-term investments and term bank deposits, which mature within three months. The estimated fair value of the Company’s cash equivalents approximates their carrying value.

Short-Term Borrowings: The carrying amounts of the Company’s unsecured lines of credit and commercial paper issuances approximates fair value because of their short maturities and variable interest rates.

Senior Notes: The Company determines the fair value of its senior notes based on their quoted market value or broker quotes, when possible. In the absence of observable market quotes, the notes are valued using non-binding market consensus prices that the Company seeks to corroborate with observable market data.

Interest Rate Swap Lock Agreement: The Company entered into interest rate swap lock agreements to hedge the risk of changes in the interest payments attributable to changes in the benchmark U.S. Dollar London Interbank Offered Rate (“LIBOR”) interest rate associated with anticipated issuances of debt. The notional amount of the interest rate swap locks is $300.0. These interest rate swap lock agreements have been designated as hedges of the changes in fair value of the underlying debt obligation attributable to changes in interest rates and are accounted as fair value hedges. The liability increased by $27.5 during the year ended December 31, 2020 primarily due to lower current and projected interest rates and is recorded in Deferred and Other Long-term Liabilities with the offset to Accumulated Other Comprehensive Loss and Deferred Taxes.

Business Acquisition Liabilities: The business acquisition liabilities represent the estimated fair value of additional future contingent consideration payable for acquisitions of businesses that included contingent consideration clauses. The fair value of business acquisition liabilities are evaluated on an ongoing basis and are based on management estimates and entity-specific assumptions which are considered Level 3 inputs. As of December 31, 2020, the Company had a business acquisition liability related to the Flawless Acquisition of $98.0 and

also a $20.0 liability in connection with the Zicam acquisition which is payable five years from the closing. As of December 31, 2019, the Company had business acquisition liabilities related to the Flawless Acquisition of $192.0 and related to the Agro Acquisition of $14.2. In April 2020, a payment of $14.5 was paid to settle the Agro Acquisition liability. As of December 31, 2019, the Agro Acquisition liability was recorded within Accounts Payable and Accrued Expenses.

The initial fair value of the Passport business acquisition liability was $7.3. That amount was first established in the purchase allocation after Passport was acquired on March 8, 2018. During the second quarter of 2019, the Company recorded a reduction in fair value of the entire $7.3 Passport business acquisition liability based on the revised valuation due to updated sales forecasts. There was no change in the business acquisition liability for the year ended December 31, 2020.

The initial fair value of the Flawless business acquisition liability was $182.0. That amount was first established in the purchase allocation after Flawless was acquired on May 1, 2019 and has since been decreased by $84.0 to $98.0 based on the revised valuation due to updated sales forecasts. The $84.0 reduction of SG&A expense was recorded within the Consumer Domestic and Consumer International segments. The Flawless business acquisition liability is expected to be paid in the first half of 2022. See Note 15 for further details.

The fair value measurement of the business acquisition liabilities are determined using Level 3 inputs. The fair value is determined using the present value of the weighted probabilities of the possible payments due to randomly changing revenue growth. These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the fair value of the business acquisition liabilities. Changes in the fair value of the business acquisition liabilities are recorded in general and administrative expenses in the accompanying consolidated statements of operations.

Other: The carrying amounts of accounts receivable, and accounts payable and accrued expenses, approximated estimated fair values as of December 31, 2020 and 2019.

- 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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