Financial Instruments and Fair Value Measurements

Interest Rate Swaps

The Company uses interest rate swap agreements to minimize its exposure to interest rate fluctuations on variable rate debt borrowings. Interest rate swaps involve the exchange of fixed and variable rate interest payments and do not represent an actual exchange of the underlying notional amounts between parties. The Company has one forward starting non-amortizing interest rate swap with a total notional amount of $300.0 million to convert variable rate debt to fixed rate debt. The interest rate swap became effective in June 2018 and expires in June 2023. The interest rate swap results in interest payments based on an average fixed rate of 2.938% plus the applicable margin per the requirements in the Credit Agreement (see Note 8). During the next twelve months, the Company estimates that $1.2 million will be reclassified as an increase to interest expense.

The Company has agreements with its derivative financial instrument counter-parties that contain provisions providing that if the Company defaults on the indebtedness associated with its derivative financial instruments, then the Company could also be declared in default on its derivative financial instrument obligations. The Company minimizes this risk by evaluating the creditworthiness of our counter-parties, which are limited to major banks and financial institutions.

Upon inception, the interest rate swap was designated as a cash flow hedge under ASC 815, with gains and losses, net of tax, measured on an ongoing basis recorded in accumulated other comprehensive income (loss). The fair value of the interest rate swap is categorized as Level 2 in the fair value hierarchy as it is based on well-recognized financial principles and available market data. As of December 31, 2018, the fair value of the interest rate swap liability was $5.0 million and is recorded in the Consolidated Balance Sheets as of December 31, 2018 as follows:



				December 31, 2018
(dollars in millions)	Balance Sheet Location	December 31, 2018		Quoted Prices in active markets Level 1		Significant observable inputs Level 2		Significant unobservable inputs Level 3
Liabilities:
Interest Rate Swap	Other noncurrent liabilities	$	3.8	$	—	$	3.8	$	—
Interest Rate Swap	Other current liabilities	$	1.2	$	—	$	1.2	$	—

The amount of losses recognized in Accumulated Other Comprehensive Income ("AOCI") net of reclassifications into earnings is as follows:



	Year Ended
	December 31,
(dollars in millions)	2018
Interest Rate Swap	$	(5.0	)

The amount of losses reclassified from AOCI into earnings is as follows:



		Year Ended
		December 31,
(dollars in millions)	Statement of Operations Location	2018
Interest Rate Swap	Interest Expense	$	(1.2	)

Disclosure on Financial Instruments

The carrying values of the Company's financial instruments approximate the estimated fair values as of December 31, 2018 and December 31, 2017, except for the Company's long-term debt and other financing arrangements. The carrying and fair values of these items are as follows:



	December 31, 2018				December 31, 2017
(dollars in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current portion*	$	1,880.0	$	1,673.6	$	1,687.1	$	1,687.5
Other financing arrangements	44.6		43.6		—		—
*Excludes capital leases and note issuance costs

The fair value of our long-term debt was based on closing or estimated market prices of the Company’s debt at December 31, 2018 and December 31, 2017, which is considered Level 2 of the fair value hierarchy. The fair value of other financing arrangements was calculated using a discounted cash flow model that incorporates current borrowing rates for obligations of similar duration, which is considered Level 3 of the fair value hierarchy. As of December 31, 2018, the current borrowing rate was estimated by applying the Company's credit spread to the risk-free rate for a similar duration borrowing.

Non-Recurring Fair Value Measurements

Certain long-lived assets, intangibles, and goodwill may be required to be measured at fair value on a non-recurring basis subsequent to their initial measurement. These non-recurring fair value measurements generally occur when evidence of impairment has occurred. In 2016 and 2018, no assets were remeasured at fair value. During 2017, the following assets were remeasured at fair value in connection with impairment tests:



		Fair Value Measurements Using
(dollars in millions)	Year Ended December 31, 2017	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Impairment Losses
Equity method investment:
Equity method investment	—	—	—	—	$	(4.7	)
Impairment of equity method investment					$	(4.7	)

In the third quarter of 2017, an equity method investment recorded within “Other noncurrent assets” in the Consolidated Balance Sheets was remeasured at fair value due to a triggering event identified by management. As a result of the fair value analysis, the entire carrying value of $4.7 million was impaired and recorded to "Other expense (income), net" on the Consolidated Statements of Operations. This fair value measurement is considered a Level 3 measurement due to the significance of its unobservable inputs.