Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Measurements

Fair Value Measurements

Note 5—Fair Value Measurements

Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. These requirements establish market or observable inputs as the preferred source of values. Assumptions based on hypothetical transactions are used in the absence of market inputs. The Company does not have any non-financial instruments accounted for at fair value on a recurring basis.

The valuation techniques required are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1         Quoted prices for identical instruments in active markets.

Level 2         Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3         Significant inputs to the valuation model are unobservable.

The Company believes that the assets or liabilities subject to such standards with fair value disclosure requirements are primarily debt instruments, pension plan assets, short-term investments, derivative instruments and contingent consideration payments. Each of these assets and liabilities is discussed below, with the exception of debt instruments and pension plan assets, which are covered in Note 4 and Note 9, respectively, herein. Substantially all of the Company’s short-term investments consist of certificates of deposit with original maturities of twelve months or less and as such, are considered as Level 1 in the fair value hierarchy as they are traded in active markets for identical assets. The carrying amounts of these instruments, the majority of which are in non-U.S. bank accounts, approximate their fair value. The Company’s derivative instruments represent foreign exchange forward contracts, which are valued using bank quotations based on market observable inputs such as forward and spot rates and are therefore classified as Level 2 in the fair value hierarchy. The contingent consideration payment related to the SSI acquisition is valued using Level 3 unobservable inputs, such as probability weighted payout projections, within the fair value hierarchy. The impact of the

credit risk related to these financial assets is immaterial. The fair values of the Company’s financial and non-financial assets and liabilities subject to such standards at December 31, 2019 and December 31, 2018 are as follows:

	Fair Value Measurements
			Quoted Prices in		Significant		Significant
			Active Markets		Observable		Unobservable
			for Identical		Inputs		Inputs
2019	Total		Assets (Level 1)		(Level 2)		(Level 3)
Short-term investments	$	17.4	$	17.4	$	—	$	—
Forward contracts		(1.3)		—		(1.3)		—
Contingent consideration		(75.0)		—		—		(75.0)
Total	$	(58.9)	$	17.4	$	(1.3)	$	(75.0)
2018
Short-term investments	$	12.4	$	12.4	$	—	$	—
Forward contracts		2.4		—		2.4		—
Total	$	14.8	$	12.4	$	2.4	$	—

With the exception of the fair value of the assets acquired and liabilities assumed in connection with acquisition accounting, the Company does not have any other significant financial or non-financial assets and liabilities that are measured at fair value on a non-recurring basis.

The Company utilizes foreign exchange forward contracts to hedge exposure to foreign currency exchange rate fluctuations for certain transactions denominated in foreign currencies. As of December 31, 2019, the fair value of such contracts in the table above consisted primarily of two outstanding forward contracts, which fixed intercompany Korean Won and Great Britain Pound exposures into Hong Kong Dollar, with each expiring in 2020. These forward contracts are designated hedging instruments accounted for as cash flow hedges. For the years ended December 31, 2019 and 2018, the amounts recognized in Accumulated other comprehensive loss associated with foreign exchange forward contracts were not material. For the years ended December 31, 2019, 2018 and 2017, the amounts reclassified from Accumulated other comprehensive loss to foreign exchange gain (loss), included within Cost of sales in the accompanying Consolidated Statements of Income, were not material. The amount included in Accumulated other comprehensive loss as of December 31, 2019 associated with these forward contracts is expected to be reclassified into earnings within the next twelve months. As of December 31, 2019 and 2018, the fair values of the Company’s forward contracts are recorded within Prepaid expenses and other current assets, Other long-term assets, Other accrued expenses and Other long-term liabilities in the accompanying Consolidated Balance Sheets, depending on their value and remaining contractual period.