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Fair Value of Financial Instruments

9 Months Ended

Oct. 31, 2020

FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. U.S. GAAP prescribes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities, which are considered to be most reliable.

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

Level 3 – Unobservable inputs reflecting the reporting entity's own assumptions, which require the most judgment.

The Company's derivative instruments are considered Level 2 instruments for the purpose of determining fair value. The Company's foreign exchange forward contracts, as well as its put option contracts and cross-currency swaps, are primarily valued using the appropriate foreign exchange spot rates. The Company's precious metal forward contracts and collars are primarily valued using the relevant precious metal spot rate. For further information on the Company's hedging instruments and program, see "Note 9. Hedging Instruments."

Financial assets and liabilities carried at fair value at October 31, 2020 are classified in the table below in one of the three categories described above:


	Estimated Fair Value						Total Fair Value
(in millions)	Level 1		Level 2		Level 3
Financial assets

Marketable securities a	$	38.8	$	—	$	—	$	38.8
Derivatives designated as hedging instruments:
Precious metal forward contracts b	—		14.5		—		14.5

Foreign exchange forward contracts b	—		0.2		—		0.2
Cross-currency swaps b	—		3.6		—		3.6
Derivatives not designated as hedging instruments:
Precious metal forward contracts b	—		—		—		—
Foreign exchange forward contracts b	—		1.5		—		1.5
Total financial assets	$	38.8	$	19.8	$	—	$	58.6


	Estimated Fair Value						Total Fair Value
(in millions)	Level 1		Level 2		Level 3
Financial liabilities
Derivatives designated as hedging instruments:
Precious metal forward contracts c	$	—	$	2.6	$	—	$	2.6

Foreign exchange forward contracts c	—		3.7		—		3.7
Cross-currency swaps c	—		0.2		—		0.2
Derivatives not designated as hedging instruments:
Precious metal forward contracts c	—		1.4		—		1.4
Foreign exchange forward contracts c	—		3.2		—		3.2
Total financial liabilities	$	—	$	11.1	$	—	$	11.1

Financial assets and liabilities carried at fair value at January 31, 2020 are classified in the table below in one of the three categories described above:


	Estimated Fair Value						Total Fair Value
(in millions)	Level 1		Level 2		Level 3
Financial assets
Time deposits d	$	22.7	$	—	$	—	$	22.7
Marketable securities a	39.3		—		—		39.3
Derivatives designated as hedging instruments:
Precious metal forward contracts b	—		13.0		—		13.0

Foreign exchange forward contracts b	—		2.7		—		2.7
Cross-currency swaps b	—		2.9		—		2.9
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts b	—		2.1		—		2.1
Total financial assets	$	62.0	$	20.7	$	—	$	82.7


	Estimated Fair Value						Total Fair Value
(in millions)	Level 1		Level 2		Level 3
Financial liabilities
Derivatives designated as hedging instruments:
Precious metal forward contracts c	$	—	$	0.2	$	—	$	0.2

Foreign exchange forward contracts c	—		0.5		—		0.5
Cross-currency swaps c	—		1.9		—		1.9
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts c	—		2.9		—		2.9
Total financial liabilities	$	—	$	5.5	$	—	$	5.5

Financial assets and liabilities carried at fair value at October 31, 2019 are classified in the table below in one of the three categories described above:


	Estimated Fair Value						Total Fair Value
(in millions)	Level 1		Level 2		Level 3
Financial assets
Time deposits d	$	40.0	$	—	$	—	$	40.0
Marketable securities a	38.3		—		—		38.3
Derivatives designated as hedging instruments:
Precious metal forward contracts b	—		9.6		—		9.6
Foreign exchange forward contracts b	—		2.4		—		2.4
Cross-currency swaps b	—		1.3		—		1.3
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts b	—		1.5		—		1.5
Total financial assets	$	78.3	$	14.8	$	—	$	93.1


	Estimated Fair Value						Total Fair Value
(in millions)	Level 1		Level 2		Level 3
Financial liabilities
Derivatives designated as hedging instruments:
Precious metal forward contracts c	$	—	$	1.0	$	—	$	1.0
Foreign exchange forward contracts c	—		0.6		—		0.6
Cross-currency swaps c	—		4.2		—		4.2
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts c	—		3.8		—		3.8
Total financial liabilities	$	—	$	9.6	$	—	$	9.6

aIncluded within Other assets, net.

bIncluded within Prepaid expenses and other current assets or Other assets, net based on the maturity of the contract.

cIncluded within Accounts payable and accrued liabilities or Other long-term liabilities based on the maturity of the contract.

dIncluded within Short-term investments.

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values due to the short-term maturities of these assets and liabilities. The fair value of debt with variable interest rates approximates carrying value and is measured using Level 2 inputs. The fair value of debt with fixed interest rates was determined using the quoted market prices of debt instruments with similar terms and maturities, which are considered Level 2 inputs. The total carrying value of short-term borrowings and long-term debt was approximately $1.4 billion and $1.0 billion at October 31, 2020 and 2019, respectively, and the corresponding fair value was approximately $1.6 billion and $1.1 billion at October 31, 2020 and 2019, respectively.

- 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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