FAIR VALUE MEASUREMENT
 9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT

The Company classifies and discloses assets and liabilities carried at fair value in one of the following three categories:

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.
Items Measured at Fair Value

The carrying value of cash and cash equivalents, accounts receivable and short-term debt approximate fair value because of the short-term maturity of the instruments.




Derivatives

The Company executes financial derivative contracts for the purpose of mitigating risk exposure that is generated from our normal operations. These derivatives consist of natural gas swaps, interest rate swaps, cross currency swaps, and foreign exchange forward contracts, all of which are over-the-counter and not traded through an exchange. The Company uses widely accepted valuation tools to determine fair value, such as discounting cash flows to calculate a present value for the derivatives. The models use Level 2 inputs, such as forward curves and other commonly quoted observable transactions and prices.
Contingent Consideration

In connection with our third quarter 2014 acquisition, we recorded contingent consideration pertaining to amounts payable to the former owners related to a put/call option that is to be determined based on a multiple of 2016 EBITDA that contains a cap of $7 million and a floor of $4 million. The valuation of contingent consideration uses assumptions we believe would be made by a market participant and has been based on a significant input not observable in the market. The significant unobservable input used in the fair value measurement of our contingent consideration includes our internal forecast of business performance, which is a Level 3 input. The fair value of the put/call as of September 30, 2015 is $6 million and has been recorded in Other liabilities on the Consolidated Balance Sheet. The change in fair value of $1 million for the nine months ended September 30, 2015 was recognized in Interest expense, net on the Consolidated Statements of Earnings.

The following table summarizes the fair values and levels within the fair value hierarchy in which the fair value measurements fall as of September 30, 2015 (in millions):
 
Total
Measured at
Fair Value
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
Derivative assets
$
15

$
—

$
15

$
—

Liabilities:
 
 
 
 
Derivative liabilities
$
5

$
—

$
5

$
—

Contingent consideration
6

—

—

6

Total liabilities
$
11

$
—

$
5

$
6

The following table summarizes the fair values and levels within the fair value hierarchy in which the fair value measurements fall as of December 31, 2014 (in millions):
 
Total
Measured at
Fair Value
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
Derivative assets
$
1

$
—

$
1

$
—

Liabilities:
 
 
 
 
Derivative liabilities
$
8

$
—

$
8

$
—

Contingent consideration
5

—

—

5

Total liabilities
$
13

$
—

$
8

$
5



Items Disclosed at Fair Value
Long-term debt
The following table shows the fair value of the Company’s long-term debt as calculated based on quoted market prices for the same or similar issues (Level 2 input), or on the current rates offered to the Company for debt of the same remaining maturities:
 
September 30, 2015
December 31, 2014
6.50% senior notes, net of discount, due 2016
104
%
109
%
9.00% senior notes, net of discount, due 2019
118
%
119
%
4.20% senior notes, net of discount, due 2022
102
%
101
%
4.20% senior notes, net of discount, due 2024
100
%
99
%
7.00% senior notes, net of discount, due 2036
118
%
124
%

The Company determined that the book value of the remaining long-term debt instruments approximates market value.