v3.24.3
Fair Value Measurement of Assets and Liabilities
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement of Assets and Liabilities

10. Fair Value Measurement of Assets and Liabilities

The following financial assets and liabilities are recorded at fair value on a recurring basis (in millions):

 

 

As of September 30, 2024

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using:

 

Description

 

Recorded
Balance

 

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedges, current and long-term

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

28.3

 

 

$

-

 

 

$

28.3

 

 

$

-

 

Cross-currency interest rate swaps

 

 

18.2

 

 

 

-

 

 

 

18.2

 

 

 

-

 

Total Assets

 

$

46.5

 

 

$

-

 

 

$

46.5

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedges, current and long-term

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

4.4

 

 

$

-

 

 

$

4.4

 

 

$

-

 

Cross-currency interest rate swaps

 

 

66.2

 

 

 

-

 

 

 

66.2

 

 

 

-

 

Interest rate swaps

 

 

121.8

 

 

 

-

 

 

 

121.8

 

 

 

-

 

Contingent consideration related to acquisitions

 

 

142.7

 

 

 

-

 

 

 

-

 

 

 

142.7

 

Total Liabilities

 

$

335.1

 

 

$

-

 

 

$

192.4

 

 

$

142.7

 

 

 

 

As of December 31, 2023

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using:

 

Description

 

Recorded
Balance

 

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedges, current and long-term

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

54.4

 

 

$

-

 

 

$

54.4

 

 

$

-

 

Cross-currency interest rate swaps

 

 

5.4

 

 

 

-

 

 

 

5.4

 

 

 

-

 

Derivatives not designated as hedges, current and long-term

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

 

0.4

 

 

 

-

 

 

 

0.4

 

 

 

-

 

Total Assets

 

$

60.2

 

 

$

-

 

 

$

60.2

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedges, current and long-term

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

3.7

 

 

$

-

 

 

$

3.7

 

 

$

-

 

Cross-currency interest rate swaps

 

 

68.1

 

 

 

-

 

 

 

68.1

 

 

 

-

 

Interest rate swaps

 

 

144.7

 

 

 

-

 

 

 

144.7

 

 

 

-

 

Derivatives not designated as hedges, current and long-term

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

 

1.6

 

 

 

-

 

 

 

1.6

 

 

 

-

 

Contingent consideration related to acquisitions

 

 

141.7

 

 

 

-

 

 

 

-

 

 

 

141.7

 

Total Liabilities

 

$

359.8

 

 

$

-

 

 

$

218.1

 

 

$

141.7

 

We value our foreign currency forward contracts using a market approach based on foreign currency exchange rates obtained from active markets, and we perform ongoing assessments of counterparty credit risk.

We value our interest rate swaps using a market approach based on publicly available market yield curves and the terms of our swaps, and we perform ongoing assessments of counterparty credit risk. The valuation of our cross-currency interest rate swaps also includes consideration of foreign currency exchange rates.

Contingent payments related to acquisitions consist of sales-based payments and regulatory milestones, and are valued using discounted cash flow techniques. The fair value of sales-based payments is based upon significant unobservable inputs such as probability-weighted future revenue estimates and simulating the numerous potential outcomes, and changes as revenue estimates increase or decrease. The fair value of the regulatory milestones is based on the probability of success in obtaining the specified regulatory approval.

Contingent payments related to the Embody acquisition are to be settled by issuance of our common stock and cash payments. The Embody acquisition is discussed in Note 7. During the nine-month period ended September 30, 2024, we issued 0.2 million shares of our common stock valued at $23.4 million and paid $1.5 million of cash for a commercial milestone related to the Embody acquisition. The fair value of common stock was determined to be $123.87 per share, which represented the average of our high and low stock prices on the settlement date. To minimize dilution from issuing shares for the milestone settlement, we repurchased 0.2 million shares of our common stock in February of 2024.

The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) (in millions):

 

 

 

Level 3 - Liabilities

 

Contingent payments related to acquisitions

 

 

 

Beginning balance December 31, 2023

 

$

141.7

 

New contingent consideration related to acquisitions

 

 

26.5

 

Change in estimates

 

 

2.4

 

Settlements

 

 

(28.9

)

Foreign currency impact

 

 

1.0

 

Ending balance September 30, 2024

 

$

142.7

 

 

Changes in estimates for contingent payments related to acquisitions are recognized in the Acquisition, integration, divestiture and related line item on our condensed consolidated statements of earnings.