Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents the Company’s non-pension financial assets and liabilities which are measured at fair value on a recurring basis as of:


	June 30, 2014
(in millions of dollars)	Fair Value		Level 1		Level 2		Level 3
Assets
Foreign exchange forward contracts ⁽²⁾	$	0.1	$	—	$	0.1	$	—
Mutual funds ⁽¹⁾		2.3		2.3		—		—
Equity ⁽¹⁾		0.1		0.1		—		—

Total	$	2.5	$	2.4	$	0.1	$	—


Liabilities
Warrants		20.0		—		—		20.0
Foreign exchange forward contracts ⁽²⁾		2.8		—		2.8		—

Total	$	22.8	$	—	$	2.8	$	20.0

⁽¹⁾	Included in other current and noncurrent assets on the accompanying condensed consolidated balance sheets.

⁽²⁾	See Note 6 for further information.

The following table presents the Company’s non-pension financial assets and liabilities which are measured at fair value on a recurring basis as of:


	December 31, 2013
(in millions of dollars)	Fair Value		Level 1		Level 2		Level 3
Assets
Mutual funds ⁽¹⁾	$	2.3	$	2.3	$	—	$	—
Equity ⁽¹⁾		0.1		0.1		—		—

Total	$	2.4	$	2.4	$	—	$	—

Liabilities
Warrants		15.6		—		—		15.6
Foreign exchange forward contracts ⁽²⁾		3.7		—		3.7		—

Total	$	19.3	$	—	$	3.7	$	15.6

⁽¹⁾	Included in other current and noncurrent assets on the accompanying condensed consolidated balance sheets.

⁽²⁾	See Note 6 for further information.

Reconciliation of Changes in Fair Value of Warrants

The following table sets forth a reconciliation of changes in the fair value of warrants that is based on significant unobservable inputs for the six months ended June 30, 2014:


(in millions of dollars)

Fair value of warrants at January 1, 2014	$	15.6
Unrealized change during the period		4.4

Fair value of warrants at June 30, 2014	$	20.0

The following table sets forth a reconciliation of changes in the fair value of warrants that is based on significant unobservable inputs for the year ended December 31, 2013:


(in millions of dollars)

Fair value of warrants at January 1, 2013	$	9.5
Unrealized change during period		6.1

Fair value of warrants at December 31, 2013	$	15.6

Warrants [Member]

Significant Unobservable Inputs In Warrant Valuation

The following table summarizes the significant unobservable inputs in the warrant valuation:


(in millions of dollars)	Fair Value as of June 30, 2014		Valuation Technique	Unobservable Input	Range (Weighted Average)

Warrants	$	20.0	Option Pricing	Discount Rate	11.75% - 12.75% (12.25%)
				Volatility ⁽¹⁾	55.0% - 65.0%
				EBITDA Multiples ⁽²⁾	7.0x - 8.0x (7.5)
				Enterprise Value	$891.9 - $1,016.4 ($954.1)
				Liquidity Event ⁽³⁾	7 to 10 years (7 years)

⁽¹⁾	Volatility was 55.0% for the Kenner Equity Management, LLC (“Kenner”) warrants and 65.0% for MIHI LLC (“Macquarie”) warrants.

⁽²⁾	Before control premium.

⁽³⁾	Not based on weighted average.

The following table summarizes the significant unobservable inputs in the warrant valuation:


(in millions of dollars)	Fair Value as of December 31, 2013		Valuation Technique	Unobservable Input	Range (Weighted Average)

Warrants	$	15.6	Option Pricing	Discount Rate	12.25% - 13.25% (12.75%)
				Volatility ⁽¹⁾	60.0% - 65.0%
				EBITDA Multiples ⁽²⁾	6.25 x to 7.25 x (6.75)
				Enterprise Value	$799.4 - $915.4 ($857.4)
				Liquidity Event ⁽³⁾	7 to 10 years (7 years)

⁽¹⁾	Volatility was 60.0% for the Kenner warrants and 65.0% for Macquarie warrants.

⁽²⁾	Before control premium.

⁽³⁾	Not based on weighted average.

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

+ References+ Details

Dynacast International Inc. 10-Q