Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability is as follows:

•Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

Observable market data is required to be used in making fair value measurements when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2024:


In millions	Fair Value		Fair value measurements
			Level 1		Level 2		Level 3

Assets:
Derivative instruments	$	2.5	$	—	$	2.5	$	—

Liabilities:
Derivative instruments	8.9		—		8.9		—
Contingent consideration	61.2		—		—		61.2

The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2023:


In Millions	Fair Value		Fair value measurements
			Level 1		Level 2		Level 3

Assets:
Derivative instruments	$	4.1	$	—	$	4.1	$	—

Liabilities:
Derivative instruments	4.8		—		4.8		—
Contingent consideration	90.3		—		—		90.3

Derivative instruments include forward foreign currency contracts and instruments related to non-functional currency balance sheet exposures and commodity swaps. The fair value of the foreign exchange derivative instruments are determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable. The fair value of the commodity derivatives is valued under a market approach using published prices, where applicable, or dealer quotes.

The carrying values of cash and cash equivalents, short-term investments, accounts receivable and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. There have been no transfers between levels of the fair value hierarchy.

The Company agreed to two contingent consideration arrangements in connection with the acquisition of Nuvolo Technologies Corporation (Nuvolo) in November 2023. The first contingent consideration arrangement, payable of up to $90.0 million in cash, is based on the attainment of key revenue targets from November 2, 2023 through April 4, 2025. If the first contingent consideration targets are met, a second contingent consideration arrangement with no maximum earnout is available to the sellers based on revenues in excess of the initial targets attained from a specified customer contract through April 4, 2025.

The Company agreed to a contingent consideration arrangement in connection with the acquisition of Farrar Scientific Corporation in October 2021, conditioned on the attainment of key financial targets during the period of January 1, 2022 through December 31, 2024. These targets were not met and no payment was made.

Each quarter, the Company evaluates the fair value of the liability as assumptions change and any non-cash adjustments are recorded in Selling and administrative expenses in the Consolidated Statements of Earnings. Contingent consideration related to acquisitions are measured at fair value using Level 3 unobservable inputs. The fair value of the contingent consideration is determined using the Monte Carlo simulation model based on revenue projections during the earnout period, implied revenue volatility and a risk adjusted discount rate.

The changes in the fair value of the Company's Level 3 liabilities during the years ended December 31, 2024 and 2023 are as follows:


In millions	2024		2023
Balance at beginning of period	$	90.3	$	49.3
Fair value of contingent consideration recorded in connection with acquisitions	—		90.3
Change in fair value of contingent consideration	(25.0)		(49.3)
Measurement period adjustment	(4.1)		—
Balance at end of period	$	61.2	$	90.3

The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the contingent consideration at December 31, 2024: