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Fair Value of Assets and Liabilities | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
Fair Value of Assets and Liabilities | Fair Value of Assets and Liabilities For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair value measurement as follows: Level 1—Valuations based on unadjusted quoted prices for identical assets or liabilities in active markets; Level 2—Valuations based upon quoted prices for similar instruments, prices for identical or similar instruments in markets that are not active, or model-derived valuations, all of whose significant inputs are observable, and Level 3—Valuations based upon one or more significant unobservable inputs . There were no transfers in or out of Level 1, Level 2 and Level 3 during the period. Following is a description of the valuation methodologies used for instruments measured at fair value and their classification in the valuation hierarchy. Cash Equivalents Cash equivalents primarily consist of money market funds, certificates of deposit, and short-term time deposits, which are held with institutions with sound credit ratings and are highly liquid. The Company classified cash equivalents as Level 1 and are valued at cost which approximates fair value. Investments in Equity Securities Investments in equity securities listed on a national market or exchange are valued at the last sales price and classified within Level 1 of the valuation hierarchy and recorded in Investments and Other long-term assets. Derivatives Designated as Hedging Instruments On May 12, 2022, the Company entered into an interest rate swap agreement to manage interest rate risk exposure, effectively converting the interest rate on the Company's SOFR based floating-rate loans to a fixed-rate. The interest rate swap, with a notional value of $200 million, was designated as a cash flow hedge against the variability of cash flows associated with the Company's SOFR based loans scheduled to mature on June 30, 2027. The fair value of the interest rate swap was valued using an independent third-party valuation model. Pursuant to this model, c hanges in fair value of derivatives that are designated as cash flow hedges are deferred in accumulated other comprehensive loss u ntil the underlying transactions are recognized in earnings. The primary inputs into the valuation of the interest rate swap are interest yield curves, interest rate volatility, credit risk, credit spreads and other market information. The interest rate swap is classified within Level 2 of the fair value hierarchy, since all significant inputs are corroborated by market observable data. The use of derivatives creates exposure to credit risk relating to potential losses that could be recognized in the event that the counterparties to these instruments fail to perform their obligations under the contracts. The Company seeks to minimize this risk by limiting our counterparties to major financial institutions with acceptable credit ratings and monitoring the total value of positions with individual counterparties. In the event of a default by one of our counterparties, the Company may not receive payments provided for under the terms of our derivatives. Derivatives Not Designated as Hedging Instruments On July 14, 2022, the Company entered into a foreign currency exchange forward contract to mitigate the currency fluctuation risk between the Euro and U.S. dollar on its Euro denominated Senior Notes, Series A due 2023. The notional value of the forward contract at July 14, 2022 was €117.0 million and expires on December 7, 2023. The foreign currency contract was not designated as a hedge instrument and is marked to market on a monthly basis. As a result, changes in fair value are reported in Foreign exchange loss in the Condensed Consolidated Statements of Operations. The fair value of the foreign currency forward contract was valued using market exchange rates by a third party and classified as a Level 2 input under the fair value hierarchy. As of September 30, 2023 and December 31, 2022, the fair values of our derivative financial instrument and their classifications on the Condensed Consolidated Balance Sheets were as follows:
(in thousands) | Consolidated Balance Sheet Classification |  | September 30, 2023 |  | December 31, 2022 |  |
Derivatives Designated as Hedging Instruments |  |  |  |  |  |  |
Interest rate swap agreement: |  |  |  |  |  |  |
Designated as cash flow hedge | Prepaid expenses and other current assets |  | $ | 4,963 |  |  | $ | 3,939 |  |  |
| Other long-term assets |  | $ | 6,533 |  |  | $ | 4,740 |  |  |
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |  |
Foreign exchange forward contract | Prepaid expenses and other current assets |  | $ | 2,862 |  |  | $ | 6,186 |  |  |
The pre-tax (gains) losses recognized on derivative financial instruments in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and October 1, 2022 were as follows:
|  |  |  | Three Months Ended |  | Nine Months Ended
(in thousands) |  | Classification of (Gain) Loss Recognized in the Condensed Consolidated Statements of Operations |  | September 30, 2023 |  | October 1, 2022 |  | September 30, 2023 |  | October 1, 2022
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |  |  |
Interest rate swap agreement |  | Interest expense, net |  | $ | (1,252) |  |  | $ | 314 |  |  | $ | (3,246) |  |  | $ | 335 |
Derivatives Not Designated as Hedging Instruments |  |  |  |  |  |  |  |  |  |
Foreign exchange forward contract |  | Foreign exchange loss |  | $ | 4,310 |  |  | $ | 3,209 |  |  | $ | 3,226 |  |  | $ | 3,209 |
The pre-tax gains recognized on derivative financial instruments in the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and October 1, 2022 was as follows:
|  | Three Months Ended |  | Nine Months Ended
(in thousands) |  | September 30, 2023 |  | October 1, 2022 |  | September 30, 2023 |  | October 1, 2022
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |
Interest rate swap agreement |  | $ | (2,034) |  |  | $ | (10,012) |  |  | $ | (2,817) |  |  | $ | (9,300) |
The pre-tax gain of $5.0 million from accumulated other comprehensive loss to earnings is expected to be recognized during the next twelve months. Mutual Funds The Company has a non-qualified Supplemental Retirement and Savings Plan which provides additional retirement benefits for certain management employees and named executive officers by allowing participants to defer a portion of their annual compensation. The Company maintains accounts for participants through which participants make investment elections. The marketable securities are classified as Level 1 under the fair value hierarchy as they are maintained in mutual funds with readily determinable fair value and recorded in Other long-term assets. There we re no changes during the quarter ended September 30, 2023 to the Company’s valuation techniques used to measure asset and liability fair values o n a recurring basis. As of September 30, 2023 and December 31, 2022, the Company did not hold any non-financial assets or liabilities that are required to be measured at fair value on a recurring basis. The following table presents assets measured at fair value by classification within the fair value hierarchy as of September 30, 2023:
|  | Fair Value Measurements Using |  |
(in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Cash equivalents |  | $ | 427,671 |  |  | $ | — |  |  | $ | — |  |  | $ | 427,671 |
Investments in equity securities |  | 9,703 |  |  | — |  |  | — |  |  | 9,703 |
Mutual funds |  | 18,192 |  |  | — |  |  | — |  |  | 18,192 |
Total |  | $ | 455,566 |  |  | $ | — |  |  | $ | — |  |  | $ | 455,566 |
The following table presents assets measured at fair value by classification within the fair value hierarchy as of December 31, 2022:
|  | Fair Value Measurements Using |  |
(in thousands) |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Cash equivalents |  | $ | 304,101 |  |  | $ | — |  |  | $ | — |  |  | $ | 304,101 |
Investments in equity securities |  | 10,653 |  |  | — |  |  | — |  |  | 10,653 |
Mutual funds |  | 14,094 |  |  | — |  |  | — |  |  | 14,094 |
Total |  | $ | 328,848 |  |  | $ | — |  |  | $ | — |  |  | $ | 328,848 |
In addition to the methods and assumptions used for the financial instruments recorded at fair value as discussed above, the following methods and assumptions are used to estimate the fair value of other financial instruments that are not marked to market on a recurring basis. The Company’s other financial instruments include cash and cash equivalents, short-term investments, accounts receivable and its long-term debt. Due to their short-term maturity, the carrying amounts of cash and cash equivalents, short-term investments and accounts receivable approximate their fair values. The Company’s revolving and term loan debt facilities' fair values approximate book value at September 30, 2023 and December 31, 2022, as the rates on these borrowings are variable in nature. The carrying value and estimated fair values of the Company’s Euro Senior Notes, Series A and Series B and USD Senior Notes, Series A and Series B, as of September 30, 2023 and December 31, 2022 were as follows:
|  | September 30, 2023 |  | December 31, 2022
(in thousands) |  | Carrying Value |  | Estimated Fair Value |  | Carrying Value |  | Estimated Fair Value
Euro Senior Notes, Series A due 2023 |  | $ | 123,605 |  |  | $ | 122,830 |  |  | $ | 124,716 |  |  | $ | 122,270 |
Euro Senior Notes, Series B due 2028 |  | 100,363 |  |  | 87,722 |  |  | 101,265 |  |  | 87,119 |
USD Senior Notes, Series B due 2027 |  | 100,000 |  |  | 92,866 |  |  | 100,000 |  |  | 93,764 |
USD Senior Notes, Series A due 2025 |  | 50,000 |  |  | 48,338 |  |  | 50,000 |  |  | 48,145 |
USD Senior Notes, Series B due 2030 |  | 125,000 |  |  | 109,188 |  |  | 125,000 |  |  | 112,028 |
USD Senior Notes, due 2032 |  | 100,000 |  |  | 86,977 |  |  | 100,000 |  |  | 90,131 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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