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Fair Value of Financial Assets and Liabilities
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities

Note 12 – Fair Value of Financial Assets and Liabilities

The Company measures and records certain assets and liabilities at fair value. A fair value hierarchy is used for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs), and the Company’s assumptions (unobservable inputs). The hierarchy consists of the following three levels:

Level 1 Inputs – Quoted market prices in active markets for identical assets or liabilities.

Level 2 Inputs – Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3 Inputs – Unobservable inputs that are not corroborated by market data.

The following table summarizes the Company’s assets and liabilities, recorded and measured at fair value, in the Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022:

Description

 

Balance as of
 June 30, 2023

 

 

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

 

 

Significant Other Observable Inputs
 (Level 2)

 

 

Significant Unobservable Inputs
 (Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

217

 

 

$

—

 

 

$

217

 

 

$

—

 

Total assets

 

$

217

 

 

$

—

 

 

$

217

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Supplemental profit sharing plan

 

 

7,688

 

 

 

—

 

 

 

7,688

 

 

 

—

 

Total liabilities

 

$

7,688

 

 

$

—

 

 

$

7,688

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Description

 

Balance as of December 31, 2022

 

 

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

 

 

Significant Other Observable Inputs
 (Level 2)

 

 

Significant Unobservable Inputs
 (Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

548

 

 

$

—

 

 

$

548

 

 

$

—

 

Total assets

 

$

548

 

 

$

—

 

 

$

548

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contracts

 

$

81

 

 

$

—

 

 

$

81

 

 

$

—

 

Supplemental profit sharing plan

 

 

7,299

 

 

 

—

 

 

 

7,299

 

 

 

—

 

Total liabilities

 

$

7,380

 

 

$

—

 

 

$

7,380

 

 

$

—

 

 

The Company operates internationally and enters into intercompany transactions denominated in foreign currencies. Consequently, the Company is subject to market risk arising from exchange rate movements between the dates foreign currency transactions occur and the dates they are settled. The Company currently uses foreign currency forward contracts to reduce the risk related to some of these transactions. These contracts usually have maturities of 90 days or less and generally require an exchange of foreign currencies for U.S. dollars at maturity at rates stated in the contracts. These contracts are not designated as hedging instruments under U.S. GAAP. Accordingly, the changes in the fair value of the foreign currency forward contracts are recognized in each accounting period in Other operating expense, net on the Consolidated Statements of Income together with the transaction gain or loss from the related balance sheet position. For the three and six months ended June 30, 2023, the Company recognized net losses of $0.5 million and $0.4 million, respectively, on foreign currency forward contracts. For the three and six months ended June 30, 2022, the Company recognized net gains of $3.1 million and $1.0 million, respectively, on foreign currency forward contracts. The derivative financial instrument contracts are with major investment grade financial institutions, and we do not anticipate any material non-performance by any of the counterparties.

The Company has a non-qualified Supplemental Profit Sharing Plan for its executives. The liability for this unfunded Supplemental Profit Sharing Plan was $7.7 million at June 30, 2023 and was $7.3 million at December 31, 2022. These amounts are recorded within Other noncurrent liabilities on the Company’s Consolidated Balance Sheets. The Supplemental Profit Sharing Plan allows participants the ability to hypothetically invest their proportionate award into various investment options, which primarily includes mutual funds. The Company credits earnings, gains and losses to the participants’ deferred compensation account balances based on the investments selected by the participants. The Company measures the fair value of the Supplemental Profit Sharing Plan liability using the market values of the participants’ underlying investment accounts.

The carrying value of the Company’s current financial instruments, which include cash, cash equivalents and restricted cash, accounts receivable, accounts payable and short-term debt, approximates fair value because of the short-term maturity of these instruments.

At June 30, 2023 and December 31, 2022, the fair value of the Company’s long-term debt was estimated using a discounted cash flows analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements that are considered to be Level 2 inputs. Based on the analysis performed, the fair value and the carrying value of the Company’s long-term debt are as follows:

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

Long-term debt and related current maturities

 

$

69,939

 

 

$

71,166

 

 

$

68,054

 

 

$

71,438