Fair Value

6 Months Ended

Jun. 28, 2024

FAIR VALUE

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following table summarizes, for assets or liabilities measured at fair value, the respective fair value and the classification by level of input within the fair value hierarchy:


			Fair Value Measurement at Reporting Date Using
Description	June 28, 2024		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(In millions)
Other non-current assets:
Plan assets	$	0.7	$	—	$	—	$	0.7
Other current liabilities:
Forward contracts	$	0.3	$	—	$	0.3	$	—
Other liabilities:
Pension obligation	$	1.5	$	—	$	—	$	1.5
Contingent earn-out	$	6.3	$	—	$	—	$	6.3

			Fair Value Measurement at Reporting Date Using
Description	December 29, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
(In millions)
Other non-current assets:
Plan assets	$	1.3	$	—	$	—	$	1.3
Other current liabilities:
Forward contracts	$	0.1	$	—	$	0.1	$	—
Other liabilities:
Pension obligation	$	1.6	$	—	$	—	$	1.6
Contingent earn-out	$	29.1	$	—	$	—	$	29.1

The estimated fair value of foreign currency forward contracts is based upon quoted market prices obtained from independent pricing services for similar derivative contracts and these financial instruments are characterized as Level 2 assets in the fair value hierarchy.

The estimated fair value of pension obligation is based on expected years of service and average compensation. The valuation model used to value pension obligation utilizes mortality rate, inflation, interest rate risks and changes in the life expectancy for pensioners. These assumptions are routinely made in the appraisal process by the independent actuary resulting in a Level 3 classification. As of June 28, 2024, the Company's aggregate pension benefit obligations was $11.6 million and the fair value of the pension plan assets was $10.8 million. The underfunded pension benefit obligations was $0.8 million as of June 28, 2024. The Company recognizes the overfunded or underfunded status of defined benefit pension plans, measured as the difference between the fair value of the plan assets and the benefit obligation. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability.

The Company measures its contingent earn-out liabilities at fair value on a recurring basis using a Monte Carlo simulation model. The significant unobservable inputs used in the model include the forecasted operating profit of the acquired business during each of calendar years 2024 and 2025. Significant increases or decreases to the forecasted results would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings. The amount paid that is less than or equal to the contingent earn-out liability on the acquisition date is reflected as cash used in financing activities in the consolidated statements of cash flows. Any amount paid in excess of the contingent earn-out liability on the acquisition date will be reflected as cash used in operating activities in the consolidated statements of cash flows. For the three and six months ended June 28, 2024, the Company recorded $24.1 million and $22.8 million, respectively of gain from change in the fair value of contingent earn-out related to the acquisition of HIS. This gain from change in the fair value was recognized as other income (expense), net in the Condensed Consolidated Statements of Operations.

There were no transfers from Level 1 or Level 2. Fair value adjustments were noncash, and therefore did not impact the Company’s liquidity or capital resources.