Fair Value Measurement

3 Months Ended

Mar. 31, 2023

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 - Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3 - Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities, pension assets and liabilities. The carrying value of these instruments approximates fair value as a result of the short duration of such instruments or due to the variability of the interest cost associated with such instruments.

Recurring Measurements

Foreign Currency Forward Exchange Contracts. Our derivative assets and liabilities represent foreign exchange contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and counterparty credit risk. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2. To manage our risk for transactions denominated in Mexican Pesos and Czech Crown, we have entered into forward exchange contracts that are designated as cash flow hedge instruments, which are recorded in the Condensed Consolidated Balance Sheets at fair value. The gains and losses as a result of the changes in fair value of the hedge contract for transactions denominated in Mexican Pesos are deferred in accumulated other comprehensive loss and recognized in cost of revenues in the period the related hedge transactions are settled. As of March 31, 2023, hedge contracts for transactions denominated in Czech Crown were not designated as a hedging instruments; therefore, they are marked-to-market and the fair value of agreements is recorded in the Condensed Consolidated Balance Sheets with the offsetting gains and losses recognized in other (income) expense and recognized in cost of revenues in the period the related hedge transactions are settled in the Condensed Consolidated Statements of Operations.

Interest Rate Swaps. To manage our exposure to variable interest rates, we have entered into interest rate swaps to exchange, at a specified interval, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. The interest rate swaps are intended to mitigate the impact of rising interest rates on the Company and covers approximately 50% of outstanding debt under the Term Loan Facility. Any changes in fair value are included in

earnings or deferred through Accumulated other comprehensive loss, depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow hedging relationship is recognized immediately in earnings in the consolidated statements of operations.

The fair values of our derivative assets and liabilities measured on a recurring basis are categorized as follows:


	March 31, 2023								December 31, 2022
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Foreign exchange contract	$	3,109	$	—	$	3,109	$	—	$	—	$	—	$	—	$	—
Interest rate swap agreement	$	954	$	—	$	954	$	—	$	1,849	$	—	$	1,849	$	—
Liabilities:
Foreign exchange contract	$	—	$	—	$	—	$	—	$	356	$	—	$	356	$	—

The following table summarizes the notional amount of our open foreign exchange contracts:


	March 31, 2023				December 31, 2022
	U.S. $ Equivalent		U.S. Equivalent Fair Value		U.S. $ Equivalent		U.S. Equivalent Fair Value
Commitments to buy or sell currencies	$	41,230	$	43,553	$	55,220	$	53,847

The following table summarizes the fair value and presentation of derivatives in the Condensed Consolidated Balance Sheets:


	Derivative Asset
	Balance Sheet Location	Fair Value
		March 31, 2023		December 31, 2022

Foreign exchange contracts	Other current assets	$	3,109	$	—
Interest rate swap agreement	Other assets, net	$	954	$	1,849

Derivative Liability

Balance Sheet
Location

Fair Value

March 31, 2023

December 31, 2022

Foreign exchange contracts

Accrued liabilities and other

—

356

Derivative Equity

Balance Sheet
Location

Fair Value

March 31, 2023

December 31, 2022

Derivative instruments

Accumulated other comprehensive (loss) income

6,115

3,777

The following table summarizes the effect of derivative instruments on the Condensed Consolidated Statements of Operations:


		Three Months Ended March 31,
		2023		2022
	Location of Gain (Loss) on Derivatives Recognized in Income	Amount of Gain (Loss) on Derivatives Recognized in Income
Foreign exchange contracts	Cost of revenues	$	451	$	456
Interest rate swap agreement	Interest expense	$	454	$	(193)
Foreign exchange contracts	Other (income) expense	$	469	$	(671)

We consider the impact of our credit risk on the fair value of the contracts, as well as our ability to honor obligations under the contract.

Other Fair Value Measurements

The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs. Based on these inputs, our long-term debt fair value as disclosed is classified as Level 2. The carrying amounts and fair values of our long-term debt obligations are as follows:


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Term loan and security agreement 1	$	150,252	$	144,052	$	152,437	$	143,477
Revolving credit facility	$	11,000	$	11,000	$	—	$	—

1.Presented in the Condensed Consolidated Balance Sheets are the current portion of long-term debt of $12.0 million and long-term debt of $149.2 million as of March 31, 2023, and current portion of long-term debt of $10.9 million and long-term debt of $141.5 million as of December 31, 2022.

- 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.

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