Fair Value Measurements

9 Months Ended

Sep. 29, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents, derivatives, marketable securities and accounts receivable. The Company believes it had no significant concentrations of credit risk as of September 29, 2024.

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during the nine months ended September 29, 2024.  The Company’s financial assets and liabilities carried at fair value are primarily comprised of marketable securities, derivative contracts used to hedge the Company’s currency risk, and acquisition and divestiture related contingent consideration. The Company has not elected to measure any additional financial instruments or other items at fair value.

Valuation Hierarchy: The following summarizes the three levels of inputs required to measure fair value. For Level 1 inputs, the Company utilizes quoted market prices as these instruments have active markets. For Level 2 inputs, the Company utilizes quoted market prices in markets that are not active, broker or dealer quotations, or utilizes alternative pricing sources with reasonable levels of price transparency. For Level 3 inputs, the Company utilizes unobservable inputs based on the best information available, including estimates by management primarily based on information provided by third-party fund managers, independent brokerage firms and insurance companies. A financial asset’s or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

The following tables show the assets and liabilities carried at fair value measured on a recurring basis as of September 29, 2024 and December 31, 2023 classified in one of the three classifications described above:

			Fair Value Measurements at September 29, 2024 Using:
	Total Carrying Value at September 29, 2024		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Marketable securities - available for sale	$	31,000	$	31,000	$	—	$	—
Foreign exchange derivative assets	205		—		205		—
Foreign exchange derivative liabilities	(1,405)		—		(1,405)		—
Contingent consideration asset	14,890		—		—		14,890
Contingent consideration liabilities	(31,085)		—		—		(31,085)

			Fair Value Measurements at December 31, 2023 Using:
	Total Carrying Value at December 31, 2023		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
	(In thousands)
Marketable securities - available for sale	$	13,913	$	13,913	$	—	$	—
Foreign exchange derivative assets	1,697		—		1,697		—
Foreign exchange derivative liabilities	(1,763)		—		(1,763)		—
Contingent consideration asset	14,890		—		—		14,890
Contingent consideration liabilities	(40,005)		—		—		(40,005)

Level 1 and Level 2 Valuation Techniques:    The Company’s Level 1 and Level 2 assets and liabilities are comprised of investments in equity and fixed-income securities as well as derivative contracts. For financial assets and liabilities that utilize Level 1 and Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including common stock price quotes, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for Level 1 and Level 2 financial assets and liabilities.

Marketable securities - available for sale: Includes equity and mutual fund investments measured at fair value using the quoted market prices in active markets at the reporting date.

Foreign exchange derivative assets and liabilities: Include foreign exchange derivative contracts that are valued using quoted forward foreign exchange prices at the reporting date. The Company’s foreign exchange derivative contracts are subject to master netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company’s condensed consolidated balance sheet on a net basis and are recorded in other assets. As of both September 29, 2024 and December 31, 2023, none of the master netting arrangements involved collateral.

Level 3 Valuation Techniques: The Company’s Level 3 assets and liabilities are comprised of contingent consideration related to the sale of the Business (see Note 3) and acquisitions. For assets and liabilities that utilize Level 3 inputs, the Company uses significant unobservable inputs. Below is a summary of valuation techniques for Level 3 assets and liabilities.

Contingent consideration:    Contingent consideration is measured at fair value at the disposition or acquisition date using projected milestone dates, discount rates, volatility, probabilities of success and projected achievement of financial targets, including revenues of the acquired business in many instances. Projected risk-adjusted contingent payments are discounted back to the current period using a discounted cash flow model.

The fair value of the contingent consideration asset was initially measured using a lattice model and recognized upon the sale of the Business on March 13, 2023. In accordance with the terms of the sale of the Business, the Company is entitled to receive up to $150.0 million that is contingent on the exit valuation the Sponsor and its affiliated funds receive on a sale or other capital event related to the Business. Potential valuation adjustments may be made as additional information and market factors that impact the expected exit valuation of the Business becomes available, with the impact of such adjustments being recorded in the Company’s condensed consolidated statements of operations.

A reconciliation of the beginning and ending Level 3 contingent consideration asset is as follows:

	Three Months Ended				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
	(In thousands)
Balance at beginning of period	$	14,890	$	15,930	$	14,890	$	—
Amount recognized upon the sale of the Business	—		—		—		15,930
Change in fair value (included within selling, general and administrative expenses)	—		—		—		—
Balance at end of period	$	14,890	$	15,930	$	14,890	$	15,930

The fair values of contingent consideration liabilities are calculated on a quarterly basis based on a collaborative effort of the Company’s operations, finance and accounting groups, as appropriate. Valuation adjustments are made as additional information becomes available, including the progress towards achieving the revenue targets, with the impact of such adjustments being recorded in the Company’s condensed consolidated statements of operations.

A reconciliation of the beginning and ending Level 3 contingent consideration liabilities is as follows:

	Three Months Ended				Nine Months Ended
	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
	(In thousands)
Balance at beginning of period	$	(30,540)	$	(37,561)	$	(40,005)	$	(46,618)
Amounts paid and foreign currency translation	(889)		817		14,925		10,959
Change in fair value (included within selling, general and administrative expenses)	344		(633)		(6,005)		(1,718)
Balance at end of period	$	(31,085)	$	(37,377)	$	(31,085)	$	(37,377)

Financial Instruments Not Recorded at Fair Value

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short-term maturities of these assets and liabilities. If measured at fair value, cash and cash equivalents would be classified as Level 1.

The Company’s investments in U.S. treasury securities that were classified as held-to-maturity as of December 31, 2023 had a fair value of $688.7 million and a carrying value of $689.9 million. If measured at fair value, the investments in U.S. treasury securities would be classified as Level 1.

The Company’s outstanding senior unsecured notes had a fair value of $2,889.4 million and a carrying value of $3,186.8 million as of September 29, 2024. The Company’s outstanding senior unsecured notes had a fair value of $3,474.5 million and a carrying value of $3,889.3 million as of December 31, 2023. The fair values of the outstanding senior unsecured notes were estimated using market quotes from brokers and were based on current rates offered for similar debt, which are Level 2 measurements.

The Company’s other debt facilities, including the Company’s senior unsecured revolving credit facility, had an aggregate carrying value of $1.4 million and $10.3 million as of September 29, 2024 and December 31, 2023, respectively. The carrying values approximate fair value and were classified as Level 2.