Note 13 - Fair Value Measurements

12 Months Ended

Dec. 03, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 13: Fair Value Measurements

Overview

Estimates of fair value for financial assets and liabilities are based on the framework established in the accounting guidance for fair value measurements. The framework defines fair value, provides guidance for measuring fair value and requires certain disclosures. The framework discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The framework utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

● Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

● Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

● Level 3: Unobservable inputs that reflect management’s assumptions, and include situations where there is little, if any, market activity for the asset or liability.

Balances Measured at Fair Value on a Recurring Basis

The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis as of December 3, 2022 and November 27, 2021, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			Fair Value Measurements
			Using:
	December 3,
Description	2022		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	4,013	$	4,013	$	-	$	-
Foreign exchange contract assets		10,282		-		10,282		-
Liabilities:
Foreign exchange contract liabilities	$	4,570	$	-	$	4,570	$	-
Interest rate swaps, cash flow hedge liabilities		42,542				42,542
Net investment hedge		54,046		-		54,046		-
Contingent consideration liabilities		1,977		-		-		1,977

			Fair Value Measurements
			Using:
	November 27,
Description	2021		Level 1		Level 2		Level 3
Assets:
Marketable securities	$	2,079	$	2,079	$	-	$	-
Foreign exchange contract assets		5,725		-		5,725		-
Cross-currency cash flow hedge assets		14,496		-		14,496		-
Liabilities:
Foreign exchange contract liabilities	$	6,082	$	-	$	6,082	$	-
Cross-currency cash flow hedge liabilities		12,366		-		12,366		-
Interest rate swaps, cash flow hedge liabilities		10,539		-		10,539		-
Contingent consideration liability		8,100		-		-		8,100

The valuation of our contingent consideration liability related to the acquisitions of ZKLT and TissueSeal was $1,477 and $500, respectively, as of December 3, 2022. As of December 3, 2022, the agreement provisions for the D.H.M. contingent consideration were met, and as a result, $8,122 was paid during 2022. Adjustments to the fair value of contingent consideration are recorded to selling, general and administrative expenses in the Statement of Income. See Note 2 for further discussion regarding our acquisitions.

Contingent consideration liability	2022
Level 3 balance at beginning of year	$	8,100
Acquisitions		1,977
Payment of contingent consideration		(8,122	)
Mark to market adjustment		22
Level 3 balance at end of year	$	1,977

Balances Measured at Fair Value on a Nonrecurring Basis

We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets include intangible assets acquired in an acquisition. The identified intangible assets of customer relationships, technology and tradenames acquired in connection with our acquisitions were measured using unobservable (Level 3) inputs. The fair value of the intangible assets was calculated using either the income or cost approach. Significant inputs include estimated revenue growth rates, gross margins, operating expenses, attrition rate, royalty rate and discount rate.  

See Note 2 for further discussion regarding our acquisitions.

See Note 7 for discussion regarding the fair value of debt.