Note 6 - Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6. FAIR VALUE MEASUREMENTS

Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date.  Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.  There are three levels of inputs that may be used to measure fair value:

Level 1 – Observable inputs such as quoted market prices in active markets;

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level 3 – Unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions.

	September 30, 2024
	Carrying value		Fair value		Cash and cash equivalents		Other Current Assets
Cash	$	74,555	$	74,555	$	74,555	$	-
Level 1:
Money market funds		58,208		58,208		58,208		-
Money market funds (Rabbi Trust)		685		685		-		685
Subtotal		58,893		58,893		58,208		685
Level 2:
Certificates of deposit and time deposits		3,329		3,708		1,503		1,827
Subtotal		3,329		3,708		1,503		1,827
Total	$	136,777	$	137,156	$	134,266	$	2,512

	December 31, 2023
	Carrying value		Fair value		Cash and cash equivalents		Other Current Assets
Cash	$	57,544	$	57,544	$	57,544	$	-
Level 1:
Money market funds		31,188		31,188		31,188		-
Money market funds (Rabbi Trust)		303		303		-		303
Subtotal		31,491		31,491		31,188		303
Level 2:
Certificates of deposit and time deposits		3,629		3,926		639		2,990
Subtotal		3,629		3,926		639		2,990
Total	$	92,664	$	92,961	$	89,371	$	3,293

As of September 30, 2024 and December 31, 2023, our available-for-sale securities primarily consisted of investments held in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations. These securities are measured at fair value using quoted prices in active markets for identical assets (Level 1) inputs and amounted to $0.7 million at  September 30, 2024 and $0.3 million at December 31, 2023. 

Throughout 2024 and 2023, the Company entered into a series of foreign currency forward contracts, the fair values of which were ($0.6) million at  September 30, 2024 and $0.5 million at  December 31, 2023. The estimated fair value of foreign currency forward contracts is based on quotes received from the applicable counterparty, and represents the estimated amount we would receive or pay to settle the contracts, taking into consideration current exchange rates which can be validated through readily observable data from external sources (Level 2).

The Company is a party to two interest rate swap agreements as further described in Note 10, "Derivative Instruments and Hedging Activities". The fair value of the interest rate swap agreements was $2.5 million at September 30, 2024 and $4.0 million at  December 31, 2023, which was based on market data, and represents the estimated amount we would receive or pay to settle the agreements, taking into consideration current and projected future interest rates as well as the creditworthiness of the parties, all of which can be validated through readily observable data from external sources (Level 2).

The fair values of our derivative financial instruments and their classifications in our condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 were as follows:

	Balance Sheet Classification	September 30, 2024		December 31, 2023
Derivative assets:
Foreign currency forward contracts:
Designated as cash flow hedges	Other current assets	$	93	$	-
Non designated as hedging instruments	Other current assets		-		486
Interest rate swap agreements:
Designated as a cash flow hedge	Other assets		2,478		3,960
Total derivative assets		$	2,571	$	4,446
Derivative liabilities:
Foreign currency forward contracts:
Designated as cash flow hedges	Other current liabilities	$	-	$	5
Not designated as hedging instruments	Other current liabilities		728		-
Total derivative liabilities		$	728	$	5

The Company does not have any financial assets measured at fair value on a recurring basis categorized as Level 3, and there were no transfers in or out of Level 1, Level 2 or Level 3 during the nine months ended September 30, 2024 or  September 30, 2023. There were no changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the nine months ended September 30, 2024 or  September 30, 2023.

There were no financial assets accounted for at fair value on a nonrecurring basis as of  September 30, 2024 or December 31, 2023.

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, which are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company’s long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At  September 30, 2024 and December 31, 2023, the estimated fair value of total debt was $59.9 million at each date, compared to a carrying amount of $60.0 million at each date. The Company did not have any other financial liabilities within the scope of the fair value disclosure requirements as of September 30, 2024.

Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets, long-lived assets and the net liability related to the put/call options pursuant to the innolectric investment agreement, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment upon the occurrence of a triggering event or in the case of goodwill, on at least an annual basis. Based on the Company's assessment, it was concluded that no triggering events occurred during the nine months ended September 30, 2024 or September 30, 2023.