Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability is as follows:

•Level 1: Observable inputs such as quoted prices in active markets;

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

•Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

Observable market data is required to be used in making fair value measurements when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2024:

In millions	Fair Value		Fair value measurements
			Level 1		Level 2		Level 3
Assets:
Derivative instruments	$	2.3	$	—	$	2.3	$	—
Liabilities:
Derivative instruments	4.4		—		4.4		—
Contingent consideration	86.2		—		—		86.2

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2023:

In millions	Fair Value		Fair value measurements
			Level 1		Level 2		Level 3
Assets:
Derivative instruments	$	4.1	$	—	$	4.1	$	—
Liabilities:
Derivative instruments	4.8		—		4.8		—
Contingent consideration	90.3		—		—		90.3

Derivative instruments include forward foreign currency contracts and instruments related to non-functional currency balance sheet exposures and commodity swaps. The fair value of the foreign exchange derivative instruments is determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable. The fair value of the commodity derivative instruments is valued under a market approach using published prices, where applicable, or dealer quotes.

On November 2, 2023, the Company acquired 100% of Nuvolo Technologies Corporation (Nuvolo). In connection with the acquisition, the Company agreed to two contingent consideration arrangements. The first contingent consideration arrangement, payable up to $90.0 million in cash, is based on the attainment of key revenue targets from November 2, 2023 through April 2025. If the first contingent consideration targets are met, a second contingent consideration arrangement with no maximum earnout is available to the sellers based on revenues in excess of the initial targets attained from a specified customer contract through April 2025.

Each quarter the Company remeasures the fair value of the liability as assumptions change and such non-cash adjustments are recorded in Selling and administrative expenses in the Condensed Consolidated Statements of Earnings. Contingent consideration related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The fair value of the contingent consideration is determined using the Monte Carlo simulation model based on revenue projections during the earnout period, implied revenue volatility and a risk adjusted discount rate.

The changes in the fair value of the Company's Level 3 liabilities were as follows:

In millions	March 31, 2024
Balance at beginning of period	$	90.3
Measurement period adjustment	(4.1)
Balance at end of period	$	86.2

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. There have been no transfers between levels of the fair value hierarchy.