Financial Instruments and Fair Value Measurement

12 Months Ended

Dec. 31, 2021

Financial Instruments and Fair Value Measurement

Financial Instruments

Concentrations of Credit Risk: Financial instruments which potentially subject the Company to significant concentrations of credit risk consist of trade receivables, cash equivalents and investments. The Company grants credit terms in the normal course of business to its customers. Due to the diversity of its product lines, the Company has an extensive customer base including electrical distributors and wholesalers, electric utilities, equipment manufacturers, electrical contractors, telecommunication companies and retail and hardware outlets. We are not dependent on a single customer, however, the Company’s top ten customers account for approximately 42% of its Net sales. As part of its ongoing procedures, the Company monitors the credit worthiness of its customers. Bad debt write-offs have historically been minimal. The Company places its cash and cash equivalents with financial institutions and limits the amount of exposure in any one institution.

At December 31, 2021 our accounts receivable balance was $675.3 million, net of allowances of $10.6 million. The allowance for doubtful accounts has not materially changed since December 31, 2020.

Fair Value: The carrying amounts reported in the Consolidated Balance Sheet for cash and cash equivalents, short-term investments, receivables, bank borrowings, accounts payable and accruals approximate their fair values given the immediate or short-term nature of these items. See also Note 8 — Investments.

Fair value measurements

At December 31, 2021 and 2020 the Company had $78.5 million and $80.4 million respectively, of investments carried on the balance sheet at fair value. Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The FASB fair value measurement guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. Refer to Note 8 — Investments for more information about these investments.

The three broad levels of the fair value hierarchy are as follows:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 - Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly

Level 3 - Unobservable inputs for which little or no market data exists, therefore requiring a company to develop its own assumptions

The following tables show, by level within the fair value hierarchy, the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis at December 31, 2021 and 2020 (in millions):


Asset (Liability)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Quoted Prices in Active Markets for Similar Assets (Level 2)		Unobservable inputs for which little or no market data exists (Level 3)		Total
Money market funds (a)	$	58.5	$	—	$	—	$	58.5

Available for sale investments	—		54.0		—		54.0
Trading securities	24.5		—		—		24.5
Deferred compensation plan liabilities	(24.5)		—		—		(24.5)
Derivatives:
Forward exchange contracts-Assets (b)	—		0.5		—		0.5

BALANCE AT DECEMBER 31, 2021	$	58.5	$	54.5	$	—	$	113.0


Asset (Liability)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Quoted Prices in Active Markets for Similar Assets (Level 2)		Unobservable inputs for which little or no market data exists (Level 3)		Total
Money market funds (a)	$	26.6	$	—	$	—	$	26.6

Available-for-sale investments	—		57.7		—		57.7
Trading securities	22.7		—		—		22.7
Deferred compensation plan liabilities	(22.7)		—		—		(22.7)
Derivatives:

Forward exchange contracts-(Liabilities) (c)	—		(0.8)		—		(0.8)
BALANCE AT DECEMBER 31, 2020	$	26.6	$	56.9	$	—	$	83.5

(a)Money market funds and time deposits are included in Cash and cash equivalents in the Consolidated Balance Sheet.

(b)Forward exchange contracts-Assets are reflected in Other current assets in the Consolidated Balance Sheet.

(c)Forward exchange contracts-(Liabilities) are reflected in Other accrued liabilities in the Consolidated Balance Sheet.

The methods and assumptions used to estimate the Level 2 fair values were as follows:

Forward exchange contracts – The fair value of forward exchange contracts were based on quoted forward foreign exchange prices at the reporting date.

Available-for-sale municipal bonds classified in Level 2 – The fair value of available-for-sale investments in municipal bonds is based on observable market-based inputs, other than quoted prices in active markets for identical assets.

Deferred compensation plan

The Company offers certain employees the opportunity to participate in non-qualified deferred compensation plans. A participant’s deferrals are invested in a variety of participant-directed debt and equity mutual funds that are classified as trading securities. During 2021 and 2020, the Company purchased $2.7 million and $3.0 million, respectively, of trading securities related to these deferred compensation plans. As a result of participant distributions, the Company sold $3.6 million and $2.0 million of these trading securities in 2021 and 2020 respectively. The unrealized gains and losses associated with these trading securities are directly offset by the changes in the fair value of the underlying deferred compensation plan obligation.

Long-term Debt

As of December 31, 2021 and December 31, 2020, the carrying value of long-term debt, net of unamortized discount and debt issuance costs, was $1,435.5 million and $1,436.9 million, respectively. The estimated fair value of the long-term debt as of December 31, 2021 and December 31, 2020 was $1,524.5 million and $1,569.5 million, respectively, using quoted market prices in active markets for similar liabilities (Level 2).

- 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.

+ References + Details