Fair Value Measurement

3 Months Ended

Mar. 31, 2024

Financial Instruments

Financial instruments which potentially subject the Company to significant concentrations of credit loss 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. 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 March 31, 2024, our accounts receivable balance was $865.6 million, net of allowances of $11.4 million. During the three months ended March 31, 2024, our allowances decreased by approximately $0.2 million.

Investments

At March 31, 2024 and December 31, 2023, the Company had $62.3 million and $65.0 million, respectively, of available-for-sale municipal debt securities. These investments had an amortized cost of $63.0 million and $65.3 million, respectively. No allowance for credit losses related to our available-for-sale debt securities was recorded for the three months ended March 31, 2024 or March 31, 2023. As of March 31, 2024 and December 31, 2023, the unrealized losses attributable to our available-for-sale debt securities were $0.8 million and $0.6 million, respectively. The fair value of available-for-sale debt securities with unrealized losses was $42.9 million at March 31, 2024 and $34.5 million at December 31, 2023.

The Company also had trading securities of $25.1 million at March 31, 2024 and $23.4 million at December 31, 2023 that are carried on the balance sheet at fair value. Unrealized gains and losses associated with available-for-sale debt securities are reflected in Accumulated other comprehensive loss, net of tax, while unrealized gains and losses associated with trading securities are reflected in the Condensed Consolidated Statement of Income.

Fair value measurements

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. 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 table shows, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis at March 31, 2024 and December 31, 2023 (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
March 31, 2024
Money market funds(a)	$	144.2	$	—	$	—	$	144.2

Available for sale investments	—		62.3		—		62.3
Trading securities	25.1		—		—		25.1
Deferred compensation plan liabilities	(25.1)		—		—		(25.1)
Derivatives:
Forward exchange contracts-Assets(b)	—		0.2		—		0.2
Forward exchange contracts-(Liabilities)(c)	—		(0.1)		—		(0.1)
TOTAL	$	144.2	$	62.4	$	—	$	206.6

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
December 31, 2023
Money market funds(a)	$	105.1	$	—	$	—	$	105.1

Available for sale investments	—		65.0		—		65.0
Trading securities	23.4		—		—		23.4
Deferred compensation plan liabilities	(23.4)		—		—		(23.4)
Derivatives:

Forward exchange contracts-(Liabilities)(c)	—		(0.5)		—		(0.5)
TOTAL	$	105.1	$	64.5	$	—	$	169.6

(a) Money market funds are reflected in Cash and cash equivalents in the Condensed Consolidated Balance Sheets.

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

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

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 was 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 plans

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. The Company purchased $2.8 million and $2.1 million of trading securities related to these deferred compensation plans during the three months ended March 31, 2024 and 2023, respectively. As a result of participant distributions, the Company sold $2.7 million of these trading securities during the three months ended March 31, 2024 and $2.0 million during the three months ended March 31, 2023. 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 March 31, 2024 and December 31, 2023, the carrying value of long-term debt, net of unamortized discount and debt issuance costs, including the $18.7 million and $15.0 million, respectively, current portion of the Term Loan, was $1,914.4 million and $2,038.2 million, respectively. The estimated fair value of the long-term debt as of March 31, 2024 and December 31, 2023 was $1,820.0 million and $1,951.6 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.

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