FRANKLIN ELECTRIC CO INC
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
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FY2024 · Filed Feb 21, 2025
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Fair Value Measurements
- FAIR VALUE MEASUREMENTS
As of December 31, 2024 and December 31, 2023, the assets and liabilities measured at fair value on a recurring basis were as set forth in the table below:
| (In millions) | December 31, 2024 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
|---|---|---|---|---|
| Assets: | ||||
| Cash equivalents | $5.0 | $5.0 | $— | $— |
| Total assets | $5.0 | $5.0 | $— | $— |
| Liabilities: | ||||
| Share swap transaction | $2.5 | $2.5 | $— | $— |
| Contingent payments related to acquisition | 5.0 | — | — | 5.0 |
| Total liabilities | $7.5 | $2.5 | $— | $5.0 |
| December 31, 2023 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |
| Assets: | ||||
| Cash equivalents | $10.9 | $10.9 | $— | $— |
| Share swap transaction | 1.1 | 1.1 | — | — |
| Total assets | $12.0 | $12.0 | $— | $— |
| Liabilities: | ||||
| Contingent payments related to acquisition | 3.0 | — | — | 3.0 |
| Total liabilities | $3.0 | $— | $— | $3.0 |
The Company’s Level 1 cash equivalents assets are generally comprised of foreign bank guaranteed certificates of deposit and short term deposits. The share swap transaction is recorded within the "Accounts Payable" and "Receivables" lines of the consolidated balance sheets and is further described in Note 13 - Financial Instruments.
The Company has no assets measured on a recurring basis classified as Level 2 excluding the recurring fair value measurements in the Company's pension and other retirement plans as discussed in Note 10 - Employee Benefit Plans.
The Company's Level 3 category includes contingent consideration related to acquisitions, which valuation inputs are unobservable and significant to the fair value measurement. Projections and estimated probabilities are used to estimate future contingent earn-out payments, which are discounted back to present value to compute contingent earn-out liabilities. The following table provides a roll-forward of the contingent consideration liability, which is included in "Accrued expenses and other liabilities" as of December 31, 2024 and "Other long-term liabilities" as of December 31, 2023 in the consolidated balance sheets:
| (In millions) | 2024 | 2023 |
|---|---|---|
| Fair value at beginning of period | $3.0 | $— |
| Additions | — | 3.0 |
| Adjustment to prior year acquisition | 1.3 | — |
| Change in fair value recognized in earnings | 0.7 | — |
| Payments | — | — |
| Fair value at end of period | $5.0 | 3.0 |
Total debt, including current maturities, have carrying amounts of $129.4 million as of December 31, 2024 and $100.5 million at December 31, 2023. The estimated fair value of all debt was $128.0 million and $98.6 million as of December 31, 2024 and
December 31, 2023, respectively. In the absence of quoted prices in active markets, considerable judgment is required in developing estimates of fair value. Estimates are not necessarily indicative of the amounts the Company could realize in a current market transaction. In determining the fair value of its debt, the Company uses estimates based on rates currently available to the Company for debt with similar terms and remaining maturities. Accordingly, the fair value of debt is classified as Level 2 within the valuation hierarchy.
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