POWER SOLUTIONS INTERNATIONAL, INC.PSIX

POWER SOLUTIONS INTERNATIONAL, INC. Fair Value Disclosure

10-KFiled Mar 2, 20262 min read
Fair Value of Financial Instruments
For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair-value measurement as follows:
•Level 1 – based on quoted prices in active markets for identical assets or liabilities;
•Level 2 – based on other significant observable inputs for the assets or liabilities through corroborations with market data at the measurement date; and
•Level 3 – based on significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Financial Instruments Measured at Carrying Value
Current Assets
Cash and cash equivalents (Level 1) are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.
Debt
The Company measured its material debt obligations and notes payable at original carrying value. The fair value of the Revolving Credit Agreement and other short-term financing approximated carrying value, as it consisted primarily of variable rate loans. The Company measured its non-interest bearing note payable using a rate which the Company could obtain financing of similar nature from other sources at the date of the transaction. The unamortized discount is reported in the Consolidated Balance Sheets as a deduction from the face amount of the note payable. The Company measured its material debt obligations and note payable using Level 2 inputs as follows:
(in thousands)As of December 31, 2025
Carrying ValueFair Value
Level 1Level 2Level 3
Revolving Credit Agreement$95,000 $— $95,000 $— 
Note payable2,810 — 2,810 — 
(in thousands)As of December 31, 2024
Carrying ValueFair Value
Level 1Level 2Level 3
Revolving Credit Agreement$95,000 $— $95,000 $— 
Note payable3,502 — 3,502 — 
Other financing25,000 — 25,000 — 

Other Financial Assets and Liabilities
In addition to the methods and assumptions used for the financial instruments discussed above, accounts receivable, net income tax receivable, accounts payable, and certain accrued expenses are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.
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Historical Timeline

Fiscal YearFiled
2025Mar 2, 2026Showing above
2024Mar 24, 2025
2023Mar 14, 2024
2022Apr 14, 2023
2021Mar 31, 2022
2020Mar 30, 2021
2019May 4, 2020
2018Dec 27, 2019
2017May 16, 2019
2015Feb 26, 2016

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

Income TaxesRevenueEarnings Per SharePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsStock CompensationNew StandardsPay vs Performance