FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2014

Financial Instruments

The fair values of the Company’s cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value due to their short maturities.

The fair value of the Company’s long-term debt approximates its carrying value, as it is variable rate debt and the terms are comparable to market terms as of the balance sheet dates, and are classified as Level 2.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table represents the assets and liabilities, measured at fair value on a recurring basis as of December 31, 2014 and the basis for that measurement (in thousands):



Liabilities:	Level 1		Level 2		Level 3		Total
Contingent purchase price payments related to the acquisition of HOLLY HUNT	$	—	$	—	$	16,000	$	16,000

Pursuant to the agreement governing the acquisition of HOLLY HUNT, the Company may be required to make annual contingent purchase price payments in 2015, 2016 and 2017. The payouts are based upon HOLLY HUNTreaching annual sales targets in 2014, 2015, and 2016, and are paid out by February 15 of the following year. The Company classifies these contingent purchase price payments as a Level 3 measurement and is required to remeasure this liability at fair value on a recurring basis. The fair value of such contingent purchase price payments was determined based upon net sales projections for HOLLY HUNTfor 2014, 2015, and 2016. Based on sales achievement made by HOLLY HUNT during 2014, $5.0 million of the $16.0 million contingent purchase price was paid by February 15, 2015. Excluding the initial recognition of the liability for the contingent purchase price payments and payments made to reduce the liability, any changes in the fair value will be included within selling, general and administrative expenses.

22. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

There were no assets or liabilities recorded at fair value on a recurring basis as of December 31, 2013.

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

The following table represents the assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2013 and the basis for that measurement (in thousands):



	Fair Value Measurements
	at December 31, 2013 Using
Description	Total		Level 1	Level 2	Level 3	Total Impairment
Edelman Leather tradename (1)	$	17,150	—	—	17,150	$	8,900

(1) The Company estimated the fair value of the indefinite-life intangible asset using the relief-from-royalty method under the income approach as of December 31, 2013. The Company used a royalty rate of 5.0% based on comparable market rates and a discount rate of 12.7%.

Based on the results of the 2013 annual impairment test, the Company determined that the Edelman Leather tradename was impaired as the estimated fair value of the tradename was less than its respective carrying amount due to a 100-basis-point increase in the assumed discount rate and a reduction in expected future revenue growth rates. As a result, the carrying amount of the Edelman Leather tradename was reduced from $26.1 million to its estimated fair value of $17.2 million, resulting in a non-cash pre-tax impairment charge of $8.9 million during the fourth quarter of 2013. There were no assets or liabilities recorded at fair value on a nonrecurring basis as of December 31, 2014.

- 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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