FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2019

The fair values of the Company’s cash and cash equivalents, classified as Level 1 within the fair value hierarchy, approximate carrying value due to their short maturities.

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

Recurring Fair Value Measurements

The Company measures certain financial liabilities at fair value on a recurring basis. The following table summarizes the valuation of those liabilities as of the dates presented (in millions):



	Fair Value as of December 31, 2019								Fair Value as of December 31, 2018
Description:	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Interest rate swap	$	—	$	6.6	$	—	$	6.6	$	—	$	1.7	$	—	$	1.7
Contingent consideration - Fully	—		—		2.0		2.0		—		—		—		—
Contingent consideration - DatesWeiser	—		—		—		—		—		—		0.8		0.8

Interest Rate Swap

The fair value of the interest rate swap is based on observable prices as quoted for receiving the variable one-month London Interbank Offered Rates (LIBOR) and paying fixed interest rates and therefore is classified as Level 2 within the fair value hierarchy.

Contingent Consideration - Fully

Earn-Out Consideration payments up to $5.0 million may be required if Fully achieves certain annual targets related to net sales and earnings before interest, taxes, depreciation and amortization (EBITDA) for each of the calendar years 2020 through 2023. In addition, the Company may be required to pay up to $10.0 million if Fully achieves a certain cumulative EBITDA target for calendar years 2020 and 2021. The Company classifies these as Level 3 measurements and was required to measure these liabilities at fair value. The estimated fair value of the Earn-Out Consideration of $2.0 million was determined as of the acquisition date using net sales and EBITDA projections for Fully through 2023, and a discount rate of 3.7%. Any change in fair value will be included within Selling, general and administrative expenses.

Contingent Consideration - DatesWeiser

Pursuant to the agreement governing the acquisition of DatesWeiser, the Company was required to make annual contingent purchase price payments. The payouts were based upon DatesWeiser reaching an annual net sales target, for each year through 2020. The Company classifies this as a Level 3 measurement and was required to remeasure this liability at fair value on a recurring basis. The fair value of such contingent purchase price payments, totaling $1.1 million, was determined at the time of acquisition based upon net sales projections for DatesWeiser through 2020 and a discount rate of 10%. As of December 31, 2019, the Company remeasured the fair value of the liability and determined that it is unlikely that DatesWeiser will meet any of the remaining future targets related to the agreement. The Company recorded reductions in fair value of $0.8 million and $0.4 million within Selling, general and administrative expense during 2019 and 2018, respectively. There were no changes in the fair value during 2017. The maximum amount of possible future contingent payments under the agreement as of December 31, 2019 is $4.0 million.

There were no additional assets and/or liabilities recorded at fair value on a recurring basis as of December 31, 2019 or 2018.

Assets Measured at Fair Value on a Nonrecurring Basis

The following table presents the impairment loss on assets that were measured at fair value on a nonrecurring basis (in millions):



	Level 3 Fair Value as of December 31,
	2019		2018		Impairment/Loss
Assets:
Tradename - Edelman Leather⁽¹⁾	$	—	$	6.5	$	6.5


(1)	See Note 7 for additional information.

Other than the fair value measurements applied to the Edelman Leather tradename, the Company did not have any non-recurring fair value measurements as of December 31, 2019 or 2018 and for the years then ended.

- 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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