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FAIR VALUE MEASUREMENTS
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
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 June 30, 2020Fair Value as of December 31, 2019
Liabilities:Level 1Level 2 Level 3TotalLevel 1Level 2 Level 3Total
Interest rate swap
$—  $12.2  $—  $12.2  $—  $6.6  $—  $6.6  
Contingent consideration obligations (1)
—  —  14.4  14.4  —  —  2.0  2.0  
(1) In connection with the Company’s acquisition of FHI LLC (“Fully”) in August 2019, the Company is contingently liable to make additional payments in the form of consideration based upon the achievement of certain performance targets. The maximum amount of contingent consideration that could be earned through 2023 as of June 30, 2020 is $15.0 million (see Notes 4 and 11 to the Company’s 2019 Annual Report on Form 10-K for additional information on the Fully acquisition, the valuation of the related contingent consideration and the accounting treatment applied to any changes thereof).
Interest Rate Swap
The fair value of the interest rate swap is based on observable prices as quoted for receiving the variable one-month LIBOR and paying fixed interest rates and therefore is classified as Level 2 within the fair value hierarchy.
Contingent Consideration Obligations
The fair value measurement of the Company’s contingent consideration obligations is based on significant, unobservable inputs for which little or no market data exists, and thus represents a Level 3 measurement. The contingent consideration obligations are revalued each reporting period, with changes in fair value recognized in the condensed consolidated statements of operations. The valuation inputs utilized to estimate the fair value of the contingent consideration obligations as of June 30, 2020, included a discount rate of 2.5% and projections related to Fully’s net sales and earnings before interest, taxes, depreciation and amortization (“EBITDA”) for each of the calendar years 2020 through 2023.
For the three and six months ended June 30, 2020, the $12.4 million change in the fair value of the Company’s contingent consideration obligations was primarily due to changes in expectations related to the achievement of the applicable performance targets. The emergent and seemingly durable shift to a significant “Work-from-home” (“WFH”) paradigm, catalyzed in large measure by movement and business operation restrictions imposed by various state and local governments during the second quarter of 2020, aligns well with Fully’s WFH product portfolio and e-commerce capabilities. As of June 30, 2020, $1.2 million of the contingent consideration obligation is classified as current and is included in Other current liabilities, while the remaining $13.2 million is included in Other non-current liabilities on the condensed consolidated balance sheets.
Non-Recurring Fair Value Measurements
The Company did not have any non-recurring fair value measurements during the three and six months ended June 30, 2020.