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FAIR VALUE

12 Months Ended

Dec. 31, 2020

(9)FAIR VALUE

The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:


Level 1 —	Quoted prices in active markets for identical assets or liabilities.

Level 2 —	Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

Level 3 —	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following presents information as of December 31, 2020 and 2019 of the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.

Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include market observable inputs and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. As of December 31, 2020, the investment in CaféX Communications, Inc., which consists of the Company’s total $15.6 million investment, was fully impaired to zero (see Note 2).

Debt - The Company’s debt consists primarily of the Company’s Credit Agreement, which permits floating-rate borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of December 31, 2020 and 2019, the Company had $385.0 million and $290.0 million, respectively, of borrowings outstanding under the Credit Agreement. During 2020 and 2019, borrowings accrued interest at an average rate of 1.6% and 3.4% per annum, respectively, excluding unused commitment fees. The amounts recorded in the accompanying Balance Sheets approximate fair value due to the variable nature of the debt based on level 2 inputs.

Derivatives - Net derivative assets (liabilities) are measured at fair value on a recurring basis. The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract. As of December 31, 2020, credit risk did not materially change the fair value of the Company’s derivative contracts.

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of December 31, 2020 and 2019 (in thousands):

As of December 31, 2020


	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		At Fair Value
Cash flow hedges	$	—	$	11,390	$	—	$	11,390
Fair value hedges		—		(15)		—		(15)
Total net derivative asset (liability)	$	—	$	11,375	$	—	$	11,375

As of December 31, 2019


	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		At Fair Value
Cash flow hedges	$	—	$	5,674	$	—	$	5,674
Fair value hedges		—		98		—		98
Total net derivative asset (liability)	$	—	$	5,772	$	—	$	5,772

The following is a summary of the Company’s fair value measurements as of December 31, 2020 and 2019 (in thousands):

As of December 31, 2020


	Fair Value Measurements Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments, net	$	—	$	11,375	$	—
Total assets	$	—	$	11,375	$	—

Liabilities
Deferred compensation plan liability	$	—	$	(23,858)	$	—
Derivative instruments, net		—		—		—
Contingent consideration		—		—		(18,032)
Total liabilities	$	—	$	(23,858)	$	(18,032)

Redeemable noncontrolling interest	$	—	$	—	$	(52,976)

As of December 31, 2019


	Fair Value Measurements Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments, net	$	—	$	5,772	$	—
Total assets	$	—	$	5,772	$	—

Liabilities
Deferred compensation plan liability	$	—	$	(20,370)	$	—
Derivative instruments, net		—		—		—
Contingent consideration		—		—		(6,134)
Total liabilities	$	—	$	(20,370)	$	(6,134)

Redeemable noncontrolling interest	$	—	$	—	$	(48,923)

Deferred Compensation Plan - The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments. The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.

Contingent Consideration — The Company recorded contingent consideration related to the acquisitions of FCR and VF. The contingent payable for FCR was recognized at fair value using a discounted cash flow approach and a discount rate of 16.7%. The contingent payable for VF US was calculated using a Monte Carlo simulation including a discount rate of 23.1%. The contingent payable for VF Asean was calculated using a Monte Carlo simulation including a discount rate of 18.4% The measurements were based on significant inputs not observable in the market. The Company records interest expense each period using the effective interest method until the future value of these contingent payables reaches their expected future value. Interest expense related to all recorded contingent payables is included in Interest expense in the Consolidated Statements of Comprehensive Income (Loss).

During the first, second and fourth quarters of 2020, the Company recorded fair value adjustments to the contingent consideration associated with the FCR acquisition based on decreased estimates of EBITDA which caused the estimated payable to decrease. Accordingly, a $3.3 million decrease, a $1.1 million decrease and a $1.8 million decrease to the payable were recorded as of March 31, 2020, June 30, 2020 and December 31, 2020, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss). As of December 31, 2020, the final calculated contingent consideration for FCR is zero.

During the fourth quarter of 2020, the Company recorded fair value adjustments to the contingent consideration associated with the VF acquisitions based on increased actual results and estimates of EBITDA for 2021 which caused the payables to increase. Accordingly, a combined $4.3 million increase to the payables was recorded as of December 31, 2020, and was included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

During the fourth quarter of 2018 and the second quarter of 2019, the Company recorded fair value adjustments to the contingent consideration associated with the SCS acquisition based on decreased estimates of EBITDA which caused the estimated payable to be zero for both future payments. Accordingly, a $0.3 million and a $2.5 million decrease to the payable were recorded as of December 31, 2018 and June 30, 2019, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss). As of December 31, 2019, the EBITDA was below the target, thus the contingent consideration was finalized with a zero value.

A rollforward of the activity in the Company’s fair value of the contingent consideration is as follows (in thousands):


							Imputed
	December 31,						Interest /		December 31,
	2019		Acquisitions		Payments		Adjustments		2020

FCR	$	6,134	$	—	$	—	$	(6,134)	$	—
VF US		—		10,943		—		3,142		14,085
VF ASEAN		—		2,778		—		1,169		3,947
Total	$	6,134	$	13,721	$	—	$	(1,823)	$	18,032


							Imputed
	December 31,						Interest /		December 31,
	2018		Acquisitions		Payments		Adjustments		2019

SCS	$	2,363	$	—	$	—	$	(2,363)	$	—
FCR		—		6,134		—		—		6,134
Total	$	2,363	$	6,134	$	—	$	(2,363)	$	6,134

- 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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