FAIR VALUE

3 Months Ended

Mar. 31, 2022

FAIR VALUE [Abstract]

FAIR VALUE

(7)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 March 31, 2022 and December 31, 2021 for 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 March 31, 2022, the investment in CaféX Communication, Inc., which consisted of the Company’s total $15.6 million investment, is fully impaired to zero.

Debt - The Company’s debt consists primarily of the Company’s Credit Facility, 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 March 31, 2022 and December 31, 2021, the Company had $803.0 million and $791.0 million, respectively, of borrowings outstanding under the Credit Facility. During the first quarter of 2022 outstanding borrowings accrued interest at an average rate of 1.3% per annum, 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 March 31, 2022, 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 March 31, 2022 and December 31, 2021 (in thousands):

As of March 31, 2022

	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	$	—	$	787	$	—	$	787
Fair value hedges		—		148		—		148
Total net derivative asset (liability)	$	—	$	935	$	—	$	935

As of December 31, 2021

	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	$	—	$	(62)	$	—	$	(62)
Fair value hedges		—		198		—		198
Total net derivative asset (liability)	$	—	$	136	$	—	$	136

The following is a summary of the Company’s fair value measurements as of March 31, 2022 and December 31, 2021 (in thousands):

As of March 31, 2022

	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	$	—	$	935	$	—
Total assets	$	—	$	935	$	—
Liabilities
Deferred compensation plan liability	$	—	$	(28,801)	$	—
Derivative instruments, net		—		—		—
Contingent consideration		—		—		—
Total liabilities	$	—	$	(28,801)	$	—
Redeemable noncontrolling interest	$	—	$	—	$	(56,666)

As of December 31, 2021

	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	$	—	$	136	$	—
Total assets	$	—	$	136	$	—
Liabilities
Deferred compensation plan liability	$	—	$	(30,012)	$	—
Derivative instruments, net		—		—		—
Contingent consideration		—		—		(9,600)
Total liabilities	$	—	$	(30,012)	$	(9,600)
Redeemable noncontrolling interest	$	—	$	—	$	(56,316)

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 VF US and VF ASEAN that closed during 2020. 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 recorded interest expense each period using the effective interest method until the future value of these contingent payments reached the expected total future value.

During the fourth quarter of 2020, the first quarter of 2021, the second quarter of 2021 and the fourth quarter of 2021, the Company recorded fair value adjustments to the contingent consideration associated with the VF US and VF ASEAN 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, $0.9 million increase, $0.2 million increase and a $0.1 million increase to the payables were recorded as of December 31, 2020, March 31, 2021, June 30, 2021 and December 31, 2021, respectively, and were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss). As of March 31, 2022, the expected future contingent consideration for the VF US and VF ASEAN acquisitions were finalized at $9.6 million and were paid in March 2022.

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

							Imputed
	December 31,						Interest /		March 31,
	2021		Acquisitions		Payments		Adjustments		2022
VF US	$	7,414	$	—	$	(7,414)		—	$	—
VF ASEAN		2,186		—		(2,186)		—		—
Total	$	9,600	$	—	$	(9,600)	$	—	$	—