FAIR VALUE

6 Months Ended

Jun. 30, 2023

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 June 30, 2023 and December 31, 2022 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.

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 SOFR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of June 30, 2023 and December 31, 2022, the Company had $915.0 million and $960.0 million, respectively, of borrowings outstanding under the Credit Facility. During the second quarter of 2023 outstanding borrowings accrued interest at an average rate of 6.6% 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 June 30, 2023, 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 June 30, 2023 and December 31, 2022 (in thousands):

As of June 30, 2023

	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	$	—	$	9,689	$	—	$	9,689
Fair value hedges		—		(43)		—		(43)
Total net derivative asset (liability)	$	—	$	9,646	$	—	$	9,646

As of December 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	$	—	$	115	$	—	$	115
Fair value hedges		—		205		—		205
Total net derivative asset (liability)	$	—	$	320	$	—	$	320

The following is a summary of the Company’s fair value measurements as of June 30, 2023 and December 31, 2022 (in thousands):

As of June 30, 2023

	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	$	—	$	—	$	—
Deferred compensation plan asset		29,302		—		—
Contingent consideration		—		—		—
Total assets	$	29,302	$	—	$	—
Liabilities
Derivative instruments, net	$	—	$	9,646	$	—
Contingent consideration		—		—		(778)
Total liabilities	$	—	$	9,646	$	(778)
Redeemable noncontrolling interest	$	—	$	—	$	(3,997)

As of December 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	$	—	$	320	$	—
Deferred compensation plan asset		25,046		—		—
Contingent consideration		—		—		5,724
Total assets	$	25,046	$	320	$	5,724
Liabilities
Derivative instruments, net	$	—	$	—	$	—
Contingent consideration		—		—		(5,916)
Total liabilities	$	—	$	—	$	(5,916)
Redeemable noncontrolling interest	$	—	$	—	$	(55,645)

Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. The plan assets are invested in a variety of equity and bond mutual funds. The deferred compensation asset represents the combined fair value of all the funds based on quoted values and market observable inputs.

Contingent Consideration - The Company recorded contingent consideration payable related to the acquisition of Faneuil that closed in 2022. The contingent payables for Faneuil were calculated using a Monte Carlo simulation including a discount rate of 19.3%. 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 payments reaches the expected total future value.

During the third and fourth quarters of 2022, and the first and second quarters of 2023, fair value adjustments of a $2.4 million benefit, a $0.5 million benefit, a $0.6 million expense and $1.7 million expense, respectively, were recorded related to fair value adjustments of the estimated contingent payments associated with the Faneuil acquisition based on updated discount factors, the passage of time, updated EBITDA estimates and a modification to the agreement (see Note 2) for one contract, and a complete reduction for the second contract as it was not awarded to the Company. The fair value adjustment benefits(expenses) were included in Other income (expense) in the Consolidated Statements of Comprehensive Income (Loss).

Contingent Receivables – The Company recorded a contingent receivable related to the Faneuil acquisition. During the third and fourth quarters of 2022, and the first and second quarters of 2023, the Company recorded fair value adjustments for the receivable based on current information which caused the receivable to decrease, and a $4.4 million expense, a $0.2 million expense, a $2.5 million expense, and a $1.9 million expense, respectively, were included in Other income (expense), net in the Consolidated Statements of Comprehensive Income (Loss).

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 /		June 30,
	2022		Acquisitions		Payments		Adjustments		2023
Faneuil	$	(5,916)	$	—	$	7,400	$	(2,262)	$	(778)
Total	$	(5,916)	$	—	$	7,400	$	(2,262)	$	(778)

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

							Imputed
	December 31,						Interest /		June 30,
	2022		Acquisitions		Payments		Adjustments		2023
Faneuil	$	5,724	$	—	$	(1,343)	$	(4,381)	$	—
Total	$	5,724	$	—	$	(1,343)	$	(4,381)	$	—