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4. FAIR VALUE MEASUREMENTS
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following table summarizes, for assets or liabilities measured at fair value, the respective fair value and the classification by level of input within the fair value hierarchy:
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Fair Value Measurement at |
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Reporting Date Using |
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Description |
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March 27, 2020 |
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Quoted Prices in
Active Markets for Identical Assets
(Level 1) |
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Significant
Other
Observable
Inputs
(Level 2) |
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Significant
Unobservable
Inputs
(Level 3) |
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(In millions) |
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Other liabilities: |
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Contingent earn-out liability |
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$ |
12.3 |
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$ |
— |
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$ |
— |
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$ |
12.3 |
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Pension obligation |
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$ |
4.9 |
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$ |
— |
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$ |
— |
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$ |
4.9 |
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Common stock purchase obligation |
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$ |
7.0 |
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$ |
— |
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$ |
— |
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$ |
7.0 |
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Fair Value Measurement at |
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Reporting Date Using |
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Description |
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December 27, 2019 |
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Quoted Prices in
Active Markets for
Identical Assets
(Level 1) |
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Significant
Other
Observable
Inputs
(Level 2) |
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Significant
Unobservable
Inputs
(Level 3) |
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(In millions) |
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Other liabilities: |
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Contingent earn-out liability |
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$ |
9.5 |
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$ |
— |
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$ |
— |
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$ |
9.5 |
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Common stock purchase obligation |
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$ |
6.8 |
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$ |
— |
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$ |
— |
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$ |
6.8 |
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Pension obligation |
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$ |
4.4 |
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$ |
— |
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$ |
— |
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$ |
4.4 |
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There were no transfers from Level 1 or Level 2 to Level 3. Fair value adjustments were noncash, and therefore did not impact the Company’s liquidity or capital resources. Qualitative information about Level 3 fair value measurements are primarily as follows:
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March 27, |
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Valuation |
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Unobservable |
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2020 |
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Techniques |
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Input |
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Range |
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(Dollars in millions, except rate/multiple) |
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Contingent earn-out liability |
$ |
12.3 |
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Monte Carlo simulation |
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Revenue discount rate |
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7.5% |
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Revenue volatility rate |
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41.0% |
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Common stock purchase obligation |
$ |
7.0 |
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Discounted cash flow |
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Revenue multiple |
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1.3 |
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EBITDA Multiple |
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5.0 |
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Pension obligation |
$ |
4.9 |
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Projected unit credit method |
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Discount rate |
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2.0% |
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Rate on return |
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1.5% |
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Salary increase rate |
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4.5% |
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Following is a summary of the Level 3 activity:
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(In millions) |
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Contingent
earn-out
liability |
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Purchase
obligation |
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Pension
obligation |
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As of December 27, 2019 |
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$ |
9.5 |
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$ |
6.8 |
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$ |
4.4 |
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Fair value adjustments |
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2.8 |
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0.2 |
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0.5 |
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As of March 27, 2020 |
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$ |
12.3 |
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$ |
7.0 |
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$ |
4.9 |
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