Fair Value Measurement

6 Months Ended

Sep. 30, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurement

5. FAIR VALUE MEASUREMENT

When applying fair value principles in the valuation of assets and liabilities, the Company is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The Company has not changed its valuation techniques used in measuring the fair value of any financial assets or liabilities during the fiscal years presented. The fair value estimates take into consideration the credit risk of both the Company and its counterparties.

When active market quotes are not available for financial assets and liabilities, ADS uses industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including credit risk, interest rate curves, foreign currency rates and forward and spot prices for currencies. In circumstances where market-based observable inputs are not available, management judgment is used to develop assumptions to estimate fair value. Generally, the fair value of Level 3 instruments is estimated as the net present value of expected future cash flows based on internal and external inputs.

Recurring Fair Value Measurements - The assets and liabilities carried at fair value as of the periods presented were as follows:

	September 30, 2017
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Derivative assets – diesel fuel contracts	$	442	$	—	$	442	$	—
Derivative assets – interest rate swap		615		—		615		—
Total assets at fair value on a recurring basis	$	1,057	$	—	$	1,057	$	—
Liabilities:
Derivative liability - diesel fuel contracts	$	2	$	—	$	2	$	—
Derivative liability - interest rate swap		428		—		428		—
Contingent consideration for acquisitions		735		—		—		735
Total liabilities at fair value on a recurring basis	$	1,165	$	—	$	430	$	735

	March 31, 2017
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Derivative assets – diesel fuel contracts	$	179	$	—	$	179	$	—
Total assets at fair value on a recurring basis	$	179	$	—	$	179	$	—
Liabilities:
Derivative liability - diesel fuel contracts	$	142	$	—	$	142	$	—
Contingent consideration for acquisitions		1,348		—		—		1,348
Total liabilities at fair value on a recurring basis	$	1,490	$	—	$	142	$	1,348

For the six months ended September 30, 2017 and 2016, respectively, there were no transfers in or out of Levels 1, 2 or 3.

Valuation of Contingent Consideration for Acquisitions - The fair values of the contingent consideration payables for acquisitions were calculated based on a discounted cash flow model, whereby the probability-weighted future payment value is discounted to the present value using a market discount rate. The method used to price these liabilities is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the fair value. Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3) for the periods presented were as follows:

	Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017			2016
	(In thousands)
Balance at the beginning of the period	$	858		$	2,199		$	1,348		$	2,858
Change in fair value		6			31			32			57
Payments of contingent consideration liability		(129	)		(233	)		(645	)		(918	)
Balance at the end of the period	$	735		$	1,997		$	735		$	1,997

Valuation of Debt - The carrying amounts of current financial assets and liabilities approximate fair value because of the immediate or short-term maturity of these items, or in the case of derivative instruments, because they are recorded at fair value. The carrying and fair value of the Company’s Senior Notes (discussed in “Note 7. Debt”) were $125.0 million and $124.9 million, respectively, as of September 30, 2017 and $75.0 million and $75.9 million, respectively, at March 31, 2017. The fair value of the Senior Notes was determined based on a comparison of the interest rate and terms of such borrowings to the rates and terms of similar debt available for the period. The Company believes the carrying amount on the remaining long-term debt, including the Secured Bank Term Loans, is not materially different from its fair value as the interest rates and terms of the borrowings are similar to currently available borrowings. The categorization of the framework used to evaluate this debt is considered Level 2.