Fair Value Measurement

9 Months Ended

Dec. 31, 2018

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 periods 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:

	December 31, 2018
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Derivative assets – diesel fuel contracts	$	122	$	—	$	122	$	—
Interest rate swaps		2,034		—		2,034		—
Total assets at fair value on a recurring basis	$	2,156	$	—	$	2,156	$	—
Liabilities:
Derivative liabilities – diesel fuel contracts	$	851	$	—	$	851	$	—
Contingent consideration for acquisitions		228		—		—		228
Foreign exchange forward contracts		35		—		35		—
Total liabilities at fair value on a recurring basis	$	1,079	$	—	$	851	$	228

	March 31, 2018
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Derivative assets – diesel fuel contracts	$	596	$	—	$	596	$	—
Interest rate swaps		2,801		—		2,801		—
Total assets at fair value on a recurring basis	$	3,397	$	—	$	3,397	$	—
Liabilities:
Derivative liability - diesel fuel contracts	$	116	$	—	$	116	$	—
Contingent consideration for acquisitions		578		—		—		578
Total liabilities at fair value on a recurring basis	$	694	$	—	$	116	$	578

For the three and nine months ended December 31, 2018 and 2017, 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 December 31,						Nine Months Ended December 31,
	2018			2017			2018			2017
	(In thousands)
Balance at the beginning of the period	$	325		$	735		$	578		$	1,348
Change in fair value		6			1			15			33
Payments of contingent consideration liability		(103	)		(96	)		(365	)		(741	)
Balance at the end of the period	$	228		$	640		$	228		$	640

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 12. Debt” in the Company’s Fiscal 2018 Form 10-K) were $100.0 million and $97.8 million, respectively, as of December 31, 2018 and $125.0 million and $122.3 million, respectively, at March 31, 2018. 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.