4.	FAIR VALUE MEASUREMENTS

Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based upon the best use of the asset or liability at the measurement date. Entities are required to use a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are

three

levels of inputs that

may

be used to measure fair value:

Level

– Observable inputs such as quoted market prices in active markets;

Level

– Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

Level

– Unobservable inputs about which little or

market data exists, therefore requiring an entity to develop its own assumptions.

As of

September 30, 2019

and

December 31, 2018

, our available-for-sale securities primarily consisted of investments held in a rabbi trust which are intended to fund the Company’s Supplemental Executive Retirement Plan (“SERP”) obligations. These securities are measured at fair value using quoted prices in active markets for identical assets (Level

) inputs and amounted to

$1.2

million at

September 30, 2019

and

$1.4

million at

December 31, 2018

. The Company does

not

have any financial assets measured at fair value on a recurring basis categorized as Level

and there were

transfers in or out of Level

Level

or Level

during the

nine

months ended

September 30, 2019

September 30, 2018

. There were

changes to the Company’s valuation techniques used to measure asset fair values on a recurring or nonrecurring basis during the

nine

months ended

September 30, 2019

September 30, 2018

There were

financial assets accounted for at fair value on a nonrecurring basis as of

September 30, 2019

December 31, 2018

The Company has other financial instruments, such as cash and cash equivalents, accounts receivable, restricted cash, accounts payable and accrued expenses, which are

not

measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. The fair value of the Company’s long-term debt is estimated using a discounted cash flow method based on interest rates that are currently available for debt issuances with similar terms and maturities. At

September 30, 2019

and

December 31, 2018

, the estimated fair value of total debt was

$116.8

million and

$117.9

million, respectively, compared to a carrying amount of

$112.3

million and

$114.2

million, respectively. The Company did

not

have any other financial liabilities within the scope of the fair value disclosure requirements as of

September 30, 2019

Nonfinancial assets and liabilities, such as goodwill, indefinite-lived intangible assets and long-lived assets, are accounted for at fair value on a nonrecurring basis. These items are tested for impairment upon the occurrence of a triggering event. We review goodwill for impairment on a reporting unit basis annually during the

fourth

quarter of each year and whenever events or changes in circumstances indicate the carrying value of goodwill

may

not

be recoverable. As weakened market conditions from earlier in

2019

continued into the

third

quarter without a visible rebound in incoming orders, the Company’s actual revenue and margin levels in

2019

were significantly lower than the financial projections utilized in the annual goodwill impairment analysis (performed as of

October 1, 2018),

and were

not

projected to rebound to those levels in

2019.

The Company determined that current business conditions, and the resulting decrease in the Company’s projected undiscounted and discounted cash flows, together with the accompanying stock price decline, constituted a triggering event, which required the Company to perform interim impairment tests related to its long-lived assets and goodwill during the

third

quarter of

2019.

The Company’s interim test on its long-lived assets indicated that the carrying value of its long-lived assets was recoverable and that

impairment existed as of the

July 31, 2019

testing date.

The Company’s Level

fair value analysis related to the interim test for goodwill impairment was supported by a weighting of

two

generally accepted valuation approaches, the income approach and the market approach, as further described in the Company’s Annual Report on Form

-K for the year ended

December 31, 2018.

These approaches include numerous assumptions with respect to future circumstances, such as industry and/or local market conditions, which might directly impact each of the reporting units’ operations in the future, and are therefore uncertain. These approaches are utilized to develop a range of fair values and a weighted average of these approaches is utilized to determine the best fair value estimate within that range.

The

July 31, 2019

interim impairment test related to the Company's goodwill was performed by reporting unit (North America and Europe). The valuation test, which heavily weights future discounted cash flow projections, indicated impairment of the goodwill associated with the Company’s North America reporting unit. As a result, the Company recorded a non-cash goodwill impairment charge of

$8.9

million (

$8.5

million after-tax) during the

third

quarter of

2019.

The Company’s goodwill associated with its North America reporting unit originated from several of Bel’s prior acquisitions, primarily Power Solutions and Connectivity Solutions. The carrying value of the Company's goodwill was

$19.8

million at

December 31, 2018.

The remaining goodwill as of

September 30, 2019

has a carrying value of

$10.8

million related solely to the Company's Europe reporting unit. See Note

Goodwill.

Detailed below is a table of key underlying assumptions utilized in the fair value estimate calculation for the interim test performed as of

July 31, 2019

as compared to those assumptions utilized during the annual valuation performed as of

October 1, 2018.

The table below shows the assumptions utilized for the North America reporting unit.

	Goodwill Impairment Analysis
	Key Assumptions
	2019 - Interim			2018 - Annual

Income Approach - Discounted Cash Flows:
Revenue 5-year compound annual growth rate (CAGR)		1.5	%		2.6	%
2019 EBITDA margins		3.9	%		7.6	%
Cost of equity capital		15.4	%		14.2	%
Cost of debt capital		4.0	%		3.7	%
Weighted average cost of capital		14.0	%		13.0	%

Market Approach - Multiples of Guideline Companies:
Net operating revenue multiples used		0.3			0.4
Operating EBITDA multiples used		7.0 - 8.0			5.1 - 5.7
Invested capital control premium		25	%		25	%

Weighting of Valuation Methods:
Income Approach - Discounted Cash Flows		75	%		75	%
Market Approach - Multiples of Guideline Companies		25	%		25	%

The Company had also performed an interim impairment analysis of its indefinite-lived intangible assets as of

July 31, 2019.

The Company tests indefinite-lived intangible assets for impairment using a fair value approach, the relief-from-royalty method (a form of the income approach). At

December 31, 2018,

the Company’s indefinite-lived intangible assets related to the trademarks acquired in the Power Solutions, Connectivity Solutions, Cinch and Fibreco acquisitions. The Company's interim test on its indefinite-lived intangible assets indicated that the carrying value of its long-lived assets was recoverable and that

impairment existed as of the

July 31, 2019

testing date.