FAIR VALUE MEASUREMENTS AND INVESTMENTS

9 Months Ended

Sep. 30, 2023

FAIR VALUE MEASUREMENTS AND INVESTMENTS

FAIR VALUE MEASUREMENTS AND INVESTMENTS

7. FAIR VALUE MEASUREMENTS AND INVESTMENTS

In accordance with the provisions of fair value accounting, a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, and defines fair value based upon an exit price model.

The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 assets and liabilities include money market funds, debt and equity securities and derivative contracts that are traded in an active exchange market.
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate obligations and non-exchange traded derivative contracts.
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. Level 3 assets and liabilities include financial instruments and intangible assets that have been impaired whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Assets and liabilities of the Company measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 are summarized as follows (in thousands):

	September 30, 2023
	Significant Other
	Quoted Prices in		Unobservable
	Active Markets		Inputs
Description	(Level 1)		(Level 3)		Total
Short term investments	$	300	$	—	$	300
Other investments		—		1,278		1,278
Alaska Communications redeemable common units		—		(22,266)		(22,266)
Alloy redeemable common units		—		(14,760)		(14,760)
Warrants on Alaska Communications redeemable common units		—		(654)		(654)
Total assets and liabilities measured at fair value	$	300	$	(36,402)	$	(36,102)

	December 31, 2022
	Significant Other
	Quoted Prices in		Unobservable
	Active Markets		Inputs
Description	(Level 1)		(Level 3)		Total
Short term investments	$	300	$	—	$	300
Other investments		—		1,616		1,616
Alaska Communications redeemable common units		—		(22,557)		(22,557)
Alloy redeemable common units		—		(14,760)		(14,760)
Warrants on Alaska Communications redeemable common units		—		(654)		(654)
Total assets and liabilities measured at fair value	$	300	$	(36,355)	$	(36,055)

Other Investments

The Company holds investments in equity securities consisting of noncontrolling investments in privately held companies. The investments are accounted for using equity method accounting, the measurement alternative for investments without a readily determinable fair value, or fair value. The fair value investments are valued using level 3 inputs and the Company used the income approach to fair value the investment. The inputs consisted of a discount rate and future cash flows calculated based on the investment attributes. A roll forward of the investments is below:

	Investments without a readily determinable fair value		Fair value investments		Equity method investments		Total
Balance, December 31, 2022	$	22,590	$	1,616	$	13,963	$	38,169
Income recognized		2,430		229		93		2,752
Contributions		425		(567)		630		488
Foreign currency gain		—		—		229		229
Reclassification of foreign currency losses		—		—		1,349		1,349
Transfers		16,264		—		(16,264)		—
Balance, September 30, 2023	$	41,709	$	1,278	$	—	$	42,987
Balance, December 31, 2021	$	17,820	$	1,925	$	28,699	$	48,444
Sale of Investments						(13,212)		(13,212)
Income (loss) recognized		—		326		(2,163)		(1,837)
Contributions / (distributions)		—		(389)		2,750		2,361
Foreign currency loss		—		—		(1,815)		(1,815)
Gain recognized		4,770		—		—		4,770
Balance, September 30, 2022	$	22,590	$	1,862	$	14,259	$	38,711

During the nine months ended September 30, 2023, the Company lost the ability to exert significant influence over its India solar investment. As a result, the Company transferred $16.3 million from equity method investments to investments without a readily determinable fair value and the accounting for the investment changed to the cost method from the equity method of accounting. Before transitioning to the cost method, the Company recorded income of $0.1 million and reclassified $1.3 million from accumulated other comprehensive income into income.

These investments are included with other assets on the consolidated balance sheets.

Redeemable Common Units and Warrants

The Company has issued redeemable common units, and warrants to purchase additional common units, in consolidated subsidiaries of the Company. The instruments are redeemable at the option of the holder. Both the common units and warrants to purchase common units are recorded at fair value in the Company’s financial statements. The common units are recorded in redeemable noncontrolling interest and the warrants are recorded in other liabilities on the Company’s balance sheets. The put options for the Alloy redeemable common units begin in 2026. The put options for the Alaska Communications redeemable common units begin the earlier of a public offering or 2028. The Company calculates the fair value of the instruments using a combination of market and discounted cash flows approaches with Level 3 inputs.

Other Fair Value Disclosures

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values because of the relatively short-term maturities of these financial instruments.

The fair value of long-term debt is estimated using Level 2 inputs. At September 30, 2023, the fair value of long-term debt, including the current portion, was $552.2 million and its book value was $543.1 million. At December 31, 2022, the fair value of long-term debt, including the current portion, was $473.7 million and its book value was $467.2 million.