Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2022

Derivatives Not Designated As Hedging Instrument

The Company has an interest rate swap with a notional amount of $200,000 and a termination date of April 2, 2030 to reduce the interest rate risk associated with the Company’s Credit Facility. The interest rate swap is not designated as a hedging instrument for accounting purposes. The Company accounts for the interest rate swap as either an asset or a liability in the consolidated balance sheets and carries the derivative at fair value.

The following is a summary of the interest rate swap activity:


	Three Months Ended				Six Months Ended
	June 30,				June 30,				Recognized in Consolidated
	2022		2021		2022		2021		Statements of Operations
Interest rate swap:
Gain (loss) from change in fair value	$	7,406	$	(5,926)	$	19,490	$	7,735	Other income (expense), net
(Refunds) payments	(17)		316		277		617		Interest expense, net

Fair Value

The Company applies the provisions of FASB ASC Topic 820, Fair Value Measurement, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non‑financial items that are recognized or disclosed at fair value in the consolidated financial statements.

The Company’s financial instruments include cash equivalents, account receivables, certain other assets, accounts payable, accruals, certain other current and long‑term liabilities, and long‑term debt.

The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments as of June 30, 2022 and December 31, 2021:

Current assets and current liabilities — In general, the carrying amounts reported on the Company’s consolidated balance sheets for current assets and current liabilities approximate their fair values due to the short‑term nature of those instruments.

Acquisition contingent consideration — The fair value of these liabilities is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant.

Interest rate swap — The fair value of the Company’s interest rate swap is measured based on the implied forward rates from the U.S. Dollar one‑month LIBOR yield curve and are classified as Level 2 within the fair value hierarchy.

Long-term debt — The fair value of the Company’s borrowings under its Credit Facility approximated its carrying value based upon discounted cash flows at current market rates for instruments with similar remaining terms. The Company considers these valuation inputs to be Level 2 inputs in the fair value hierarchy. As of June 30, 2022, the estimated fair value of the 2026 Notes and 2027 Notes was $601,825 and $450,467, respectively. As of December 31, 2021, the estimated fair value of the 2026 Notes and 2027 Notes was $720,284 and $531,915, respectively. The estimated fair value of the 2026 Notes and 2027 Notes is based on quoted market prices of the Company’s instrument in markets that are not active and are classified as Level 2 within the fair value hierarchy. Considerable judgment is necessary to interpret the market data and develop estimates of fair values. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold, or settled.

Deferred compensation plan liabilities — The fair value of deferred compensation plan liabilities, including the liability classified phantom investments in the DCP, are marked to market at the end of each reporting period.

A financial asset or liability classification is determined based on the lowest level input that is significant to the fair value measurement. The fair value hierarchy consists of the following three levels:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value.

Financial assets and financial liabilities carried at fair value measured on a recurring basis consist of the following:


June 30, 2022	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (1)	$	19	$	—	$	—	$	19
Interest rate swap (2)	—		29,607		—		29,607
Total assets	$	19	$	29,607	$	—	$	29,626
Liabilities:
Acquisition contingent consideration (3)	$	—	$	—	$	1,923	$	1,923
Deferred compensation plan liabilities (4)	77,566		—		—		77,566
Cash-settled equity awards (5)	447		—		—		447
Total liabilities	$	78,013	$	—	$	1,923	$	79,936


December 31, 2021	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (1)	$	21	$	—	$	—	$	21
Interest rate swap (2)	—		10,117		—		10,117
Total assets	$	21	$	10,117	$	—	$	10,138
Liabilities:
Acquisition contingent consideration (3)	$	—	$	—	$	6,613	$	6,613
Deferred compensation plan liabilities (4)	102,199		—		—		102,199
Cash-settled equity awards (5)	353		—		—		353
Total liabilities	$	102,552	$	—	$	6,613	$	109,165

(1)Included in Cash and cash equivalents in the consolidated balance sheets.

(2)Included in Other assets in the consolidated balance sheets.

(3)Included in Other liabilities, except for current liabilities of $1,923 and $5,382 as of June 30, 2022 and December 31, 2021, respectively, which are included in Accruals and other current liabilities in the consolidated balance sheets. Acquisition contingent consideration liability is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant.

(4)Included in Deferred compensation plan liabilities, except for current liabilities of $2,041 and $7,309 as of June 30, 2022 and December 31, 2021, respectively, which are included in Accruals and other current liabilities in the consolidated balance sheets.

(5)Included in Accruals and other current liabilities in the consolidated balance sheets.

The following is a reconciliation of the changes in fair value of the Company’s financial liabilities which have been classified as Level 3 in the fair value hierarchy:


	Six Months Ended		Year Ended
	June 30, 2022		December 31, 2021


Balance, beginning of year	$	6,613	$	4,299
Payments	(5,059)		(2,371)
Addition	—		4,544
Change in fair value	500		294
Foreign currency translation adjustments	(131)		(153)
Balance, end of period	$	1,923	$	6,613

The Company did not have any transfers between levels within the fair value hierarchy.