Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2023

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.

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.

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.

The following methods and assumptions were used by the Company in estimating its fair value measurements for Level 2 and Level 3 financial instruments as of March 31, 2023 and December 31, 2022:

Acquisition contingent consideration — The fair value of these liabilities is generally determined using a cost or income approach and is measured 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 asset or liability is determined using an income approach and is measured based on the implied forward rates from the U.S. dollar one‑month LIBOR yield curve. The Company considers these valuation inputs to be Level 2 inputs in 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 March 31, 2023, the estimated fair value of the 2026 Notes and 2027 Notes was $644,572 and $487,376, respectively. As of December 31, 2022, the estimated fair value of the 2026 Notes and 2027 Notes was $622,431 and $470,856, 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.

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


March 31, 2023	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (1)	$	6,578	$	—	$	—	$	6,578
Interest rate swap (2)	—		32,711		—		32,711
Total assets	$	6,578	$	32,711	$	—	$	39,289
Liabilities:
Acquisition contingent consideration (3)	$	—	$	—	$	955	$	955
Deferred compensation plan liabilities (4)	82,807		—		—		82,807
Cash-settled equity awards (5)	823		—		—		823
Total liabilities	$	83,630	$	—	$	955	$	84,585


December 31, 2022	Level 1		Level 2		Level 3		Total
Assets:
Money market funds (1)	$	19	$	—	$	—	$	19
Interest rate swap (2)	—		37,200		—		37,200
Total assets	$	19	$	37,200	$	—	$	37,219
Liabilities:
Acquisition contingent consideration (3)	$	—	$	—	$	1,196	$	1,196
Deferred compensation plan liabilities (4)	79,081		—		—		79,081
Cash-settled equity awards (5)	536		—		—		536
Total liabilities	$	79,617	$	—	$	1,196	$	80,813

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

(4)Included in Deferred compensation plan liabilities, except for current liabilities of $2,133 and $2,067 as of March 31, 2023 and December 31, 2022, 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:


	Three Months Ended		Year Ended
	March 31, 2023		December 31, 2022


Balance, beginning of year	$	1,196	$	6,613
Payments	(249)		(5,261)
Addition	—		1,390
Change in fair value	—		(1,427)
Foreign currency translation adjustments	8		(119)
Balance, end of period	$	955	$	1,196

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