Fair Value Measurements

9 Months Ended

Sep. 30, 2020

FAIR VALUE MEASUREMENTS

Factors used in determining the fair value of financial assets and liabilities are summarized into three broad categories:

•Level 1 - observable inputs such as quoted prices (unadjusted) in active liquid markets for identical securities as of the reporting date;

•Level 2 - other significant directly or indirectly observable inputs, including quoted prices for similar securities, interest rates, prepayment speeds and credit risk; or observable market prices in markets with insufficient volume and/or infrequent transactions; and

•Level 3 - significant inputs that are generally unobservable inputs for which there is little or no market data available, including our own assumptions in determining fair value.

Assets and liabilities measured at fair value on a recurring basis were as follows (in thousands):


	September 30, 2020
	Level 1		Level 2		Level 3		Total
Assets:













Derivatives

Foreign currency forward contracts	$	—	$	637	$	—	$	637

Total assets measured at fair value	$	—	$	637	$	—	$	637


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:












Derivatives

Foreign currency forward contracts	$	—	$	295	$	—	$	295

Total assets measured at fair value	$	—	$	295	$	—	$	295

Liabilities:
Derivatives

Foreign currency forward contracts	$	—	$	9	$	—	$	9
Total liabilities measured at fair value	$	—	$	9	$	—	$	9

For our assets measured at fair value on a recurring basis, we recognize transfers between levels at the actual date of the event or change in circumstance that caused the transfer. There were no transfers between levels during the nine month period ended September 30, 2020, nor for the year ended December 31, 2019.

We did not have any changes to our valuation techniques during the nine month period ended September 30, 2020, nor for the year ended December 31, 2019.

The fair values of our foreign currency forward contracts are calculated as the present value of estimated future cash flows using discount factors derived from relevant Level 2 market inputs, including forward curves and volatility levels.

We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property, plant and equipment, goodwill, other intangible assets and certain other long-lived assets in connection with impairment evaluations. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy.

As of September 30, 2020, there were held-for-sale assets of $28.7 million and liabilities of $9.7 million that were recorded at fair value on a nonrecurring basis. As of September 30, 2020, there were no liabilities that were recorded at fair value on a recurring basis.

In accordance with ASC 360 — Property, Plant and Equipment (“ASC 360”), we met the criteria for classification of held-for-sale for the Octane Fitness® disposal group as of the reporting date. We performed an evaluation during the second and third quarter of 2020 to determine the held-for-sale fair values of assets and liabilities less related costs to sell, which resulted in a non-cash charge for loss on disposal group of $20.7 million. The disposal group was sold in October for $25.0 million with related disposal costs of $3.0 million. For additional information related to asset and liabilities held-for-sale, see Notes 2 and 18.

The held-for-sale valuation was performed using a quantitative assessment of the disposal group and we determined the fair value less costs to sell of the disposal group was less than the carrying amount. We assigned assets and liabilities to the disposal group either by specific identification or assumptions for the assets and liabilities that are specific to the held-for-sale disposal

group. As of September 30, 2020, we determined the fair value of the disposal group using the market approach because we estimated there was a high likelihood that our disposal group would sell in an orderly transaction to market participants. In addition, we observed a range of offers to determine the reasonableness of assumptions and the estimated fair value of the disposal group. These quoted prices were used as observable market data from Level 2 inputs. As of June 30, 2020, we determined the fair value of the disposal group using the income approach and the market approach. In addition, we determined observed recent transactions of comparable multiples from publicly traded companies in our industry to determine the reasonableness of assumptions and the fair values of the disposal group estimated. Significant unobservable inputs and assumptions inherent in the valuation methodologies from Level 3 inputs were employed and include, but were not limited to, prospective financial information, growth rates, terminal value and discount rates. We compared the carrying amount of the disposal group to its respective fair value. We reconciled the aggregate fair values of the disposal group determined (as described above) to the carrying value less related costs to sell.

As of December 31, 2019, there were no assets or liabilities that were recorded at fair value on a nonrecurring basis.

The carrying values of cash and cash equivalents, restricted cash, trade receivables, prepaids and other current assets, trade payables and accrued liabilities approximate fair value due to their short maturities. The carrying value of our debt approximates its fair value and falls under Level 2 of the fair value hierarchy, as the interest rate is variable and based on current market rates.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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