Fair Value Measurement

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 - Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3 - Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our financial instruments consisted of cash, accounts receivable, accounts payable, accrued liabilities and our revolving credit facility. The carrying value of these instruments approximates fair value as a result of the short duration of such instruments or due to the variability of the interest cost associated with such instruments.

Foreign Currency Forward Exchange Contracts. Our derivative assets and liabilities represent foreign exchange contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and counterparty credit risk. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2. To manage our risk for transactions denominated in Mexican Pesos, we have entered into forward exchange contracts that are designated as cash flow hedge instruments, which are recorded in the Condensed Consolidated Balance Sheets at fair value. The gains and losses as a result of the changes in fair value of the hedge contract are deferred in accumulated other comprehensive loss and recognized in cost of revenues in the period the related hedge transactions are recognized. Refer to Note 17 for additional disclosures.

Interest Rate Swap Agreement. To manage our exposure to variable interest rates, we have entered into an agreement (the “Interest Rate Swap Agreement”) with Bank of America, N.A. whereby the Company has agreed to exchange, at a specified interval, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. The Interest Rate Swap Agreement is intended to mitigate the impact of rising interest rates on the Company and covers $80 million of outstanding debt under the senior secured term loan facility. The Company expects this agreement to remain effective during the remaining term of the Interest Rate Swap Agreement and records the impact of the agreement in interest and other expense in the Condensed Consolidated Statements of Operations. Refer to Note 17 for additional disclosures.

The fair values of our derivative assets and liabilities and contingent consideration measured on a recurring basis are categorized as follows:



		March 31, 2020								December 31, 2019
		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Derivative assets	Foreign exchange contract ¹	$	—	$	—	$	—	$	—	$	464	$	—	$	464	$	—
Derivative assets	Interest rate swap agreement ²	$	1,213	$	—	$	1,213	$	—	$	150	$	—	$	150	$	—
Derivative liabilities	Foreign exchange contract ³	$	3,025	$	—	$	3,025	$	—	$	—	$	—	$	—	$	—
Derivative liabilities	Interest rate swap agreement ³	$	2,976	$	—	$	2,976	$	—	$	995	$	—	$	995	$	—
Earnout liability	Contingent consideration⁴	$	4,801	$	—	$	—	$	4,801	$	4,700	$	—	$	—	$	4,700
Derivative equity	Foreign exchange contract ⁵	$	2,314	$	—	$	2,314	$	—	$	464	$	—	$	464	$	—


¹	Presented in the Condensed Consolidated Balance Sheets in other current assets and based on observable market transactions of spot and forward rates.


²	Presented in the Condensed Consolidated Balance Sheets in other assets and based on observable market transactions of forward rates.


³	Presented in the Condensed Consolidated Balance Sheets in accrued liabilities and other and based on observable market transactions of forward rates.


⁴	Presented in the Condensed Consolidated Balance Sheets in accrued liabilities and other long term liabilities and based on a Monte Carlo valuation model.


⁵	Presented in Condensed Consolidated Balance Sheets in accumulated other comprehensive income and based on observable market transactions of spot and forward rates.

The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs. Based on these inputs, our long-term debt is classified as Level 2. The carrying amounts and fair values of our long-term debt obligations are as follows:



	March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loan and security agreement¹	$	155,572	$	144,653	$	156,384	$	157,983


¹	Presented in the Condensed Consolidated Balance Sheets as the current portion of long-term debt of $3.3 million and long-term debt of $152.3 million as of March 31, 2020, and current portion of long-term debt of $3.3 million and long-term debt of $153.1 million as of December 31, 2019.

Long Lived Assets Impairment. For the quarter ended March 31, 2020, an impairment charge of $0.6 million was recognized for a corporate asset and was based on the estimated selling price, less selling costs, of $0.5 million. The impairment charge is presented in impairment expense in the Condensed Consolidated Statements of Operations. Given the limited market comparable values of the asset, it is classified as Level 2. Additionally, in the quarter ended March 31, 2020, we recorded a $0.4 million impairment associated with an operating lease right-of-use asset and an impairment of property, plant and equipment of $0.7 million in the Electrical Systems segment. There were no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-recurring basis as of March 31, 2019.

Goodwill Impairment. As a result of the Company's market capitalization maintaining a value less than the carrying value of its equity, the Company determined it had an impairment indicator. Accordingly, we calculated the estimated fair value of the goodwill reporting units within the Electrical Systems and Global Seating Segments by discounting the estimated operating cash flows of each reporting unit. We then compared these estimated fair values to the net carrying values at March 31, 2020 and, as a result, recognized a $27.1 million impairment charge to goodwill. Given the subjectivity of the inputs into the fair value estimate of goodwill, the asset is classified as Level 3.