FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2018

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

5. FAIR VALUE MEASUREMENTS

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  As such, fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy was established, which prioritizes the inputs used in measuring fair value as follows:

Level 1:  Observable inputs such as quoted prices in active markets;

Level 2:  Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

Level 3:  Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

An asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

A.Market approach: Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

B.Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).

C.Income approach: Techniques to convert future amounts to a single present amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured and disclosed at fair value on a recurring basis:

	Asset/						Valuation
	(Liability)		Level 2		Level 3		Technique
December 31, 2018:
Contingent consideration	$	(6,895)	$	—	$	(6,895)	C
Interest rate swaps (Note 11)		(4,292)		(4,292)		—	A
December 31, 2017:
Contingent consideration	$	(12,100)	$	—	$	(12,100)	C

The following table sets forth the change in contingent consideration (Level 3 measurements):

	Contingent
	Consideration
Balance at January 1, 2016	$	(52,665)
Change in fair value		8,922
Payments		43,743
Balance at December 31, 2016		—
Affinity acquisition		(35)
Comfort acquisition		(3,800)
WRB acquisition		(530)
Accurate acquisition		(1,980)
Focus acquisition		(2,080)
Changes in fair values		(3,675)
Balance at December 31, 2017		(12,100)
Change in fair value		(3,364)
Payments		8,569
Balance at December 31, 2018	$	(6,895)

The carrying amount of debt approximates fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing.