Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

The market approach is applied for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value balances are classified based on the observability of those inputs.

A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize observable inputs in markets other than active markets.

In estimating the fair value of the financial instruments presented, we used the following methods and assumptions:

Cash and cash equivalents

For cash and cash equivalents, the carrying value is a reasonable estimate of fair value due to the short-term nature of the instruments.

Restricted cash

Restricted cash is comprised of certificates of deposit that are pledged for various letters of credit secured by us and escrow accounts due to acquisitions and divestitures. We deem the carrying value to be a reasonable estimate of fair value due to the nature of these instruments.

Marketable securities

Equity and debt securities are classified as available-for-sale securities and are valued using quoted prices in active markets.

Contingent consideration

The fair value of the contingent consideration was estimated using the Monte-Carlo simulation method, which relies on significant assumption and estimates including discount rates and future market conditions, among others.

Long-term debt

The fair value of long-term debt was estimated based on the current rates available to us for similar debt of the same remaining maturities and consideration of our default and credit risk.

Interest rate swap agreements

The fair value of the interest rate swap agreements \were estimated based on market value quotes received from the counter parties to the agreements.

The fair values of our financial instruments as of December 31, 2016 are presented in the following table:

	Fair Value Measurements Using
(in thousands)	Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and cash equivalents	$	72,031	$	—	$	—	$	72,031
Restricted cash	—		17,943		—		17,943
	$	72,031	$	17,943	$	—	$	89,974
Financial Liabilities:
Total debt	$	—	$	1,622,811	$	—	$	1,622,811
Derivatives:
Asset for interest rate swap agreements	$	—	$	5,392	$	—	$	5,392
Liability for interest rate swap agreements	$	—	$	2,283	$	—	$	2,283

The fair values of our financial instruments as of December 31, 2015 are presented in the following table:

	Fair Value Measurements Using
(in thousands)	Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and cash equivalents	$	99,090	$	—	$	—	$	99,090
Restricted cash	—		10,926		—		10,926
Equity securities	22,709		—		—		22,709
	$	121,799	$	10,926	$	—	$	132,725
Financial Liabilities:
Total debt	$	—	$	1,315,473	$	—	$	1,315,473
Derivatives:
Liability for interest rate swap agreements	$	—	$	4,370	$	—	$	4,370

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the year ended December 31, 2016:

			Fair Value Measurements Using
(in thousands)	Remaining Fair Value		Level 1		Level 2		Level 3		Impairment Losses
Property and equipment, net	$	—	$	—	$	—	$	—	$	2,005
Capitalized data and database costs, net	—		—		—		—		882
Investment in affiliates, net	5,662		—		—		5,662		23,431
	$	5,662	$	—	$	—	$	5,662	$	26,318

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the year ended December 31, 2015:

			Fair Value Measurements Using
(in thousands)	Remaining Fair Value		Level 1		Level 2		Level 3		Impairment Losses
Property and equipment, net	$	—	$	—	$	—	$	—	$	3,770

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the year ended December 31, 2014:

			Fair Value Measurements Using
(in thousands)	Remaining Fair Value		Level 1		Level 2		Level 3		Impairment Losses
Property and equipment, net	—		—		—		—		1,070
Goodwill, net	—		—		—		—		3,900
Investment in affiliates, net	—		—		—		—		360
	$	—	$	—	$	—	$	—	$	5,330

We recorded non-cash impairment charges of $2.0 million, $3.8 million and $1.1 million for the years ended December 31, 2016, 2015 and 2014, respectively, in our property and equipment, net primarily related to internally developed software. Further, we recorded a non-cash impairment charge of $0.9 million for the year ended December 31, 2016, in our capitalized data and database costs, net primarily related to a database that has become obsolete. Further, we recorded non-cash impairment charges of $3.9 million for the year ended December 31, 2014, in our goodwill, net related to our technology solutions, solutions express and outsourcing services businesses. See Note 6 - Goodwill, Net for further discussion. Impairment losses from property and equipment, net and goodwill, net are recorded within depreciation and amortization in the accompanying consolidated statements of operations.

We also recorded a non-cash impairment charge of $23.4 million and $0.4 million for the year ended December 31, 2016 and December 31, 2014, respectively, in our investment in affiliates, net due to other-than-temporary losses in value from the absence of an ability to recover the carrying amount of the investments.

In April 2016, we completed the acquisition of FNC for $400.0 million in cash paid at closing, subject to certain closing adjustments, and up to $75.0 million to be paid in cash in 2018, contingent upon the achievement of certain revenue targets in fiscal 2017. See Note 16 - Acquisitions for further discussion. We fair-valued the contingent payment using the Monte-Carlo simulation model and initially recorded $8.0 million as contingent consideration. The contingent payment is fair-valued quarterly and changes are recorded within gain on investments and other, net in our consolidated statements of operations. As of December 31, 2016, we reversed the remaining balance on the contingent payment and recorded an $8.0 million gain for the year ended December 31, 2016.