Fair Value Measurements

12 Months Ended

Dec. 31, 2021

A fair value measurement assumes a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The hierarchy for observable and unobservable inputs used to measure fair value into three broad levels are described below:

•Level 1 - Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2 - Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

•Level 3 - Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Instruments that are not Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial liability that is not measured at fair value on a recurring basis at December 31, 2021 and 2020:



	December 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

5.625% Notes	$	1,100,000	$	1,120,900	$	—	$	—

Our long-term debt includes fixed rate debt. The fair value of this instrument is based on quoted market prices in markets that are not active. Therefore, this debt is classified as Level 2 within the fair value hierarchy.

Financial Instruments Measured at Fair Value on a Recurring Basis

The following table presents certain information for our financial instruments that are measured at fair value on a recurring basis at December 31, 2021 and 2020:



	December 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Interest Rate Swap	$	77	$	77	$	416	$	416
Call Options	—		—		360		360
Preferred Shares	—		—		12,033		12,033

The interest rate swap and call options are classified as Level 3 within the fair value hierarchy.

As of December 31, 2020, the Company owned preferred shares in a company called Finn Partners. The preferred shares had a cost basis of $10,000, accrued non-cash dividends, on a cost basis, at a rate of 6% annually. The shares were redeemable to cash in the amount of the cost-plus accrued interest at any time after February 28, 2021 or upon a liquidation event and were also convertible to common shares of Finn Partners at any time until February 28, 2021 using a conversion ratio of 1% per $1,000 of preferred shares held including accrued dividends. The conversion feature was not bifurcated and was clearly and closely related to the host instrument, preferred shares. Management determined that the preferred shares were a debt-like financial instrument and should be accounted for as available-for-sale securities at their fair value at each reporting period. These preferred shares were considered to be a Level 3 fair value measurement since they utilize unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions.

On March 11, 2021, the Company transferred all of its ownership in the preferred shares. The Company recognized a gain of $1,200 within Gain on sale of business and other, net on the Audited Consolidated Statements of Operations for the twelve months ended December 31, 2021 related to this transaction.

Contingent deferred acquisition consideration (Level 3 fair value measurement) is recorded at the acquisition date fair value and adjusted at each reporting period. The estimated liability is determined in accordance with models of each business' future performance, including revenue growth and free cash flows. These models are dependent upon significant assumptions, such as the growth rate of the earnings of the relevant subsidiary during the contractual period and the discount rate. These growth rates are consistent with the Company’s long-term forecasts. As of December 31, 2021, the discount rate used to measure these liabilities ranged from 3.5% to 7.2%.

As these estimates require the use of assumptions about future performance, which are uncertain at the time of estimation, the fair value measurements presented on the Audited Consolidated Balance Sheets are subject to material uncertainty.

See Note 9 of the Notes included herein for additional information regarding contingent deferred acquisition consideration.

At December 31, 2021 and 2020, the carrying amount of the Company’s financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximated fair value because of their short-term maturity.

Non-financial Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Certain non-financial assets are measured at fair value on a nonrecurring basis, primarily goodwill, intangible assets (Level 3 fair value measurement) and right-of-use lease assets (Level 2 fair value measurement). Accordingly, these assets are not measured and adjusted to fair value on an ongoing basis but are subject to periodic evaluations for potential impairment. The Company did not recognize an impairment of goodwill or right-of-use lease assets in the twelve months ended December 31, 2021 and 2020. The Company did recognize an impairment for intangible assets (Level 3 fair value measurement) of $16,187 in the twelve months ended December 31, 2021 and did not recognize an impairment for intangible assets in the twelve months ended December 31, 2020. See Note 8 of the Notes included herein for further detail.

- 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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