Financial Instruments

9 Months Ended

Sep. 30, 2019

The following table presents the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of September 30, 2019 and December 31, 2018:



	September 30, 2019
			Hierarchy Level (Fair Value)
	Carrying Amount		Level 1		Level 2		Level 3
Liabilities
Acquisition-related contingent consideration, including current portion ⁽¹⁾⁽²⁾	$	16,584	$	—	$	—	$	16,584
Long-term debt ⁽³⁾	273,055		—		380,362		—
Total	$	289,639	$	—	$	380,362	$	16,584



	December 31, 2018
			Hierarchy Level (Fair Value)
	Carrying Amount		Level 1		Level 2		Level 3
Liabilities
Acquisition-related contingent consideration, including current portion ⁽¹⁾	$	2,960	$	—	$	—	$	2,960
Long-term debt ⁽³⁾	265,571		—		291,837		—
Total	$	268,531	$	—	$	291,837	$	2,960


⁽¹⁾	The short-term portion is included in “Accounts payable, accrued expenses and other,” and the long-term portion is included in “Other liabilities” on the Condensed Consolidated Balance Sheets.


⁽²⁾	During the three months ended September 30, 2019, we acquired Andersch within our Corporate Finance & Restructuring segment and recorded an acquisition-related contingent consideration liability of $14.4 million, including accretion for the time value of money.


⁽³⁾	The carrying values include unamortized deferred debt issue costs and debt discount.

The fair values of financial instruments not included in the table above are estimated to be equal to their carrying values as of September 30, 2019 and December 31, 2018.

We estimate the fair value of our 2023 Convertible Notes based on their last actively traded prices. The fair value of our debt is classified within Level 2 of the fair value hierarchy because it is traded in less active markets.

We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted discounted cash flow model or a Monte Carlo simulation. These fair value estimates represent Level 3 measurements as they are based on significant inputs not observed in the market and reflect our own assumptions. The significant unobservable inputs used in the fair value measurements of our acquisition-related contingent consideration include measures of discount rates, future cash flows, volatility and the cost of debt. Significant increases (decreases) in these unobservable inputs in isolation would result in a significantly lower (higher) fair value. The fair value of our contingent consideration is reassessed at each reporting period by the Company based on additional information as it becomes available.

Any change in the fair value of an acquisition’s contingent consideration liability results in a remeasurement gain or loss that is recorded in “Selling, general and administrative expenses” on the Consolidated Statements of Comprehensive Income. During the three and nine months ended September 30, 2019 and 2018, there was no change in the estimated fair value of future expected contingent consideration payments.

- 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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