Quarterly report pursuant to Section 13 or 15(d)

Fair Value

v3.2.0.727
Fair Value
6 Months Ended
Jun. 30, 2015
Fair Value  
Fair Value

2.Fair Value

 

Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor.  Fair value measurements are categorized into one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs available at the measurement date, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

 

The following table presents financial assets and liabilities measured at fair value on a recurring basis and discloses the fair value of long-term debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value at

 

Fair Value at

 

 

June 30,

 

December 31,

 

 

2015

 

2014

Assets:

 

 

 

 

 

 

Interest rate swaps (a)

 

$

93

 

$

 -

Other long-term assets (b)

  

 

2,590

  

 

1,725

 

 

 

 

 

 

 

Total Assets

 

$

2,683

 

$

1,725

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Interest rate swaps (a)

 

$

137

 

$

 -

Long term debt (c)

 

 

187,754

 

 

187,160

Earnout - TrynEx (d)

 

 

2,032

 

 

1,987

Earnout - Henderson (e)

 

 

714

 

 

600

Total Liabilities

 

$

190,637

 

$

189,747

 

 

 

 


(a)  Valuation models are calibrated to initial trade price. Subsequent valuations are based on observable inputs to the valuation model (e.g. interest rates and credit spreads). Model inputs are changed only when corroborated by market data. A credit risk adjustment is made on each swap using observable market credit spreads. Thus, inputs used to determine fair value of the interest rate swap are Level 2 inputs.  Interest rate swaps of $137 and $93 at June 30, 2015 are included in accrued expenses and other current liabilities and other long-term assets, respectively.

 

(b) Included in other assets is the cash surrender value of insurance policies on various individuals that are associated with the Company. The carrying amounts of these insurance policies approximates their fair value.

 

(c)  The fair value of the Company’s long-term debt, including current maturities, is estimated using discounted cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements, which is a Level 2 input for all periods presented. Meanwhile, long-term debt is recorded at carrying amount, net of discount, as disclosed on the face of the balance sheet.

 

(d)  Included in accrued expenses and other current liabilities in the amount of $2,032 at June 30, 2015 is an obligation for a portion of the potential earn out incurred in conjunction with the acquisition of substantially all of the assets of TrynEx, Inc. (“TrynEx”).  The carrying amount of the earn out approximates its fair value.  Fair value is based upon Level 3 inputs of a monte carlo simulation analysis using key inputs of forecasted future sales and financial performance as well as a growth rate reduced by the market required rate of return.  See reconciliation of liability included below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

 

 

2015

 

2015

 

2014

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

  

$

2,032

 

$

1,987

 

$

3,587

 

$

3,587

 

Additions

 

 

 

 

 

 

 

 

 

Adjustments to fair value

 

 

 

 

313

 

 

 

 

 

Payment to former owners

 

 

 

 

(268)

 

 

 

 

 

Ending balance

 

$

2,032

 

$

2,032

 

$

3,587

 

$

3,587

 

 

(e)  Included in accrued expenses and other current liabilities and other long term liabilities in the amounts of $272 and $442, respectively, at June 30, 2015 is the fair value of an obligation for a portion of the potential earn out acquired in conjunction with the acquisition of Henderson Enterprise Group, Inc. (“Henderson”).   Fair value is based upon Level 3 discounted cash flow analysis using key inputs of forecasted future sales as well as a growth rate reduced by the market required rate of return. See reconciliation of liability included below: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2015

 

2015

 

 

 

 

 

 

 

 

 

Beginning Balance

  

$

635

 

$

600

 

Additions

 

 

 

 

 

Adjustments to fair value

 

 

96

 

 

192

 

Payment to former owners

 

 

(17)

 

 

(78)

 

Ending balance

 

$

714

 

$

714