Quarterly report pursuant to Section 13 or 15(d)

Fair Value

v2.4.0.8
Fair Value
 9 Months Ended
Sep. 30, 2014
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

 

 

September 30,

 

December 31,

 

 

2014

 

2013

Assets:

 

 

 

 

 

 

Other long-term assets (a)

  

$
1,685 

  

$
1,127 

 

 

 

 

 

 

 

Total Assets

 

$
1,685 

 

$
1,127 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Long term debt (b)

 

$
109,715 

 

$
110,439 

Earnout - TrynEx (c)

 

 
3,987 

 

 
3,587 

Interest rate swaps (d)

 

 
64 

 

 
282 

 

 

 

 

 

 

 

Total Liabilities

 

$
113,766 

 

$
114,308 

 

(a)  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.

 

(b)  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.

 

(c)  Included in accrued expenses and other current liabilities and other long term liabilities in the amounts of $2,200 and $1,787, respectively, at September 30, 2014 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

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2014

 

2014

 

 

 

 

 

 

 

Beginning Balance

  

$
3,587 

 

$
3,587 

Additions

 

 

—

 

 

—

Adjustments to fair value

 

 
400 

 

 
400 

Ending balance

 

$
3,987 

 

$
3,987 

 

(d)  Interest rate swaps are included in accrued expenses and other current liabilities.  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.