Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

v3.5.0.2
FAIR VALUE MEASUREMENTS
9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS
NOTE 14. FAIR VALUE MEASUREMENTS
 
FASB ASC Topic 820 “Fair Value Measurements and Disclosures,” established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring fair value. This framework defines three levels of inputs to the fair value measurement process and requires that each fair value measurement be assigned to a level corresponding to the lowest level input that is significant to the fair value measurement in its entirety. The three broad levels of inputs defined by the FASB ASC Topic 820 hierarchy are as follows:
 
Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and
Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).
 
As of September 30, 2016, the carrying value of cash and cash equivalents, trade accounts receivables, accounts payable, accrued expenses and accrued interest approximates fair value due to the short-term nature of such instruments. 
 
 The following table summarizes the fair value of our financial liabilities that are measured at fair value:
 
 
 
September 30, 2016
 
 
 
Total Fair Value
 
Fair Value Measurement Category
 
 
 
and Carrying
Value on
Balance Sheet
 
Level 1
 
Level 2
 
Level 3
 
 
 
(Dollars in thousands)
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated fair value of contingent earn-out consideration included in accrued expenses
 
$
305
 
$
—
 
$
—
 
$
305
 
Long-term debt and capital lease obligations less unamortized discount and debt issuance costs
 
 
268,049
 
 
—
 
 
268,049
 
 
—
 
Fair value of interest rate swap
 
 
2,124
 
 
—
 
 
2,124
 
 
—
 
 
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
 
The fair value of contingent earn-out consideration is estimated as the present value of the expected contingent payments to be made using a probability-weighted discounted cash flow model for probabilities of possible future payments. These fair value estimates use unobservable inputs that reflect our own assumptions as to the ability of the acquired business to meet the targeted benchmarks and discount rates used in the calculations. The carrying value of long-term debt and capital lease obligations approximates the fair value as the related interest rates approximate rates currently available to the company for similar debt instruments of comparable maturity. The fair value of the interest rate swap is based on market quotes from a major financial institution taking into consideration the most recent market activity.