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Fair Value Measurements and Interest Rate Swaps | 6 Months Ended
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Jun. 30, 2022
Fair Value Disclosures [Abstract] |
Fair Value Measurements and Interest Rate Swaps | Fair Value Measurements and Interest Rate Swaps Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swap contracts and contingent consideration related to recent acquisitions. The three levels of the fair value hierarchy under the accounting guidance are described below: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Inputs to the valuation methodology include: •quoted prices for similar assets or liabilities in active markets; •quoted prices for identical or similar assets or liabilities in inactive markets; •inputs other than quoted prices that are observable for the asset or liability; or •inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Recurring Fair Value Measurements The table below presents the estimated fair values of our interest rate swap contracts, our forward-starting interest rate swap contracts and our contingent consideration liabilities (in thousands):
|  | Fair Value at June 30,
|  | 2022 |  | 2021
Level 2 |  |  |  |
Unrealized gains on interest rate swaps |  | $ | 24,828 |  |  | $ | 4,641 |
Unrealized losses on interest rate swaps |  | — |  |  | 7,425 |
Level 3 |  |  |  |
Contingent consideration liabilities |  | $ | 582 |  |  | $ | 1,008 |
Interest Rate Swaps We utilize interest rate swap contracts and forward-starting interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on our variable rate borrowings. For determining the fair value of our interest rate swap contracts and forward-starting interest rate swap contracts, we use significant other observable market data or assumptions (Level 2 inputs) that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. Our fair value estimates reflect an income approach based on the terms of the interest rate swap contracts and inputs corroborated by observable market data including interest rate curves. We include unrealized gains in Prepaid expenses and other current assets and unrealized losses in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. We recognize any differences between the variable interest rate in effect and the fixed interest rates per our swap contracts as an adjustment to interest expense over the life of the swaps. To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, we record the changes in the estimated fair value of our interest rate swap contracts to Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. We currently have three interest rate swap contracts in place, two of which became effective on November 20, 2020, and terminate on September 29, 2022, and a third that became effective on February 26, 2021, and terminates on February 28, 2025. These swap contracts were previously forward-starting and convert the variable interest rate to a fixed interest rate on our variable rate borrowings. Interest expense related to the notional amounts under these swap contracts is based on the fixed rates plus the applicable margin on our variable rate borrowings. Changes in the estimated fair value of these interest rate swap contracts are recorded to Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The following table provides additional details related to these swap contracts:
Derivative |  | Inception Date |  | Effective Date |  | Termination Date |  | Notional Amount (in millions) |  | Fixed Interest Rate
Interest rate swap 1 |  | May 7, 2019 |  | November 20, 2020 |  | September 29, 2022 |  | $75.0 |  | 2.0925%
Interest rate swap 2 |  | July 25, 2019 |  | November 20, 2020 |  | September 29, 2022 |  | $75.0 |  | 1.5500%
Interest rate swap 3 |  | February 5, 2020 |  | February 26, 2021 |  | February 28, 2025 |  | $150.0 |  | 1.3800%
For the interest rate swap contracts in effect at June 30, 2022, a portion of the change in the estimated fair value between periods relates to future interest expense. Recognition of the change in fair value between periods attributable to accrued interest is reclassified from Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets to Interest and other non-operating expenses, net on the Consolidated Statements of Income. This amount was not material in the six-month period ended June 30, 2022. We have entered into forward-starting interest rate swap contracts to extend the hedged period for future interest payments on our variable rate borrowings. These swap contracts will convert the variable interest rate to a fixed interest rate on our variable rate borrowings. We record changes in the estimated fair value of these forward-starting interest rate swap contracts to Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. The following table provides details related to each of our forward-starting interest rate swap contracts:
Derivative |  | Inception Date |  | Effective Date |  | Termination Date |  | Notional Amount (in millions) |  | Fixed Interest Rate
Forward-starting interest rate swap 1 |  | March 9, 2020 |  | September 29, 2022 |  | February 26, 2027 |  | $150.0 |  | 0.7400%
Forward-starting interest rate swap 2 |  | March 9, 2020 |  | February 28, 2025 |  | February 26, 2027 |  | $150.0 |  | 0.8130%
Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements. In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements. Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we were in a net pay position. Our interest rate swap contracts and forward-starting interest rate swap contracts are subject to master netting arrangements. According to our accounting policy, we do not offset the fair values of assets with the fair values of liabilities related to these contracts. Nonrecurring Fair Value Measurements In addition to our assets and liabilities that we measure at fair value on a recurring basis, our assets and liabilities are also subject to nonrecurring fair value measurements. Generally, our assets, including long-lived assets, goodwill and intangible assets, are recorded at fair value on a nonrecurring basis as a result of impairment charges or business combinations. In the six months ended June 30, 2022, we did not record any significant nonrecurring fair value measurements for assets or liabilities in periods subsequent to their initial recognition. Other The carrying values of cash, receivables, accounts payable and accrued liabilities approximate fair value due to the short maturity of those instruments. The carrying value of long-term debt approximates fair value (Level 3 inputs). Our determination of the estimated fair value reflects a discounted cash flow model using our estimates, including assumptions related to borrowing rates (Level 3 inputs).

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI https://asc.fasb.org/extlink&oid=126976982&loc=d3e19207-110258 + Details
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