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Fair value of financial instruments
 6 Months Ended
Jun. 30, 2016
Fair Value Disclosures [Abstract]  
Fair value of financial instruments

16.

Fair value of financial instruments

The Company measures the fair value of certain assets, liabilities and noncontrolling interests subject to put provisions (temporary equity) based upon certain valuation techniques that include observable or unobservable inputs and assumptions that market participants would use in pricing these assets, liabilities, temporary equity and commitments. The Company also has classified certain assets, liabilities and temporary equity that are measured at fair value into the appropriate fair value hierarchy levels as defined by the Financial Accounting Standards Board (FASB).

The following table summarizes the Company’s assets, liabilities and temporary equity measured at fair value on a recurring basis as of June 30, 2016:

 

 

 

 

 

 

 

Quoted prices in

 

 

 

 

 

 

Significant

 

 

 

 

 

 

 

active markets for

 

 

Significant other

 

 

unobservable

 

 

 

 

 

 

 

identical assets

 

 

observable inputs

 

 

inputs

 

 

 

Total

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

$

50,056

 

 

$

50,056

 

 

$

—

 

 

$

—

 

Interest rate cap agreements

 

$

2,753

 

 

$

—

 

 

$

2,753

 

 

$

—

 

Funds on deposit with third parties

 

$

77,320

 

 

$

77,320

 

 

$

—

 

 

$

—

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent earn-out obligations

 

$

19,634

 

 

$

—

 

 

$

—

 

 

$

19,634

 

Interest rate swap agreements

 

$

70

 

 

$

—

 

 

$

70

 

 

 

—

 

Temporary equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interests subject to put provisions

 

$

936,903

 

 

$

—

 

 

$

—

 

 

$

936,903

 

 

The available-for-sale securities represent investments in various open-ended registered investment companies, or mutual funds, and are recorded at estimated fair value based upon quoted prices reported by each mutual fund. See Note 4 to these condensed consolidated financial statements for further discussion.

The interest rate swap and cap agreements are recorded at fair value estimated from valuation models utilizing the income approach and commonly accepted valuation techniques that use inputs from closing prices for similar assets and liabilities in active markets as well as other relevant observable market inputs at quoted intervals such as current interest rates, forward yield curves, implied volatility and credit default swap pricing. The Company does not believe the ultimate amount that could be realized upon settlement of these interest rate swap and cap agreements would be materially different from the fair value estimates currently reported. See Note 8 to the condensed consolidated financial statements for further discussion.

The funds on deposit with third parties represent funds held with various third parties as required by regulation or contract and invested by those parties in various investments, which are measured at estimated fair value based primarily on quoted market prices.

The estimated fair value measurements of contingent earn-out obligations are primarily based on unobservable inputs including projected EBITDA, estimated probability of achieving gross margins or quality margins of certain medical procedures and the estimated probability of earn-out payments being made using an option pricing technique and a simulation model for expected EBITDA and operating income. In addition, a probability adjusted model was used to estimate the fair value amounts of the quality margins. The estimated fair value of these contingent earn-out obligations are remeasured as of each reporting date and could fluctuate based upon any significant changes in key assumptions, such as changes in the Company credit risk adjusted rate that is used to discount obligations to present value.

See Note 10 to these condensed consolidated financial statements for a discussion of the Company’s methodology for estimating the fair value of noncontrolling interests subject to put obligations.

Other financial instruments consist primarily of cash, accounts receivable, life insurance contracts, accounts payable, other accrued liabilities and debt. The balances of the non-debt financial instruments are presented in the consolidated financial statements at June 30, 2016 at their approximate fair values due to the short-term nature of their settlements.

The carrying balance of the Company’s Senior Secured Credit Facilities totaled $4,330,000 as of June 30, 2016, and the fair value was approximately $4,357,000 based upon quoted market prices.

The carrying balance of the Company’s senior notes was $4,500,000 as of June 30, 2016 and their fair value was approximately $4,568,000, based upon quoted market prices.