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Fair Value Measurements
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE MEASUREMENTS
The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. The three levels of inputs are classified as follows:
•Level 1 — quoted prices in active markets for identical assets or liabilities;
•Level 2 — observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and
•Level 3 — unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company’s assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below.
Cash Equivalents
Cash equivalents primarily consist of time-based deposits and interest-bearing instruments with maturities of three months or less. The Company classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.
Interest Rate Swaps
As described in Note 5 – Debt, the Company may, from time to time, execute interest rate swaps as a means of fixing the floating interest rate component on a portion of its floating-rate debt. The Company classifies its interest rate swaps as Level 2 due to the use of a discounted cash flow model based on the terms of the contract and the interest rate curve (Level 2 inputs) to calculate the fair value of the swaps.
Contingent Consideration
At March 31, 2023, the Company had contingent obligations to transfer up to $7.5 million, and $8.0 million to the former owners of Deist Industries, Inc. and certain of its affiliates (collectively, “Deist”), and Blasters, respectively, if specified financial results are met over future reporting periods (i.e., an earn-out). The Deist and Blasters acquisitions were completed on December 30, 2021 and January 3, 2023, respectively. The Deist contingent earn-out payment, if earned, would be due to be paid following the third anniversary of the closing date. The Blasters contingent earn-out payments, if earned, would be due to paid annually, in each of the three years following the anniversary of the closing date. During the three months ended March 31, 2023, the Company paid $0.5 million to settle the contingent consideration obligation due to the former owners of Mark Rite Lines Equipment Company, Inc. (“MRL”), which was acquired on July 1, 2019.
Liabilities for contingent consideration are measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred. Subsequent changes in fair value are included as a component of Acquisition and integration-related expenses on the Condensed Consolidated Statements of Operations.
The Company uses an income approach to value the contingent consideration liability based on the present value of risk-adjusted future cash flows under either a scenario-based or option-pricing method, as appropriate. Due to the lack of relevant observable market data over fair value inputs, such as prospective financial information or probabilities of future events as of March 31, 2023, the Company has classified the contingent consideration liability within Level 3 of the fair value hierarchy outlined in ASC 820, Fair Value Measurements. As further described in Note 2 – Acquisitions, the Company has recognized a preliminary estimate of the fair value of the Blasters contingent consideration liability as of the acquisition date, which is subject to change during the measurement period as the applicable third-party valuation is finalized.
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023:
Fair Value Measurement at Reporting Date Using
(in millions)Level 1Level 2Level 3Total
Assets:
Cash equivalents$16.3 $— $— $16.3 
Liabilities:
Contingent consideration— — 6.0 6.0 
Interest rate swaps— 0.8 — 0.8 
The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements in the three months ended March 31, 2023 and 2022:
(in millions)20232022
Contingent consideration liability, at January 1$2.7 $2.7 
Issuance of contingent consideration in connection with acquisitions4.0 — 
Settlements of contingent consideration liabilities(0.5)— 
Total gains included in earnings (a)
(0.2)— 
Contingent consideration liability, at March 31$6.0 $2.7 
(a)    Included as a component of acquisition and integration-related expenses on the Condensed Consolidated Statements of Operations.