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FAIR VALUE | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
FAIR VALUE | FAIR VALUE Assets and liabilities measured at fair value on a recurring basis are summarized below:
| September 30, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Current assets measured at fair value: | (in thousands)
Cash equivalents | $ | — |  |  | $ | 564 |  |  | $ | — |  |  | $ | 564 |
Other assets: |  |  |  |  |  |  |
Life insurance policies | — |  |  | 36,672 |  |  | — |  |  | 36,672 |
Interest rate swap | — |  |  | 3,660 |  |  | — |  |  | 3,660 |
Total assets measured at fair value | $ | — |  |  | $ | 40,896 |  |  | $ | — |  |  | $ | 40,896 |
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During the nine months ended September 30, 2023, there were no transfers between levels.
| December 31, 2022
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Current assets measured at fair value: | (in thousands)
Cash equivalents | $ | — |  |  | $ | 78 |  |  | $ | — |  |  | $ | 78 |
Other assets: |  |  |  |  |  |  |
Life insurance policies | — |  |  | 34,527 |  |  | — |  |  | 34,527 |
Total assets measured at fair value | $ | — |  |  | $ | 34,605 |  |  | $ | — |  |  | $ | 34,605 |
Accrued liabilities measured at fair value: |  |  |  |  |  |  |
Contingent consideration | $ | — |  |  | $ | — |  |  | $ | 13,431 |  |  | $ | 13,431 |
Other long-term liabilities measured at fair value: |  |  |  |  |  |  |
Interest rate swap | — |  |  | 1,523 |  |  | — |  |  | 1,523 |
Total liabilities measured at fair value | $ | — |  |  | $ | 1,523 |  |  | $ | 13,431 |  |  | $ | 14,954 |
During the year ended December 31, 2022, there were no transfers between levels. Contingent Consideration The following table provides a rollforward of the contingent consideration related to the Company’s acquisitions.
| Nine Months Ended
| September 30, 2023 |  | September 24, 2022
| (in thousands)
Beginning balance | $ | 13,431 |  |  | $ | 37,244 |
Payments | (15,130) |  |  | (11,476) |
Total gains or losses (realized/unrealized): |  |  |
Adjustment of previously recorded contingent liability | 1,810 |  |  | (15,340) |
Foreign currency translation | (111) |  |  | (1,767) |
Ending balance | $ | — |  |  | $ | 8,661 |
The Company estimates the fair value of contingent consideration obligations through valuation models, such as probability-weighted and option pricing models, which incorporate probability adjusted assumptions and simulations related to the achievement of the milestones and the likelihood of making related payments. The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain financial targets, forecasted results or targets, volatility, and discount rates. The remaining maximum potential payments are approximately $43 million, of which the value accrued as of September 30, 2023 is zero as the probability of achieving the maximum target is estimated to be 0%. The volatility and weighted average cost of capital is approximately 40% and 16%, respectively. Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively. Cash Flow Hedge The Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates. In November 2022, the Company entered into an interest rate swap with a notional amount of $500 million to manage interest rate fluctuation related to floating rate borrowings under the Credit Facility, at a fixed rate of 4.700%. In March 2023 and in conjunction with an amendment of the Credit Agreement (Second Amendment), the Company modified the variable rate on its interest rate swap from 1-month LIBOR to 1-month adjusted term SOFR. Effective with the modification, the Company will pay a fixed rate of 4.65% on its swap maturing November 2, 2024. The Company elected to apply the optional expedient in ASC 848, Reference Rate Reform, in connection with modifying its interest rate swap from LIBOR to SOFR that enabled it to consider the modification a continuation of the existing contract. As a result, the transition did not have an impact on the Company’s hedge accounting or a material impact to the Company’s financial statements. Debt Instruments The book value of the Company’s revolving loans, which are variable rate loans carried at amortized cost, approximates the fair value based on current market pricing of similar debt. As the fair value is based on significant other observable inputs, including current interest and foreign currency exchange rates, it is deemed to be Level 2 within the fair value hierarchy. The book value of the Company’s Senior Notes are fixed rate obligations carried at amortized cost. Fair value is based on quoted market prices as well as borrowing rates available to the Company. As the fair value is based on significant other observable outputs, it is deemed to be Level 2 within the fair value hierarchy. The book value and fair value of the Company’s Senior Notes is summarized below:
| September 30, 2023 |  | December 31, 2022
| Book Value |  | Fair Value |  | Book Value |  | Fair Value
| (in thousands)
4.25% Senior Notes due 2028 | $ | 500,000 |  |  | $ | 448,350 |  |  | $ | 500,000 |  |  | $ | 460,450 |
3.75% Senior Notes due 2029 | 500,000 |  |  | 427,500 |  |  | 500,000 |  |  | 442,200 |
4.00% Senior Notes due 2031 | 500,000 |  |  | 423,100 |  |  | 500,000 |  |  | 432,500 |

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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 -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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