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Fair Value Measurement
 12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurement

NOTE 9. Fair Value Measurement

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and debt materially approximated fair value as of December 31, 2018 and 2017 due to their short-term nature.

We consider as cash equivalents all highly liquid instruments with an original maturity of three months or less. As of December 31, 2018 and 2017, our cash and temporary investments were with high quality financial institutions in DDAs, savings accounts and an interest bearing checking account.

Restricted investments included $19.2 million and $20.1 million as of December 31, 2018 and 2017, respectively, of mutual funds which are reported at fair value.  These investments relate to the nonqualified deferred compensation plan that is described in Note 14.

The fair value of the contingent consideration related to the 2017 acquisition of Estenson was reduced to zero during the third quarter of 2018.  The fair value was based on significant inputs that are not observable in the market, which are referred to as Level 3 inputs. Key assumptions include the likelihood of the acquired business achieving target levels of EBITDA using a probability-weighted expected return method.  The following table sets forth a reconciliation of changes in the fair value of the contingent consideration:

Balance at December 31, 2017

$

4,703

 

Change in fair value in the second quarter 2018 (1)

 

(3,571

)

Change in fair value in the third quarter 2018 (1)

 

(1,132

)

Balance at December 31, 2018

$

-

 

 

(1)

We recorded adjustments to the contingent consideration liability in the second and third quarters of 2018, resulting in an increase in income from operations.  The income was recorded under “General and Administrative” in the Consolidated Statement of Income.  The adjustment was the result of a change in the fair value of the contingent liability, which reflected two year EBITDA targets established prior to the close of the acquisition.

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2), or unobservable inputs (Level 3). Cash and cash equivalents, accounts receivable and accounts payable are defined as “Level 1,” while long-term debt is defined as “Level 2”, and the Estenson contingent consideration is defined as “Level 3” of the fair value hierarchy in the Fair Value Measurements and Disclosures Topic of the Codification.