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Fair Value Measurements

12 Months Ended

Dec. 31, 2020

17.	Fair Value Measurements

The Company has adopted the provisions of ASC 820, “

Fair Value Measurements and Disclosures

” (“ASC 820”), related to certain financial and nonfinancial assets and liabilities. ASC 820 establishes the authoritative definition of fair value; sets out a framework for measuring fair value; and expands the required disclosures about fair value measurements. The valuation techniques required by ASC 820 are based on observable and unobservable inputs using the following three-tier hierarchy:

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Level 1 – Inputs are observable quoted prices (unadjusted) in active markets for identical assets and liabilities.

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Level 2 – Inputs are observable, other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are directly or indirectly observable in the marketplace.

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Level 3 – Inputs are unobservable that are supported by little or no market activity.

The following table summarizes the basis used to measure financial assets and (liabilities) at fair value on a recurring basis:


	Fair Value as of December 31, 2020
(Amounts in thousands)	Level 1		Level 2			Level 3			Total
Interest-Rate Swap Contracts	$	—	$	(35	)	$	—		$	(35	)
Contingent consideration liabilities	$	—	$	—		$	(2,882	)	$	(2,882	)


	Fair Value as of December 31, 2019
(Amounts in thousands)	Level 1		Level 2			Level 3			Total
Interest-Rate Swap Contracts	$	—	$	(43	)	$	—		$	(43	)
Contingent consideration liabilities	$	—	$	—		$	—		$	—

The fair value of interest rate swap contracts is based on quoted prices for similar instruments from a commercial bank, and therefore, the fair value measurement is considered to be within Level 2.

The fair value of the contingent consideration liability was estimated by utilizing a probability weighted simulation model to determine the fair value of contingent consideration, and therefore, the fair value measurement is considered to be within Level 3.

In 2019 and 2018, the Company revalued the contingent consideration liability after determining that relevant conditions for payment of such liability were not satisfied. The revaluation resulted in a $6.1 million and $11.1 million reduction to the contingent consideration liability in 2019 and 2018, respectively, which is reflected in selling and administrative expenses in the Company’s Consolidated Statements of Operations, in Item 8 herein. In 2020, the Company incurred a $2.9 million contingent consideration liability related to the AmberLeaf acquisition.

The following table provides information regarding changes in the Company’s Level 3 fair values for the contingent consideration liability for the three years ended December 31, 2020:


	Years Ended December 31,
	2020		2019			2018
	(Amounts in thousands)
Beginning balance	$	—	$	6,069		$	17,125
Contingent consideration incurred		2,882		—			—
Payments made		—		—			—
Revaluation		—		(6,069	)		(11,056	)

Ending balance	$	2,882	$	—		$	6,069

- 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.

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