|12 Months Ended|
Dec. 31, 2020
|Fair Value Disclosures [Abstract]|
|Fair Value||FAIR VALUE
Fair Value Measurements
The following is a description of the valuation methodologies used for contingent consideration for business combinations and for the Goldman Sachs warrant prior to its July 2018 redemption (see Note 10, Long-Term Debt and Warrant Liability), both of which were initially recorded and remeasured at fair value at the end of each reporting period. The contingent consideration for business combinations are related to acquisitions made in 2018 and the contingency periods have expired at December 31, 2020. The Goldman Sachs warrant was fully redeemed in July 2018. Accordingly, at December 31, 2020, the Company no longer has any fair value estimates that are remeasured at the end of each reporting period.
Redeemed Goldman Sachs Warrant
Prior to its redemption in July 2018, the Goldman Sachs warrant was classified as level 3 in the fair value hierarchy. Historically, the fair value of the Goldman Sachs warrant was estimated based on the fair value of Priority Holdings, LLC using a weighted-average of values derived from generally accepted valuation techniques, including market approaches, which consider the guideline public company method, the guideline transaction method, the recent funding method, and an income approach, which considers discounted cash flows. Priority Holdings, LLC adjusted the carrying value of the warrant to fair value as determined by the valuation model and recognized the change in fair value as an increase or decrease in interest and other expense. On July 25, 2018, the Goldman Sachs warrant was fully redeemed in exchange for $12.7 million cash, which resulted in a gain of $0.1 million, as the value of the Goldman Sachs warrant immediately prior to the cancellation was $12.8 million.
Contingent Consideration for Business Combinations
The initial estimated fair value of approximately $1.0 million for the contingent consideration related to the 2018 business combinations for PPS Tech and PPS Northeast (see Note 4, Asset Acquisitions, Asset Contributions, and Business Combinations) were based on a weighted payout probability at the measurement date, which falls within Level 3 on the fair value hierarchy since these recurring fair value measurements are based on significant unobservable inputs. The probabilities used to estimate the payout probability of the contingent consideration for the two business combinations ranged between 15% and 35% for one and between 5.0% and 80% for the other. The weighted average probabilities were based on present value of estimated projections for financial metrics for the remaining earnout periods. At December 31, 2019 and 2018, the fair value of this contingent consideration was estimated to be an aggregate of approximately $0.4 million and $1.0 million, respectively. During the years ended December 31, 2020 and 2019, the carrying values of these contingent consideration arrangements were reduced by approximately $0.4 million and $0.6 million, respectively, and these amounts are reported within selling, general and administrative expense on the Company's consolidated statements of operations. The Company paid no amounts under either of these earnout arrangements which expired during the year ended December 31, 2020.
The following table shows a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs that are classified as Level 3 in the fair value hierarchy for the years ended December 31, 2020, 2019, and 2018:
There were no transfers among the fair value levels during the years ended December 31, 2020, 2019, or 2018.
Fair Value Disclosures
Notes receivable are carried at amortized cost. Substantially all of the Company's notes receivable are secured, and the Company believes that all of its notes receivable are collectible. The fair value of the Company's notes receivable at December 31, 2020 and December 31, 2019 was approximately $7.7 million and $5.7 million, respectively. On the fair value hierarchy, Level 3 inputs are used to estimate the fair value of these notes receivable.
The Borrower's outstanding debt obligations (see Note 10, Long-Term Debt and Warrant Liability) are reflected in the Company's consolidated balance sheets at carrying value since the Company did not elect to remeasure debt obligations to fair value at the end of each reporting period.
The fair value of the term loan facility under the Borrowers' Senior Credit Agreement at December 31, 2020 and 2019 was estimated to be approximately $278.0 million and $381.0 million, respectively. The fair value of these notes with a notional value and carrying value (gross of deferred costs and discounts) of $279.4 million and $388.8 million, respectively, was estimated using binding and non-binding quoted prices in an active secondary market, which considers the Borrowers' credit risk and market related conditions, and is within Level 3 of the fair value hierarchy.
The carrying values of the Borrowers' other long-term debt obligations approximate fair value due to mechanisms in the credit agreements that adjust the applicable interest rates and the lack of a market for these debt obligations.
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.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef