Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.22.4
Fair Value Measurements
12 Months Ended
Dec. 31, 2022
Fair Value Measurements [Abstract]  
Fair Value Measurements NOTE 10. FAIR VALUE MEASUREMENTS

We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1- inputs to the valuation methodology are quoted market prices for identical assets or liabilities in active markets.

Level 2- inputs to the valuation methodology include quoted prices in markets that are not active or model inputs that are

               observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3- inputs to the valuation methodology are based on prices or valuation techniques that are unobservable.

Items Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and 2021 were as follows:

December 31, 2022

Level 1

Level 2

Level 3

Total

Assets

Designated forward exchange contracts

$

-

$

357

$

-

$

357

$

-

$

357

$

-

$

357

Liabilities

Designated forward exchange contracts

$

-

$

6

$

-

$

6

Contingent consideration liabilities

-

-

1,595

1,595

$

-

$

6

$

1,595

$

1,601

December 31, 2021

Level 1

Level 2

Level 3

Total

Assets

Designated forward exchange contracts

$

-

$

511

$

-

$

511

$

-

$

511

$

-

$

511

Liabilities

Designated forward exchange contracts

$

-

$

24

$

-

$

24

Contingent consideration liabilities

$

-

$

-

$

3,485

$

3,485

$

-

$

24

$

3,485

$

3,509

Derivative financial instruments are recorded at fair value based on current market pricing models. No nonrecurring fair value measurements existed at December 31, 2022 and 2021.

The Company estimated the initial fair value of the contingent consideration liabilities using a series of call options. Significant unobservable inputs used in the valuation included discount rates ranging from 4.8% to 8.0%. Contingent consideration liabilities are subsequently remeasured at the estimated fair value at the end of each reporting period using financial projections of the acquired company, such as sales-based milestones and estimated probabilities of achievement, with the change in fair value recognized in contingent consideration benefit in the accompanying consolidated statements of comprehensive (loss) income for such period. We measure the initial liability and remeasure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements.

The net sales threshold required for the payment of the Rhino-Rack Contingent Consideration was not met during the measurement period ended June 30, 2022. The net sales threshold required for the payment of the 2022 portion of the MAXTRAX Contingent Consideration was met during the 2022 measurement period ended June 30, 2022. During the year ended December 31, 2022, $AUD 3,125 was paid in cash in accordance with the MAXTRAX Purchase Agreement.

The following table summarizes the changes in contingent consideration liabilities:

Rhino-Rack

MAXTRAX

Total

Balance at December 31, 2021

$

1,813

$

1,672

$

3,485

Fair value adjustments

(1,811)

2,304

493

Contingent consideration payments

-

(2,148)

(2,148)

Impact of foreign currency exchange rates

(2)

(233)

(235)

Balance at December 31, 2022

$

-

$

1,595

$

1,595

As the contingent consideration liabilities are remeasured to fair value each reporting period, significant increases or decreases in projected sales, discount rates or the time until payment is made could have resulted in a significantly lower or higher fair value

measurement. Our determination of fair value of the contingent consideration liabilities could change in future periods based on our ongoing evaluation of these significant unobservable inputs.  

Items Measured at Fair Value on a Non-Recurring Basis

In assessing the recoverability of goodwill and indefinite-lived intangible assets, management estimates the fair value of each reporting unit using Level 3 inputs through a combination of the income approach based upon projected discounted cash flows of the reporting unit and the market approach. The fair value of indefinite-lived intangible assets is estimated using Level 3 inputs through the income approach, specifically the relief-from-royalty method. The fair values are based on revenue and cash flow projections, royalty rates, and discount rates. Impairment of goodwill and indefinite-lived intangible assets was $92,311, $0, and $0 during the years ended December 31, 2022, 2021, and 2020, respectively. See Note 5 for additional information.