NOTE 11 – FAIR VALUE MEASUREMENTS

The Company classifies its financial instruments that are reported at fair value based on a hierarchal framework which ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of instrument and the characteristics specific to the instrument. Instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The Company does not adjust the quoted price for these assets or liabilities, which include marketable securities held in connection with the Company’s captive insurance program.

Level 2—Pricing inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data. Balances in this category include derivatives and marketable securities held in connection with the Company’s captive insurance program.

Level 3—Pricing inputs are unobservable as of the reporting date and reflect the Company’s own assumptions about the fair value of the asset or liability. Balances in this category include the Company’s estimate, using a combination of internal and external fair value analyses, of contingent consideration for historical acquisitions, and the Company’s estimate of achievement of performance targets, including targeted enterprise value, related to cash-settled performance stock units. The Company uses a third-party valuation specialist to determine estimated enterprise value using discounted cash flow and market approaches, weighted equally. The assumptions utilized in the discounted cash flow model include a discount rate of 15%. The expected timing of achievement is the fourth quarter of 2026.

The following table summarizes the valuation of the Company’s financial instruments by the above fair value hierarchy levels as of March 31, 2026 and December 31, 2025 (in thousands):

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The contingent consideration balance classified as a Level 3 liability remained consistent during the three months ended March 31, 2026, and is primarily related to contingent consideration associated with a prior acquisition.

Insurance Collateral

Insurance collateral is comprised of investments in U.S. Treasuries and marketable equity and debt securities held by the Company’s wholly-owned captive insurance subsidiary that support the Company’s insurance programs and reserves, as well as cash deposits with third parties. Certain of these investments, if sold or otherwise liquidated, would have to be replaced by other suitable financial assurances and are, therefore, considered restricted. All debt securities are designated as available-for-sale and reported at fair value with the related temporary unrealized gains and losses related to changes in market conditions of marketable debt securities reported as a separate component of accumulated other comprehensive income (loss), net of deferred income tax. Changes in the fair value of debt securities which are determined to be company specific credit losses are recognized in the statements of operations, thus establishing a new cost basis for such investment. All equity securities are carried at fair value with changes in fair value reported as a component other income (loss), net in the condensed consolidated statements of operations. Investment income earned on these investments is reported as a component of other income, net in the accompanying condensed consolidated statements of operations. Realized gains and losses are determined based on an average cost basis.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Insurance collateral consisted of the following as of March 31, 2026 and December 31, 2025 (in thousands):

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Amortized cost basis and aggregate fair value of the Company’s marketable securities as of March 31, 2026 and December 31, 2025 were as follows (in thousands):

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As of March 31, 2026, available-for-sale securities included U.S. Treasuries, corporate bonds and fixed income securities of $16.8 million with contractual maturities within one year, $15.8 million with contractual maturities extending longer than one year through five years and $21.4 million with contractual maturities extending longer than five years. Actual maturities may differ from contractual maturities as a result of the Company's ability to sell these securities prior to maturity.

The Company evaluates the marketable debt securities portfolio to determine whether declines in fair value of these securities are related to credit loss. Management estimates credit losses on marketable debt securities utilizing a credit loss impairment model on a quarterly basis. We estimate expected credit losses, measured over the contractual life of debt securities, considering relevant issue specific factors, including, but not limited to, a decrease in credit ratings or an entity’s ability to pay. The Company is not aware of any specific factors indicating that the underlying issuers of the debt securities would not be able to pay interest as it becomes due or repay the principal amount at maturity. Therefore, the Company believes that the changes in the estimated fair values of these debt securities are related to market fluctuations, as such, there were no credit losses recognized as of March 31, 2026 and December 31, 2025.

The Company realized net gains on the sales and maturities of available-for-sale securities of $0.7 million for the three months ended March 31, 2026 and 2025, respectively.

Debt

Based on management’s estimates, the carrying value of the other long-term debt approximates fair value as of March 31, 2026 and December 31, 2025. The estimated fair value of the Company’s senior secured term loans and senior secured notes was approximately $4,623.5 million and $4,668.0 million and the outstanding principal amount was $4,591.0 million and $4,600.0 million as of March 31, 2026 and December 31, 2025, respectively. The Company’s debt is classified as Level 2 in the fair value hierarchy.

Other financial instruments

For all other financial instruments including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses, the carrying amounts approximate fair value due to the short maturity of those instruments.