FAIR VALUE DISCLOSURES |
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| FAIR VALUE DISCLOSURES | 8. FAIR VALUE DISCLOSURES Mandatorily Redeemable Non-Controlling Interest The mandatorily redeemable non-controlling interest (“MRNCI”) liability recorded on the Company’s condensed consolidated balance sheets represents the fair value of the non-controlling interest in the Company’s strategic investment in Team Sledd. During Q3 2026, Team Sledd redeemed the remaining membership interests from its non-controlling interest, which increased the Company’s ownership percentage to 100% at June 2026. The Company owned approximately 92% of Team Sledd as of September 2025. The Company elected to present the MRNCI liability at fair value under FASB Accounting Standards Codification (“ASC”) 825 – Financial Instruments as it believed this best represented the future liability and cash flows. As such, the MRNCI balance at the end of each reporting period represents the fair value of the remaining future membership interest redemptions and other amounts due to noncontrolling interest holders as of each reporting date. The Company calculated the estimated fair value of the MRNCI based on a discounted cash flow valuation technique using the best information available at each reporting date, and changes in the fair value of the MRNCI were recorded as a component of other expense (income) in the condensed consolidated statements of operations. The MRNCI was classified as Level 3 because of the Company’s reliance on unobservable assumptions. The Company estimated the probability and timing of future redemptions and earnings of Team Sledd based on management’s knowledge and assumptions of certain events at each reporting date, including the timing of any future redemptions and an appropriate discount rate. During Q3 2026, the remaining amount due to non-controlling interest holders was distributed, resulting in the settlement of the MRNCI liability. At September 2025, the difference between the contractual amount due under the MRNCI and its fair value was approximately $0.3 million. A summary of the MRNCI activity is as follows:
Contingent Consideration In April 2024, the Company acquired substantially all of the net operating assets of Burklund Distributors, Inc. (“Burklund”). A portion of the consideration exchanged in the acquisition of Burklund was in the form of contingent consideration, which the Company recorded at fair value as of the acquisition date. At each reporting date, the Company reevaluates whether the achievement of the targets to trigger the minimum payout of any contingent consideration is probable. In Q1 2025, the Company determined that the achievement of the targets to trigger the minimum payout of any contingent consideration was not probable, and adjusted the fair value of its contingent consideration liability and recognized operating income of approximately $1.5 million, which was recorded as a reduction of selling, general and administrative expenses in the condensed consolidated statements of operations. Upon the expiration of the agreement in Q3 2026, the Company reaffirmed that the targets to trigger the minimum payout of any contingent consideration had not been achieved. |
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