Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.24.3
Fair Value Measurements
 12 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements FAIR VALUE MEASUREMENTS
The following assets and liabilities are recorded at fair value on a recurring basis.
•We hold mutual fund assets within a Rabbi Trust to cover liabilities in our deferred compensation plan. These assets have prices quoted within active markets and, accordingly, are classified as level 1 within the fair value hierarchy.
•We have interest rate swap agreements to manage our interest rate exposure. These agreements can be valued using observable data and, accordingly, are classified as level 2 within the fair value hierarchy.
•During fiscal year 2024, we recorded liabilities for additional consideration payable on certain acquisitions. This consideration was contingent upon the post-acquisition performance of these businesses. This liability was based upon our internal assumptions regarding profits, volumes, and contract terms. Accordingly, these inputs were not observable and were classified as level 3 within the fair value hierarchy. In fiscal year 2024, all outstanding liabilities were settled.
The tables below present assets and liabilities measured and recorded at fair value in our consolidated balance sheets on a recurring basis and their corresponding level within the fair value hierarchy. No transfers between Level 1, Level 2, and Level 3 fair value measurements occurred for the year ended September 30, 2024.
Table 9.1: Fair Value Measurements
As of September 30, 2024
Level 1 Level 2 Level 3 Balance
(in thousands)
Assets:
Deferred compensation assets - Rabbi Trust $ 34,692  $ —  $ —  $ 34,692 
Interest rate swaps - $300 million notional value
 —  12,573  —  12,573 
Total assets $ 34,692  $ 12,573  $ —  $ 47,265 
Liabilities:
Interest rate swaps - $350 million notional value
 $ —  $ 3,394  $ —  $ 3,394 
Total liabilities —  $ 3,394  $ —  $ 3,394 
The fair values of receivables, prepaid assets, other assets, accounts payable, accrued costs, and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments. The carrying value of our debt is consistent with the fair value as the stated interest rates in the agreements are consistent with the current market rates used in notes with similar terms in the markets (Level 2 inputs).
Accumulated Other Comprehensive Loss
All amounts recorded in accumulated other comprehensive loss are related to our foreign currency translations and interest rate swaps, net of tax. The following table shows changes in accumulated other comprehensive loss. Amounts reclassified from other comprehensive income were recorded within our selling, general, and administrative expenses (for foreign currency translation adjustments) and within interest expense (for gains on derivatives).
Table 9.2: Details of Changes in Accumulated Other Comprehensive Loss by Category
Foreign currency translation adjustment Net unrealized gain on derivatives, net of tax Total
(in thousands)
Balance as of September 30, 2021 $ (39,605) $ (303) $ (39,908)
Other comprehensive income/(loss) before reclassifications (17,504) 23,004  5,500 
Amounts reclassified from accumulated other comprehensive income/(loss) —  447  447 
Net current period other comprehensive income/(loss) (17,504) 23,451  5,947 
Balance as of September 30, 2022 (57,109) 23,148  (33,961)
Other comprehensive income/(loss) before reclassifications 6,509  8,558  15,067 
Amounts reclassified from accumulated other comprehensive income/(loss) 116  (8,837) (8,721)
Net current period other comprehensive income/(loss) 6,625  (279) 6,346 
Balance as of September 30, 2023 (50,484) 22,869  (27,615)
Other comprehensive income before reclassifications 11,126  (3,681) 7,445 
Amounts reclassified from accumulated other comprehensive loss 133  (12,423) (12,290)
Net current period other comprehensive losses 11,259  (16,104) (4,845)
Balance as of September 30, 2024 $ (39,225) $ 6,765  $ (32,460)
The foreign currency translation adjustment reflects a cumulative difference between the value of our earnings in currencies other than the U.S. Dollar between the time they were recorded and the date of the financial statements. As of September 30, 2024, the balance included approximately $18.2 million of translation differences related to the Australian Dollar and $13.3 million related to the British Pound, with the remaining balance principally comprised of differences related to the Canadian Dollar.
Contingent Consideration
The fair value of our contingent considerations are based upon estimates of the likely payments, which are based upon assumptions over future performance. The liabilities are reviewed on a quarterly basis and changes in estimates are recorded to selling and general administrative expenses.
Our contingent consideration relates to the businesses below:
•In October 2021, we acquired the student loan servicing business from Navient, which we rebranded as Aidvantage. Payments were based upon volumes, up to a maximum payment of $65.0 million. At September 30, 2023, the Aidvantage contingent consideration was $7.5 million. This liability was settled in the third quarter of fiscal year 2024.
•In January 2022, we acquired BZ Bodies Limited. Future payments were based upon the performance of the business through December 2023, up to a maximum payment of $2.5 million (£2.0 million British Pounds). At September 30, 2023, we recorded a contingent consideration liability for the maximum payment, which we paid in the second quarter of fiscal year 2024.
The following table presents a reconciliation of the contingent consideration, which is measured and recorded at fair value on a recurring basis using Level 3 inputs:
Table 9.3: Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Contingent Consideration
(in thousands)
Balance as of September 30, 2023 $ 9,903 
Adjustments to fair value recorded in the current year
 985 
Cash payments (10,977)
Foreign currency translation 89 
Closing contingent consideration as of September 30, 2024 $ — 
Other assets
Other long-lived assets are reviewed when events indicate they may no longer be able to recover their value. Assets that we cease using or which do not appear able to generate sufficient future cash flows to support their values are reviewed and, where necessary, their value is written down. In this instance, the expense is reported in the same place where future expenses were anticipated to be recorded. For example, a fixed asset impairment would be recorded in depreciation expense. All the non-recurring fair values are considered Level 3, as the inputs are not observable and based on internal assumptions. For the year ended September 30, 2023, we recorded impairment charges of $9.5 million. These impairment charges were on our long-lived assets within our U.S. Services and Outside the U.S. Services Segments and relate to assets on underperforming contracts. During the years ended September 30, 2024, and September 30, 2022, we recorded no impairment charges.