(7)FAIR VALUE

The authoritative guidance for fair value measurements establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, similar assets and liabilities in markets that are not active or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The following presents information as of September 30, 2017 and December 31, 2016 for the Company’s assets and liabilities required to be measured at fair value on a recurring basis, as well as the fair value hierarchy used to determine their fair value.

Accounts Receivable and Payable - The amounts recorded in the accompanying balance sheets approximate fair value because of their short-term nature.

Investments – The Company measures investments, including cost and equity method investments, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired. The fair values of these investments are determined based on valuation techniques using the best information available, and may include market observable inputs, and discounted cash flow projections. An impairment charge is recorded when the cost of the investment exceeds its fair value and this condition is determined to be other-than-temporary. As of September 30, 2017, the investment in CaféX Communication, Inc., which consists of the Company’s first quarter 2015 $9.0 million investment, the fourth quarter 2016 $3.2 million investment and the first quarter 2017 $1.1 million investment, is recorded at $13.3 million which approximates fair value.

Debt - The Company’s debt consists primarily of the Company’s Credit Agreement, which permits floating-rate borrowings based upon the current Prime Rate or LIBOR plus a credit spread as determined by the Company’s leverage ratio calculation (as defined in the Credit Agreement). As of September 30, 2017 and December 31, 2016, the Company had $255.0 million and $217.3 million, respectively, of borrowings outstanding under the Credit Agreement. During the third quarter of 2017 outstanding borrowings accrued interest at an average rate of 2.3% per annum, excluding unused commitment fees. The amounts recorded in the accompanying Balance Sheets approximate fair value due to the variable nature of the debt based on Level 2 inputs.

Derivatives - Net derivative assets (liabilities) are measured at fair value on a recurring basis. The portfolio is valued using models based on market observable inputs, including both forward and spot foreign exchange rates, interest rates, implied volatility, and counterparty credit risk, including the ability of each party to execute its obligations under the contract. As of September 30, 2017, credit risk did not materially change the fair value of the Company’s derivative contracts.

The following is a summary of the Company’s fair value measurements for its net derivative assets (liabilities) as of September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017


	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		At Fair Value
Cash flow hedges	$	—	$	(29,473)	$	—	$	(29,473)
Interest rate swaps		—		—		—		—
Fair value hedges		—		(92)		—		(92)
Total net derivative asset (liability)	$	—	$	(29,565)	$	—	$	(29,565)

As of December 31, 2016


	Fair Value Measurements Using
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		At Fair Value
Cash flow hedges	$	—	$	(54,039)	$	—	$	(54,039)
Interest rate swaps		—		(147)		—		(147)
Fair value hedges		—		740		—		740
Total net derivative asset (liability)	$	—	$	(53,446)	$	—	$	(53,446)

The following is a summary of the Company’s fair value measurements as of September 30, 2017 and December 31, 2016 (in thousands):

As of September 30, 2017


	Fair Value Measurements Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments, net	$	—	$	—	$	—
Total assets	$	—	$	—	$	—

Liabilities
Deferred compensation plan liability	$	—	$	(12,624)	$	—
Derivative instruments, net		—		(29,565)		—
Contingent consideration		—		—		(1,178)
Total liabilities	$	—	$	(42,189)	$	(1,178)

As of December 31, 2016


	Fair Value Measurements Using
	Quoted Prices in				Significant
	Active Markets for		Significant Other		Unobservable
	Identical Assets		Observable Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)
Assets
Derivative instruments, net	$	—	$	—	$	—
Total assets	$	—	$	—	$	—

Liabilities
Deferred compensation plan liability	$	—	$	(10,841)	$	—
Derivative instruments, net		—		(53,446)		—
Contingent consideration		—		—		(1,808)
Total liabilities	$	—	$	(64,287)	$	(1,808)

Deferred Compensation Plan — The Company maintains a non-qualified deferred compensation plan structured as a Rabbi trust for certain eligible employees. Participants in the deferred compensation plan select from a menu of phantom investment options for their deferral dollars offered by the Company each year, which are based upon changes in value of complementary, defined market investments. The deferred compensation liability represents the combined values of market investments against which participant accounts are tracked.

Contingent Consideration — The Company recorded contingent consideration related to the acquisitions of rogenSi and Atelka. These contingent payables were recognized at fair value using a discounted cash flow approach and a discount rate of 4.6% and 0%, respectively. The discount rates vary dependent on the specific risks of each acquisition including the country of operation, the nature of services and complexity of the acquired business, and other similar factors. These measurements were based on significant inputs not observable in the market. The Company recorded interest expense each period using the effective interest method until the future value of these contingent payables reached their expected future value. Interest expense related to all recorded contingent payables is included in Interest expense in the Consolidated Statements of Comprehensive Income (Loss).

The Company recorded contingent consideration related to a revenue servicing agreement with Welltok in the fourth quarter of 2016, in which a maximum of $1.25 million will be paid over eight quarters based on the dollar value of revenue earned by the Company. The contingent payable was recognized at fair value of $1.25 million as of December 31, 2016. As required, the first payment of $435 thousand was completed during the second quarter of 2017. As required, the second payment of $239 thousand was completed during the third quarter of 2017.

A rollforward of the activity in the Company’s fair value of the contingent consideration payable is as follows (in thousands):


							Imputed
	December 31,						Interest /		September 30,
	2016		Acquisitions		Payments		Adjustments		2017

Welltok	$	1,250	$	—	$	(674)	$	—	$	576
Atelka		558		—		—		44		602
Total	$	1,808	$	—	$	(674)	$	44	$	1,178