Fair Value Measurements

We use a three-level valuation hierarchy for measuring fair value and include detailed financial statement disclosures about fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:


•	Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.


•	Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:



	September 30, 2017
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Interest rate swap contracts	$	2,047		$	—	$	2,047		$	—
Currency forward contracts	1,212			—		1,212			—
Total assets recorded at fair value	$	3,259		$	—	$	3,259		$	—

Liabilities
Interest rate swap contracts	$	(668	)	$	—	$	(668	)	$	—
Cross-currency swap contracts	(29,294		)	—		(29,294		)	—
Currency forward contracts	(27,623		)	—		(27,623		)	—
Currency option contracts	(607		)	—		(607		)	—
Contingent consideration	(5,734		)	—		—			(5,734		)
Total liabilities recorded at fair value	$	(63,926	)	$	—	$	(58,192	)	$	(5,734	)



	June 30, 2017
	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets
Interest rate swap contracts	$	1,717		$	—	$	1,717		$	—
Total assets recorded at fair value	$	1,717		$	—	$	1,717		$	—

Liabilities
Interest rate swap contracts	$	(483	)	$	—	$	(483	)	$	—
Cross-currency swap contracts	(19,760		)	—		(19,760		)	—
Currency forward contracts	(14,700		)	—		(14,700		)	—
Currency option contracts	(651		)	—		(651		)	—
Contingent consideration	(5,453		)	—		—			(5,453		)
Total liabilities recorded at fair value	$	(41,047	)	$	—	$	(35,594	)	$	(5,453	)

During the quarter ended September 30, 2017 and year ended June 30, 2017, there were no significant transfers in or out of Level 1, Level 2 and Level 3 classifications.

The valuations of the derivatives intended to mitigate our interest rate and currency risk are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable market-based inputs, including interest rate curves, interest rate volatility, or spot and forward exchange rates, and reflects the contractual terms of these instruments, including the period to maturity. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurement. However, as of September 30, 2017, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 in the fair value hierarchy.

Contingent consideration obligations are measured at fair value and are based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes and probabilities for the contingent consideration. Certain contingent consideration obligations are valued using a Monte Carlo simulation model. We assess these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Any changes in the fair value of contingent consideration related to updated assumptions and estimates will be recognized within general and administrative expenses in the consolidated statements of operations during the period in which the change occurs.

As part of the acquisition of WIRmachenDRUCK on February 1, 2016, we agreed to a variable contingent payment up to €40,000, previously based on the achievement of a cumulative gross profit target for calendar years 2016 and 2017. During the fourth quarter of fiscal 2017, we determined it was reasonably certain, based on recent performance, that the maximum earn-out would be achieved. Subsequently, during the first quarter of fiscal 2018, we amended the terms of this arrangement to remove the performance target and agreed to pay the maximum amount in January 2018. The fair value of the liability is $46,316 as of September 30, 2017 and represents the present value of the agreed payment amount. Of the total liability, $5,734 is considered contingent consideration and included in the table below and the remaining portion of the liability is classified as a compensation arrangement as discussed in Note 7.

The following table represents the changes in fair value of Level 3 contingent consideration:



	Three Months Ended September 30,
	2017 (1)		2016 (2)
Balance at June 30	$	5,453	$	1,212
Fair value adjustment	102		1,112
Foreign currency impact	179		15
Balance at September 30	$	5,734	$	2,339

_____________________

(1) Classified as a current liability as of June 30, 2017 and September 30, 2017 on the consolidated balance sheet.

(2) Classified as a long-term liability as of June 30, 2016 and September 30, 2016 on the consolidated balance sheet.

As of September 30, 2017 and June 30, 2017, the carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and other current liabilities approximated their estimated fair values. As of September 30, 2017 and June 30, 2017 the carrying value of our debt, excluding debt issuance costs and debt discounts, was $829,289 and $882,578, respectively, and the fair value was $837,510 and $906,744, respectively. Our debt at September 30, 2017 includes variable rate debt instruments indexed to LIBOR that resets periodically and fixed rate debt instruments. The estimated fair value of our debt was determined using available market information based on recent trades or activity of debt instruments with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy. The estimated fair value of assets and liabilities disclosed above may not be representative of actual values that could have been or will be realized in the future.