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Fair Value Measurements
6 Months Ended
Jun. 30, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements

7. Fair Value Measurements

The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. This hierarchy requires entities to 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; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

   

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

Recurring Fair Value Measurements

The following table summarizes the fair value of the Company’s financial assets and liabilities that are measured on a recurring basis as of June 30, 2014 (in thousands):

 

     Level 1      Level 2      Level 3      Total  

Assets:

           

Marketable equity securities

     $  1,055           $ —           $ —           $ 1,055     

Foreign exchange forward contracts

     —           2,806           —           2,806     

Warrants

     —           —           395           395     
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total

     $  1,055           $ 2,806           $ 395           $ 4,256     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Interest rate swaps

     $ —           $  20,493           $ —           $ 20,493     

Contingent consideration

     —           —           13,200           13,200     
  

 

 

    

 

 

    

 

 

    

 

 

 

  Total

     $ —           $ 20,493           $ 13,200           $ 33,693     
  

 

 

    

 

 

    

 

 

    

 

 

 

Below is a summary of the valuation techniques used in determining fair value:

Marketable equity securities — The Company values marketable equity securities utilizing quoted market prices.

Foreign exchange forward contracts — The Company values foreign exchange forward contracts using quoted market prices for identical instruments in less active markets or using other observable inputs.

Warrants — The Company values warrants utilizing the Black-Scholes-Merton model.

Interest rate swaps — The Company values interest rate swaps using market inputs with mid-market pricing as a practical expedient for bid-ask spread.

Contingent consideration — The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. Key assumptions used to estimate the fair value of contingent consideration include revenue, net new business and operating forecasts and the probability of achieving the specific targets.

The following table summarizes the changes in Level 3 financial assets and liabilities measured on a recurring basis for the six months ended June 30 (in thousands):

 

     Warrants – Deposits
and Other Assets
     Contingent Consideration –
Accounts Payable and Accrued
Expenses and Other Liabilities
 
     2014      2013      2014      2013  

Balance as of January 1

     $ 211           $ 29            $ 13,014          $ 3,521    

Revaluations included in earnings

     184           5            186          (113)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of June 30

     $ 395           $ 34            $ 13,200          $ 3,408    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The revaluations for the warrants and the contingent consideration are recognized in other expense (income), net on the accompanying condensed consolidated statements of income.

Non-recurring Fair Value Measurements

Certain assets are carried on the accompanying condensed consolidated balance sheets at cost and are not remeasured to fair value on a recurring basis. These assets include cost and equity method investments and loans that are written down to fair value for declines which are deemed to be other-than-temporary, and goodwill and identifiable intangible assets which are tested for impairment annually and when a triggering event occurs.

As of June 30, 2014, assets carried on the balance sheet and not remeasured to fair value on a recurring basis totaling approximately $759.2 million were identified as Level 3. These assets are comprised of cost and equity method investments of $66.4 million, goodwill of $410.3 million and other identifiable intangibles, net of $282.5 million.

The Company has unfunded cash commitments totaling approximately $31.9 million related to its cost and equity method investments as of June 30, 2014.

Other

The estimated fair value of the Company’s long-term debt, which is primarily based on rates in which the debt is traded among banks, was approximately $2.1 billion at both June 30, 2014 and December 31, 2013.