Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2014

Note 6 – Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts and notes receivable, cash collateral deposited with insurance carriers, life insurance assets, cost and equity method investments, deferred compensation plan assets and liabilities, accounts payable and other current liabilities, acquisition-related contingent consideration and debt obligations.

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs when measuring fair value. The three levels of inputs that may be used are: (i) Level 1 - quoted market prices in active markets for identical assets or liabilities; (ii) Level 2 - observable market based inputs or other observable inputs; and (iii) Level 3 - significant unobservable inputs that cannot be corroborated by observable market data, which are generally determined using valuation models incorporating management’s estimates of market participant assumptions.

In instances in which the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Management’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2014, financial instruments required to be measured at fair value on a recurring basis consisted primarily of acquisition-related contingent consideration. This acquisition-related contingent consideration represents the estimated fair value of additional future earn-outs payable for acquisitions of businesses that closed after January 1, 2009, in accordance with U.S. GAAP ("ASC 805 contingent consideration"). The fair value of the Company's ASC 805 contingent consideration, which was determined using Level 3 inputs, totaled $149.6 million and $165.4 million, respectively, as of September 30, 2014 and December 31, 2013. The fair value of ASC 805 contingent consideration is based on management estimates and entity-specific assumptions and is evaluated on an on-going basis.

There were no additions to ASC 805 contingent consideration from new business combinations for the three month period ended September 30, 2014. Additions to ASC 805 contingent consideration totaled $35.0 million for the nine month period ended September 30, 2014, and totaled $3.3 million and $30.0 million for the three and nine month periods ended September 30, 2013, respectively. The Company paid approximately $1.3 million and $48.3 million of ASC 805 contingent consideration for the three and nine month periods ended September 30, 2014, respectively. There were no ASC 805 contingent consideration payments made for the three month period ended September 30, 2013. For the nine month period ended September 30, 2013, the Company paid approximately $2.7 million of ASC 805 contingent consideration. Foreign currency translation gains and/or losses associated with ASC 805 contingent consideration are included in other comprehensive income. For the three and nine month periods ended September 30, 2014, foreign currency translation gains associated with ASC 805 contingent consideration totaled $2.9 million and $2.5 million, respectively. For the three month period ended September 30, 2013, foreign currency translation losses associated with ASC 805 contingent consideration totaled $0.7 million, and for the nine month period ended September 30, 2013, foreign currency translation gains associated with ASC 805 contingent consideration totaled $1.1 million.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets and liabilities recognized or disclosed at fair value on a non-recurring basis, which are initially measured at fair value, and are subsequently remeasured in the event of an impairment or other measurement event, if applicable, include items such as cost and equity method investments, life insurance assets, long-lived assets, goodwill, other intangible assets and debt.

Carrying amounts and estimated fair values of selected financial instruments measured on a non-recurring basis as of the dates indicated were as follows (in millions):



	September 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
4.875% Senior Notes	$	400.0	$	377.0	$	400.0	$	380.0
2009 Convertible Notes	$	3.0	$	5.9	$	12.6	$	26.6
2011 Convertible Notes	$	97.0	$	192.1	$	198.3	$	428.3

The estimated fair values of the Company’s 4.875% Senior Notes, 2009 Convertible Notes and 2011 Convertible Notes are based on quoted market prices, a Level 1 input.

Cost and Equity Method Investments. The aggregate carrying value of the Company's cost and equity method investments, including long-term receivables from investees and contractual joint ventures, totaled approximately $15.0 million and $15.8 million as of September 30, 2014 and December 31, 2013, respectively. The fair values of the Company's cost and equity method investments are not readily available nor has the Company estimated the fair value of these investments. The Company is not aware of any events or changes in circumstance that would have a significant adverse effect on the carrying value of its cost or equity method investments as of September 30, 2014 or December 31, 2013.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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