FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The following hierarchy is used to classify the inputs used to measure fair value:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 Unobservable inputs for the asset or liability.

The following table provides a summary of assets and liabilities as of September 30, 2013, measured at fair value on a recurring basis:



Description	Balance as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Foreign exchange contracts	$	1,370	$	—	$	1,370	$	—
Commodity contracts	289		—		289		—
Total assets	$	1,659	$	—	$	1,659	$	—

Liabilities:
Foreign exchange contracts	$	1,717	$	—	$	1,717	$	—
Commodity contracts	57		—		57		—
Net investment contracts	2		—		2		—
Contingent consideration	5,250		—		—		5,250
Deferred compensation	19,278		—		19,278		—
Total liabilities	$	26,304	$	—	$	21,054	$	5,250

The following table provides a summary of assets and liabilities as of December 31, 2012, measured at fair value on a recurring basis:



Description	Balance as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Foreign exchange contracts	$	862	$	—	$	862	$	—
Commodity contracts	731		—		731		—
Total assets	$	1,593	$	—	$	1,593	$	—

Liabilities:
Foreign exchange contracts	$	1,227	$	—	$	1,227	$	—
Contingent consideration	4,894		—		—		4,894
Deferred compensation	16,882		—		16,882		—
Total liabilities	$	23,003	$	—	$	18,109	$	4,894

The Company’s derivative contracts are valued at fair value using the market approach. The Company measures the fair value of foreign exchange contracts and net investment contracts using Level 2 inputs based on observable spot and forward rates in active markets. The Company measures the fair value of commodity contracts using Level 2 inputs through observable market transactions in active markets provided by financial institutions. During the nine months ended September 30, 2013, there were no transfers between Levels 1, 2 or 3.

In connection with an acquisition, the Company recorded a contingent consideration fair valued at $5,250 as of September 30, 2013, which reflects a $356 increase in the liability from December 31, 2012. The contingent consideration is based upon estimated sales for the five-year period ending December 31, 2015 and will be paid in 2016 based on actual sales during the five-year period. The fair value of the contingent consideration is a Level 3 valuation and fair valued using a probability weighted discounted cash flow analysis. The discounted cash flow utilized weighted average inputs, including a risk-based discount rate of 9.7% and a compounded annual revenue growth rate of 30.5%. The discount rate was determined using discount rates of 3.5% reflective of the Company’s cost of debt and 14.1% as a risk adjusted cost of capital and the compounded annual revenue growth rate was determined using various scenarios with growth ranging from remaining relatively flat to growth rates of up to 65.6%.

The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections.

The fair value of “Cash and cash equivalents,” “Accounts receivable,” “Amounts due banks” and “Trade accounts payable” approximated book value due to the short-term nature of these instruments at both September 30, 2013 and December 31, 2012. The fair value of long-term debt at September 30, 2013 and December 31, 2012, including the current portion, was approximately $1,503 and $1,919, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $1,674 and $2,055, respectively. Since considerable judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount that could be realized in a current market exchange.