FAIR VALUE MEASUREMENTS

We apply the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value and provides guidance for measuring fair value and expands disclosures about fair value measurements. ASC 820 enables the reader of financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair value. ASC 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:


•	Level 1 – Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.

Marketable securities are held in foreign government treasury certificates that are actively traded and have original maturities over 90 days but less than one year. As of December 31, 2016, we did not hold any marketable securities.

Interest rate derivative instruments are measured at fair value using a market approach valuation technique. The valuation is based on an estimate of net present value of the expected cash flows using relevant mid-market observable data inputs and based on the assumption of no unusual market conditions or forced liquidation.


•	Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:


◦	quoted prices for similar assets and liabilities in active markets


◦	quoted prices for identical or similar assets or liabilities in markets that are not active


◦	observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals)


◦	inputs that are derived principally from or corroborated by observable market data by, correlation or other means


•	Level 3 – Unobservable inputs for the asset or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

The following table sets forth by level, within the fair value hierarchy, our assets (liabilities) carried at fair value as of December 31, 2016:



(in millions)	Level 1		Level 2			Level 3			Total
Contingent consideration	$	—	$	—		$	(14.0	)	$	(14.0	)
Forward share repurchase contract	—		—			19.7			19.7
Interest rate derivative instruments	—		0.5			—			0.5
Foreign currency exchange contracts	—		(5.3		)	—			(5.3		)
Total	$	—	$	(4.8	)	$	5.7		$	0.9

The following table sets forth by level, within the fair value hierarchy, our assets (liabilities) carried at fair value as of June 30, 2016:



(in millions)	Level 1		Level 2			Level 3			Total
Contingent consideration	$	—	$	—		$	(5.2	)	$	(5.2	)
Interest rate derivative instruments	—		(1.3		)	—			(1.3		)
Foreign currency exchange contracts	—		(5.3		)	—			(5.3		)
Total	$	—	$	(6.6	)	$	(5.2	)	$	(11.8	)

Level 1 Estimates

Cash equivalents are measured at quoted prices in active markets. These investments are considered cash equivalents due to the short maturity (less than 90 days) of the investments.

Level 2 Estimates

Foreign currency exchange contracts are measured at fair value using a market approach valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by leading third-party financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2.

Level 3 Estimates

We have entered into a forward share repurchase contract in connection with our 2017 accelerated share repurchase program with HSBC. We recorded the $160.0 million payment, which represents the 80% of the shares we repurchased, as a decrease to equity in our consolidated balance sheet, consisting of decreases in common stock and additional paid-in capital. As additional paid-in capital was reduced to zero, the remainder was applied as a reduction in retained earnings. The remaining $40.0 million, which is an advance payment accounted for as a forward share repurchase contract, was recorded as within other current assets within the condensed consolidated balance sheet. The prepaid forward contract was initially valued at the transaction price of $40.0 million. The forward share repurchase contract was remeasured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our forward contract are primarily impacted by the Company's stock price. During the three months ended December 31, 2016, the fair value of the forward share repurchase contract decreased by $20.3 million from $40.0 million to $19.7 million. The change in fair value of $20.3 million was recorded in miscellaneous (expense) income, net.

The recurring Level 3 fair value measurements of our forward share repurchase contract asset include the following significant unobservable inputs:



	Forward Share
Unobservable Input	Repurchase Contract
Risk free rate	0.6%
Share price volatility	37.5
Contract term	0.4 years

Contingent consideration liabilities are re-measured to fair value each reporting period using projected financial targets, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected financial targets are based on our most recent internal operational budgets and may take into consideration alternate scenarios that could result in more or less profitability for the respective service line. Increases or decreases in projected financial targets and probabilities of payment may result in significant changes in the fair value measurements. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs in isolation may result in a significantly lower or higher fair value measurement.

In October 2016, we acquired ExecuPharm, Inc. (“ExecuPharm”), a leading global functional service provider, based in Pennsylvania. ExecuPharm provides clinical monitoring or study management, along with associated operational activities such as onboarding, training, line management, performance management, and policy administration. The purchase price for the ExcuPharm acquisition was approximately $148.9 million, plus the potential to pay up to an additional $20.0 million at the end of a two year period ending June 30, 2018 if ExecuPharm achieves specific financial targets. The contingent consideration related to the ExecuPharm acquisition is measured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our contingent consideration liability is primarily impacted by the likelihood of achieving financial targets, but also by changes in discount periods and rates.

The recurring Level 3 fair value measurements of our contingent consideration liability include the following significant unobservable inputs:



	Health Advances	ExecuPharm
Unobservable Input	Range	Range
Risk free rate	1.3%	0.7%
Revenue volatility	26%	29%
Projected period of payment	Approximately 2 years	Approximately 2 years

The following table provides a summary of the change in our valuation of the fair value of the contingent consideration liability, which was determined by Level 3 inputs:



(in millions)
Balance at June 30, 2016	$	5.2
Additions of contingent consideration due to ExecuPharm acquistion	9.4
Change in fair value of contingent consideration for Health Advances	(0.6		)
Balance at December 31, 2016	$	14.0

The following table provides a summary of the change in our valuation of the fair value of the forward share repurchase contract asset, which was determined by Level 3 inputs:



(in millions)
Balance at June 30, 2016	$	—
Additions of forward share repurchase contract	40.0
Change in fair value of forward share repurchase contract	(20.3		)
Balance at December 31, 2016	$	19.7

For the three and six months ended December 31, 2016, there were no transfers among Level 1, Level 2, or Level 3 categories. Additionally, there were no changes in the valuation techniques used to determine the fair values of our Level 2 or Level 3 assets or liabilities. For the three and six months ended December 31, 2016, the change in the fair value of the contingent consideration for Health Advances, LLC (“Health Advances”) of $0.6 million was recorded in selling, general and administrative expense. During the three months ended December 31, 2016, the fair value of contingent consideration for Health Advances in the amount of $4.6 million decreased by $0.6 million from June 30, 2016. For the three and six months ended December 31, 2015, the change in the fair value of the contingent consideration for ClinIntel Limited ("ClinIntel") of $3.2 million and $8.2 million, respectively, was recorded in selling, general and administrative expense.

In February 2016, we acquired Health Advances, an independent life sciences strategy consulting firm. Health Advances combines clinical, scientific and business expertise to provide strategic advice to executives leading life sciences companies and investors. The purchase price for the Health Advances acquisition was approximately $67.1 million, plus the potential to pay up to an additional $15.8 million over a thirty-six month period following the acquisition date if Health Advances achieves specific financial targets. The contingent consideration related to the Health Advances acquisition is measured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our contingent consideration liability is primarily impacted by the likelihood of achieving financial targets, but also from changes in discount periods and rates.

In October 2014, we acquired ClinIntel, a provider of clinical randomization and trial supply management services, which are designed to make patient randomization and clinical supply chain solutions more efficient. The purchase price for the ClinIntel acquisition was approximately $8.8 million, plus the potential to pay up to an additional $16.2 million over a twenty-one month period following the acquisition date. To achieve the maximum payment of $16.2 million, billings of $13.4 million in the 21 month period needed to be achieved. As of December 31, 2016, we have no further contingent consideration in connection with this acquisition.

The fair value of the debt under the Notes was estimated to be $96.5 million as of December 31, 2016, and was determined using U.S. government treasury rates and Level 3 inputs, including a credit risk adjustment.

The carrying value of our current and long-term debt under the 2016 Credit Agreement approximates fair value because all of the debt bears variable-rate interest.