The FASB's guidance regarding fair value measurements establishes a common definition for fair value to be applied to guidance requiring use of fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. The guidance does not require any new fair value measurements, but rather applies to all other accounting guidance that requires or permits fair value measurements.

The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

	•	Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

	•	Level 2: Inputs other than quoted prices that observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that not active.

	•	Level 3: Unobservable inputs that reflect the reporting entity's own assumptions.

The Company values its interest rate swaps, company-owned life insurance policies and various deferred compensation assets and liabilities, acquisition-related consideration and an obligation related to a non-competition agreement at fair value. The Company's assets and liabilities subject to fair value measurement are as follows:

				Fair Value Measurements at June 30, 2012
		Fair Value		Using Fair Value Hierarchy
		as of
Assets		June 30, 2012		Level 1		Level 2		Level 3
Company-owned life insurance		$	1,585	$	0	$	1,585	$	0
Company-owned life insurance - Deferred compensation assets			441		0		441		0
Other deferred compensation assets
	Large capitalization registered investment companies		59		59		0		0
	Mid capitalization registered investment companies		5		5		0		0
	Small capitalization registered investment companies		8		8		0		0
	International developed and emerging markets registered investment
companies			32		32		0		0
	Fixed income registered investment companies		9		9		0		0

Total		$	2,139	$	113	$	2,026	$	0

				Fair Value Measurements at June 30, 2012
		Fair Value		Using Fair Value Hierarchy
		as of
Liabilities		June 30, 2012		Level 1		Level 2		Level 3
Deferred compensation liabilities
	Large capitalization registered investment companies	$	314	$	314	$	0	$	0
	Mid capitalization registered investment companies		83		83		0		0
	Small capitalization registered investment companies		68		68		0		0
	International developed and emerging markets registered investment
companies			163		163		0		0
	Fixed income registered investment companies		48		48		0		0
	Fixed general account		169		0		169		0
Interest rate derivatives			112		0		112		0
Acquisition-related consideration			9,506		0		0		9,506

Total		$	10,463	$	676	$	281	$	9,506

				Fair Value Measurements at December 31, 2011
		Fair Value		Using Fair Value Hierarchy
		as of
Assets		December 31, 2011		Level 1		Level 2		Level 3
Company-owned life insurance		$	1,508	$	0	$	1,508	$	0
Company-owned life insurance - Deferred compensation assets			487		0		487		0
Other deferred compensation assets
	Large capitalization registered investment companies		64		64		0		0
	Mid capitalization registered investment companies		4		4		0		0
	Small capitalization registered investment companies		7		7		0		0
	International developed and emerging markets registered investment
companies			32		32		0		0
	Fixed income registered investment companies		8		8		0		0

Total		$	2,110	$	115	$	1,995	$	0

				Fair Value Measurements at December 31, 2011
		Fair Value		Using Fair Value Hierarchy
		as of
Liabilities		December 31, 2011		Level 1		Level 2		Level 3
Deferred compensation liabilities
	Large capitalization registered investment companies	$	318	$	318	$	0	$	0
	Mid capitalization registered investment companies		83		83		0		0
	Small capitalization registered investment companies		68		68		0		0
	International developed and emerging markets registered investment
companies			168		168		0		0
	Fixed income registered investment companies		50		50		0		0
	Fixed general account		177		0		177		0
Interest rate derivatives			418		0		418		0
Acquisition related consideration			8,898		0		0		8,898

Total		$	10,180	$	687	$	595	$	8,898

The fair values of Company-owned life insurance (“COLI”) and COLI deferred compensation assets are based on quotes for like instruments with similar credit ratings and terms. The fair values of other deferred compensation assets and liabilities are based on quoted prices in active markets. The fair values of interest rate derivatives are based on quoted market prices from various banks for similar instruments. The fair value of the earnout is based on unobservable inputs and is classified as Level 3. Significant inputs and assumptions are management's estimate of the probability of the earnout ultimately being met/paid and the discount rate used to present value the liability. The fair value of the holdbacks and the obligation related to a non-competition agreement are also based on unobservable inputs and are classified as Level 3. Significant inputs and assumptions for both the obligation related to the non-competition agreement and the holdbacks is management's estimate of the discount rate used to present value the liabilities. Significant changes in any Level 3 input or assumption in isolation would result in increases or decreases to the fair value measurements for the holdbacks, the earnout and the non-competition agreement.

Changes in the fair value of the Level 3 liabilities during the six months ended June 30, 2012 were as follows:

						Non-competition
		Earnout		Hold-back		Agreement		Hold-back
		Summit		Tecniquimia		Obligation		GW Smith		Total
Balance at December 31, 2011		$	5,444	$	1,877	$	675	$	902	$	8,898
	Interest accretion		395		123		25		65		608
Balance at June 30, 2012		$	5,839	$	2,000	$	700	$	967	$	9,506

Quantitative information about the Company's Level 3 fair value measurements at June 30, 2012 were as follows:

	Fair value at June 30, 2012	Valuation technique	Unobservable input	Input value
Summit earnout	5,839	Discounted cash flow	Discount rate	14.5%
Tecniquimia hold-back	2,000	Discounted cash flow	Discount rate	14.0%
Non-competition agreement obligation	700	Discounted cash flow	Discount rate	14.0%
G.W. Smith hold-back	967	Discounted cash flow	Discount rate	15.0%

The fair value of the Summit earnout is based on the weighted average probability of the outcome of different payout scenarios. As of June 30, 2012, the probabilities applied to the payout scenarios ranged from 15% to 50%, depending on the Company's estimate of the likelihood of each payout scenario.

- 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.

+ References

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