FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 9 – FAIR VALUE MEASUREMENTS

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. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels as described below:

Level 1 – Quoted prices in active markets for identical assets or liabilities (highest priority).

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability (lowest priority).

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels. The impact of our creditworthiness and non-performance risk has been considered in the fair value measurements noted below. There were no movements of items between fair value hierarchies in the periods presented.

The following table summarizes the bases used to measure financial assets and liabilities that are carried at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:

In thousands
			Fair Value Measurements Using
	Total as of March 31, 2017		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Assets:
Short-term investments	$	62	$	62	$	—	$	—
Derivative financial instruments		790		—		790		—
Total	$	852	$	62	$	790	$	—
Liabilities:
Contingent consideration	$	24,877	$	—	$	—	$	24,877

In thousands
			Fair Value Measurements Using
	Total as of December 31, 2016		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
Assets:
Short-term investments	$	62	$	62	$	—	$	—
Derivative financial instruments		816		—		816		—
Total	$	878	$	62	$	816	$	—
Liabilities:
Contingent consideration	$	24,119	$	—	$	—	$	24,119

For our derivative financial instruments, we use a market approach valuation technique based on observable market transactions of spot and forward rates.

We recorded a $0.8 million asset related to the fair value of the U.S. dollar-Canadian dollar foreign currency swap which was classified as Other assets at March 31, 2017. The objective of the swap is to offset the foreign exchange risk to the U.S. dollar equivalent cash outflows for our Canadian subsidiary.

Our contingent consideration liabilities are recorded using Level 3 inputs and were $24.9 million as of March 31, 2017, of which $8.7 million was classified as Current liabilities. Contingent consideration liabilities were $24.1 million at December 31, 2016, of which $8.1 million was classified as Current liabilities. Contingent consideration represents amounts expected to be paid as part of acquisition consideration only if certain future events occur. These events are usually targets for revenues, earnings, or other milestones related to the business acquired. We arrive at the fair value of contingent consideration by applying a weighted probability of potential payment outcomes. The calculation of these potential outcomes is dependent on both past financial performance and management assumptions about future performance. If the financial performance measures were all fully met, our maximum liability would be $25.7 million at March 31, 2017. Contingent consideration liabilities are reassessed each reporting period and are reflected in the Condensed Consolidated Balance Sheets as part of Other current liabilities and Other liabilities.

Changes to contingent consideration are reflected in the table below:

In thousands
Contingent consideration as of January 1, 2017	$	24,119
Increases due to acquisitions		53
Changes due to foreign currency fluctuations		304
Changes in fair value reflected in selling, general, and administrative expenses		401
Contingent consideration as of March 31, 2017	$	24,877

At March 31, 2017, the fair value of the Company’s debt obligations was estimated, using Level 2 inputs, at $2.88 billion compared to a carrying amount of $2.87 billion. At December 31, 2016, the fair value of the Company’s debt obligations was estimated, using Level 2 inputs, at $2.97 billion compared to a carrying amount of $2.96 billion. The fair values were estimated using an income approach by applying market interest rates for comparable instruments.

Accounts receivable, Accounts payable and Accrued liabilities are financial assets and liabilities, respectively, with carrying values that approximate fair value. If measured at fair value in the financial statements, these financials instruments would be classified as Level 3 in the fair value hierarchy.