FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2015

As required by the guidance for fair value measurements, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Thus, assets and liabilities categorized as Level 3 may be measured at fair value using inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future operating results of those businesses as developed by the Company’s management and the probability of achievement of those operating forecasts. Management’s 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 following tables show the fair values of the Company’s financial liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:



	June 30, 2015				December 31, 2014
	Balance		Level 3		Balance		Level 3
Contingent consideration	$	—	$	—	$	37,400	$	37,400
Performance-based equity awards	801		801		3,223		3,223
Total liabilities measured at fair value on a recurring basis	$	801	$	801	$	40,623	$	40,623

As of June 30, 2015 and December 31, 2014, contingent consideration and performance-based equity awards included amounts payable in cash and stock in connection with the acquisitions of businesses completed during the year ended December 31, 2014 (Note 2). During the three months ended June 30, 2015, the Company issued 83,057 shares to settle contingent liability related to the Jointech acquisition.

Sensitivity to Changes in Significant Unobservable Inputs

The fair value of the contingent consideration, which is based on the present value of the expected future payments to be made to the sellers of the acquired businesses, was derived by analyzing the future performance of the acquired businesses using the earnout formula and performance targets specified in each purchase agreement and adjusting those amounts to reflect the ability of the acquired entities to achieve the stated targets. As of June 30, 2015 the measurement periods related to the contingent consideration for each acquisition was complete, therefore, the amount of total consideration to be paid is no longer subject to change.

A reconciliation of the beginning and ending balances of acquisition-related contractual contingent liabilities using significant unobservable inputs (Level 3) for the six months ended June 30, 2015, was as follows:



	Amount
Contractual contingent liabilities at January 1, 2015	$	40,623
Liability-classified stock-based awards	2,574
Changes in fair value of contractual contingent liabilities included in earnings	2,366
Effect of net foreign currency exchange rate changes	246
Settlements of contractual contingent liabilities - cash and stock	(45,008		)
Contractual contingent liabilities at June 30, 2015	$	801

There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the six months ended June 30, 2015 and 2014. Changes in the values of the financial liabilities, if any, are recorded within other expense (income) in operating income on the Company’s condensed consolidated statements of income and comprehensive income.

- 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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