Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts and notes receivable, cash collateral deposited with insurance carriers, cash surrender value of life insurance policies, auction rate securities, cost and equity method investments, deferred compensation plan assets and liabilities, accounts payable and other current liabilities, acquisition-related contingent consideration and debt obligations.

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value guidance establishes a valuation hierarchy, which requires maximizing the use of observable inputs. The three levels of inputs that may be used are:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Observable market based inputs or other observable inputs.

Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data. These values are generally determined using valuation models incorporating management’s estimates of market participant assumptions.

Carrying amounts and estimated fair values of financial instruments as of the dates indicated were as follows (in millions):

	September 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Cash surrender value of life insurance policies	$	11.6	$	11.6	$	10.6	$	10.6
Auction rate securities	$	14.1	$	14.1	$	13.6	$	13.6
Liabilities
Acquisition-related contingent consideration	$	79.0	$	79.0	$	80.5	$	80.5
7.625% senior notes	$	150.0	$	156.0	$	150.0	$	156.4
Original 4.0% Notes	$	9.7	$	13.9	$	9.7	$	12.5
Original 4.25% Notes	$	3.0	$	4.2	$	3.0	$	4.0
New 4.0% Notes	$	100.2	$	102.1	$	98.2	$	99.4
New 4.25% Notes	$	91.6	$	93.7	$	89.9	$	91.1

The following methods and assumptions were used to estimate the fair values of financial instruments:

Cash Surrender Value of Life Insurance Policies. Cash surrender values of life insurance policies are based on current cash surrender values as quoted by insurance carriers. Life insurance policies support the Company’s split dollar agreements and deferred compensation plan assets.        

Auction Rate Securities.  The fair value of the Company’s auction rate securities was estimated by an independent valuation firm, Houlihan Capital Advisors, LLC, using a probability weighted discounted cash flow model. See Note 7 - Securities Available for Sale.

Acquisition-Related Contingent Consideration. Acquisition-related contingent consideration in the table above represents the estimated fair value of additional future earn-outs payable for acquisitions of businesses beginning with the acquisition of Precision Pipeline LLC in November of 2009. The fair value of such acquisition-related contingent consideration is based on management’s estimates and entity-specific assumptions, and is evaluated on an ongoing basis.

Debt. The estimated fair values of the Company’s 7.625% senior notes and Original Notes are based on quoted market prices. The estimated fair value of the debt component of the Company’s New Notes is calculated using an income approach, based on a discounted cash flow model. This method is based on management’s estimates of the Company’s market interest rate for a similar nonconvertible instrument. See Note 10 - Debt.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of September 30, 2012, the Company held certain assets and liabilities required to be measured at fair value on a recurring basis. The fair values of financial assets and liabilities measured on a recurring basis were determined using the following inputs as of the dates indicated (in millions):

			Fair Value Measurements Using Inputs Considered as Significant
	Fair Value as of September 30, 2012		Level 1		Level 2	Level 3
Assets
Cash surrender value of life insurance policies	$	11.6	$	11.6	—	—
Auction rate securities	$	14.1	—		—	$	14.1
Liabilities
Acquisition-related contingent consideration	$	79.0	—		—	$	79.0
			Fair Value Measurements Using Inputs Considered as Significant
	Fair Value as of December 31, 2011		Level 1		Level 2	Level 3
Assets
Cash surrender value of life insurance policies	$	10.6	$	10.6	—	—
Auction rate securities	$	13.6	—		—	$	13.6
Liabilities
Acquisition-related contingent consideration	$	80.5	—		—	$	80.5

The following tables provide a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis using significant unobservable inputs as of the dates indicated (in millions).

	Auction Rate Securities
Three Months Ended September 30, 2012 and 2011:	Student Loan			Structured Finance Securities			Total
Assets
Balances at June 30, 2012	$	11.7		$	1.8		$	13.5
Changes in fair value recorded in earnings	—			—			—
Changes in unrealized (losses)/gains included in other comprehensive income	—			0.6			0.6
Balances at September 30, 2012	$	11.7		$	2.4		$	14.1
Balances at June 30, 2011	$	12.1		$	2.3		$	14.4
Changes in fair value recorded in earnings	—			(0.5		)	(0.5		)
Changes in unrealized (losses)/gains included in other comprehensive income	(0.3		)	—			(0.3		)
Balances at September 30, 2011	$	11.8		$	1.8		$	13.6

	Contingent Consideration
Liabilities
Balances at June 30, 2012	$	80.5
Additions from new business combinations	—
Payments of contingent consideration	(1.5		)
Balances at September 30, 2012	$	79.0
Balances at June 30, 2011	$	80.5
Changes in fair value recorded in earnings	—
Payments of contingent consideration	—
Balances at September 30, 2011	$	80.5

	Auction Rate Securities
Nine Months Ended September 30, 2012 and 2011:	Student Loan			Structured Finance Securities			Total
Assets
Balances at December 31, 2011	$	11.9		$	1.7		$	13.6
Changes in fair value recorded in earnings	—			—			—
Changes in unrealized (losses)/gains included in other comprehensive income	(0.2		)	0.7			0.5
Balances at September 30, 2012	$	11.7		$	2.4		$	14.1
Balances at December 31, 2010	$	16.4		$	2.6		$	19.0
Redemption or sale of securities, cost basis	(4.6		)	—			(4.6		)
Reversal of unrealized losses on redeemed or sold securities	0.4			—			0.4
Changes in fair value recorded in earnings	—			(0.5		)	(0.5		)
Changes in unrealized (losses)/gains included in other comprehensive income	(0.4		)	(0.3		)	(0.7		)
Balances at September 30, 2011	$	11.8		$	1.8		$	13.6

Liabilities	Contingent Consideration
Balances at December 31, 2011	$	80.5
Additions from new business combinations	—
Payments of contingent consideration	(1.5		)
Balances at September 30, 2012	$	79.0
Balances at December 31, 2010	$	45.0
Additions from new business combinations	47.7
Payments of contingent consideration	(12.2		)
Balances at September 30, 2011	$	80.5

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities recognized or disclosed at fair value on a nonrecurring basis include items such as equity method investments, goodwill and long-lived assets, which are initially measured at fair value and are subsequently remeasured in the event of an impairment or other measurement event, if applicable. Except for the assets and liabilities associated with the Globetec operation, which the Company reclassified as held-for-sale in the third quarter of 2012 and the Company’s equity investment in EC Source, which was remeasured in connection with the Company’s acquisition of EC Source’s remaining equity interests in the second quarter of 2011, the Company had no significant assets or liabilities required to be measured at fair value on a nonrecurring basis as of either September 30, 2012 or December 31, 2011. Refer to Note 3 – Acquisitions and Other Investments and Note 4 – Discontinued Operations.