4.	Fair Value Measurements

Derivative financial instruments are utilized by the Company to reduce foreign currency exchange risks. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Company does not enter into financial instruments for trading or speculative purposes. The derivative financial instruments include fair value and cash flow hedges of foreign currency exposures. The change in values of the fair value foreign currency hedges offsets exchange rate fluctuations on the foreign currency-denominated intercompany loans and obligations. The Company presently hedges exposures in the Euro, Canadian dollar, British pound sterling, Swiss franc, Swedish krona, Norwegian krone, Mexican peso and Chinese yuan generally for transactions expected to occur within the next 12 months. The notional amount of these foreign currency derivative instruments at June 30, 2016 and December 31, 2015 was $104,131 and $68,732, respectively. The counterparties to each of these agreements are major commercial banks.

The Company uses non-designated foreign currency forward contracts to hedge its net foreign currency monetary assets and liabilities primarily resulting from non-functional currency denominated receivables and payables of certain U.S. and foreign entities.

Foreign currency forward contracts are also used to hedge variable cash flows associated with forecasted sales and purchases denominated in currencies that are not the functional currency of certain entities. The forward contracts have maturities of less than twelve months pursuant to the Company’s policies and hedging practices. These forward contracts meet the criteria for and have been designated as cash flow hedges. Accordingly, the effective portion of the change in fair value of such forward contracts (approximately ($2,351) and $3,400 as of June 30, 2016 and December 31, 2015, respectively) are recorded as a separate component of stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets and reclassified into earnings as the hedged transactions occur.

The Company assesses hedge effectiveness, prospectively and retrospectively, based on regression of the change in foreign currency exchange rates. Time value of money is included in effectiveness testing. The Company measures ineffectiveness on a trade by trade basis, using the hypothetical derivative method. Any hedge ineffectiveness is recorded in the Condensed Consolidated Statements of Income in the period in which the ineffectiveness occurs.

The derivative instruments are subject to master netting arrangements with the counterparties to the contracts. The following table presents the location and amounts of derivative instrument fair values in the Condensed Consolidated Balance Sheets:


	June 30, 2016			December 31, 2015
Assets/(liabilities)
Designated as hedging instruments:
Gross amounts recognized	$	(2,351	)	$	3,559
Gross amounts offset		—			(35	)

Net amounts	$	(2,351	)	$	3,524

Not designated as hedging instruments:
Gross amounts recognized		473			174

Other current (liabilities) assets	$	(1,878	)	$	3,698

The following table presents the location and amount of gains and losses on derivative instruments in the Condensed Consolidated Statements of Income:


	Three Months Ended June 30,						Six Months Ended June 30,
Derivatives Designated as Cash Flow Hedges	2016			2015			2016			2015
Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives (Effective Portion)	$	(312	)	$	(3,800	)	$	(4,356	)	$	4,946

Amount of (Loss) Gain Reclassified from Cumulative Other Comprehensive Loss into Income (Effective Portion)		(17	)		2,664			1,395			6,990

Amount of Loss Recognized in Income on Derivatives (Ineffective Portion)		—			(289	)		—			(81	)

Location of

Gain (Loss)

Recognized

in Income on

Derivatives

Amount of Gain (Loss)

Recognized in Income on Derivatives

Three Months Ended

Six Months Ended

Derivatives not Designated

June 30,

as Hedging Instruments

2016

2015

2016

2015

Foreign exchange contracts

Other non-operating income

585

1,052

(315

)

1,284

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within the different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded on the Condensed Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Financial asset and liability values are based on unadjusted quoted prices for an identical asset or liability in an active market that the Company has the ability to access.

Level 2. Financial asset and liability values are based on quoted prices in markets that are not active or model inputs 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 or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Pricing models whose inputs are observable for substantially the full term of the asset or liability; and

Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3. Financial asset and liability values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The valuation of foreign exchange forward contracts was determined using widely accepted valuation techniques. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including forward points. The Company incorporated credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as current credit ratings, to evaluate the likelihood of default by itself and its counterparties. As of June 30, 2016 and December 31, 2015, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy.

The valuation of stock-based liabilities was determined using the Company’s stock price, and as a result, these liabilities are classified in Level 1 of the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis:


	June 30, 2016
	Total Liabilities			Quoted Prices in Active Markets for Identical Assets Level (1)			Significant Other Observable Inputs Level (2)			Significant Unobservable Inputs Level (3)
Foreign Exchange Contracts	$	(1,878	)	$	—		$	(1,878	)	$	—

Stock-based Liabilities	$	(16,097	)	$	(16,097	)	$	—		$	—

	December 31, 2015
	Total Assets (Liabilities)			Quoted Prices in Active Markets for Identical Assets Level (1)			Significant Other Observable Inputs Level (2)			Significant Unobservable Inputs Level (3)
Foreign Exchange Contracts	$	3,698		$	—		$	3,698		$	—

Stock-based Liabilities	$	(18,057	)	$	(18,057	)	$	—		$	—

The fair market value of Cash and cash equivalents, Notes receivable, Restricted cash, Notes payable and Current portion of long-term debt at June 30, 2016 and December 31, 2015 are equal to their corresponding carrying values as reported on the Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015, respectively. Each of these classes of assets and liabilities is classified as Level 1 within the fair value hierarchy.

The fair market value of Long-term debt is $329,723 and $323,522 at June 30, 2016 and December 31, 2015, respectively, and is classified within Level 1 of the fair value hierarchy. The carrying value of Long-term debt is $295,853 and $296,412 as reported on the Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015, respectively.