FAIR VALUE

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 (exit price). The following hierarchy is used to classify the inputs used to measure fair value:

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3 Unobservable inputs for the asset or liability.

The following table provides a summary of assets and liabilities as of March 31, 2014, measured at fair value on a recurring basis:



Description	Balance as of March 31, 2014		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Foreign exchange contracts	$	1,472	$	—	$	1,472	$	—
Commodity contracts	358		—		358		—
Total assets	$	1,830	$	—	$	1,830	$	—

Liabilities:
Foreign exchange contracts	$	1,808	$	—	$	1,808	$	—
Commodity contracts	13		—		13		—
Contingent consideration	5,502		—		—		5,502
Forward contract	18,925		—		—		18,925
Deferred compensation	22,018		—		22,018		—
Total liabilities	$	48,266	$	—	$	23,839	$	24,427

The following table provides a summary of assets and liabilities as of December 31, 2013, measured at fair value on a recurring basis:



Description	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Foreign exchange contracts	$	1,472	$	—	$	1,472	$	—
Commodity contracts	262		—		262		—
Total assets	$	1,734	$	—	$	1,734	$	—

Liabilities:
Foreign exchange contracts	$	447	$	—	$	447	$	—
Commodity contracts	47		—		47		—
Contingent consideration	5,375		—		—		5,375
Forward contract	16,974		—		—		16,974
Deferred compensation	20,132		—		20,132		—
Total liabilities	$	42,975	$	—	$	20,626	$	22,349

The Company’s derivative contracts are valued at fair value using the market approach. The Company measures the fair value of foreign exchange contracts and net investment contracts using Level 2 inputs based on observable spot and forward rates in active markets. The Company measures the fair value of commodity contracts using Level 2 inputs through observable market transactions in active markets provided by financial institutions. During the three months ended March 31, 2014, there were no transfers between Levels 1, 2 or 3.

In connection with an acquisition, the Company recorded a contingent consideration fair valued at $5,502 as of March 31, 2014, which reflects a $127 increase in the liability from December 31, 2013. The contingent consideration is based upon estimated sales for the five-year period ending December 31, 2015 and will be paid in 2016 based on actual sales during the five-year period. The fair value of the contingent consideration is a Level 3 valuation and fair valued using a probability weighted discounted cash flow analysis.

In connection with an acquisition, the Company obtained a controlling financial interest in the acquired entity and at the same time entered into a contract to obtain the remaining financial interest in the entity over a three-year period. The amount to be paid to obtain the remaining financial interest will be based upon actual financial results of the entity. A liability was recorded for the contract at a fair value of $18,925 as of March 31, 2014, which reflects a $957 increase in the liability from the valuation date. The change in liability is recognized in interest expense in the three months ended March 31, 2014. The fair value of the contract is a Level 3 valuation and is based on the present value of the expected future payments. The expected future payments are based on a multiple of forecast earnings and cash flows over the three-year period ending December 31, 2016, present valued utilizing a risk based discount rate. The present value calculations utilized discount rates of 3.5% reflective of the Company's cost of debt and 15.9% as a risk adjusted cost of capital and annual earnings before interest and taxes with growth rates ranging from 10.6% to 16.8%.

The deferred compensation liability is the Company’s obligation under its executive deferred compensation plan. The Company measures the fair value of the liability using the market values of the participants’ underlying investment fund elections.

The fair value of “Cash and cash equivalents,” “Accounts receivable,” “Amounts due banks” and “Trade accounts payable” approximated book value due to the short-term nature of these instruments at both March 31, 2014 and December 31, 2013. The fair value of long-term debt at March 31, 2014 and December 31, 2013, including the current portion, was approximately $2,977 and $4,212, respectively, which was determined using available market information and methodologies requiring judgment. The carrying value of this debt at such dates was $3,069 and $4,506, respectively. Since considerable judgment is required in interpreting market information, the fair value of the debt is not necessarily the amount that could be realized in a current market exchange.