FAIR VALUE MEASUREMENTS

We apply the provisions of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value and provides guidance for measuring fair value and expands disclosures about fair value measurements. ASC 820 enables the reader of financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair value. ASC 820 requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

The following table sets forth by level, within the fair value hierarchy, our assets (liabilities) carried at fair value as of March 31, 2017:



(in millions)	Level 1		Level 2		Level 3			Total
Contingent consideration	$	—	$	—	$	(15.9	)	$	(15.9	)
Interest rate derivative instruments	—		0.9		—			0.9
Foreign currency exchange contracts	—		0.8		—			0.8
Total	$	—	$	1.7	$	(15.9	)	$	(14.2	)

The following table sets forth by level, within the fair value hierarchy, our assets (liabilities) carried at fair value as of June 30, 2016:



(in millions)	Level 1		Level 2			Level 3			Total
Contingent consideration	$	—	$	—		$	(5.2	)	$	(5.2	)
Interest rate derivative instruments	—		(1.3		)	—			(1.3		)
Foreign currency exchange contracts	—		(5.3		)	—			(5.3		)
Total	$	—	$	(6.6	)	$	(5.2	)	$	(11.8	)

Level 1 Estimates

Cash equivalents are measured at quoted prices in active markets. These investments are considered cash equivalents due to the short maturity (less than 90 days) of the investments.

Level 2 Estimates

Interest rate derivative instruments are measured at fair value using a market approach valuation technique. The valuation is based on an estimate of net present value of the expected cash flows using relevant mid-market observable data inputs and based on the assumption of no unusual market conditions or forced liquidation.

Foreign currency exchange contracts are measured at fair value using a market approach valuation technique. The inputs to this technique utilize current foreign currency exchange forward market rates published by leading third-party financial news and data providers. These are observable data that represent the rates that the financial institution uses for contracts entered into at that date; however, they are not based on actual transactions, so they are classified as Level 2.

Level 3 Estimates

We have entered into a forward share repurchase contract in connection with our 2017 accelerated share repurchase program with HSBC. We recorded the $160.0 million payment, which represents the 80% of the shares we repurchased, as a decrease to equity in our consolidated balance sheet, consisting of decreases in common stock and additional paid-in capital. As additional paid-in capital was reduced to zero, the remainder was applied as a reduction in retained earnings. The remaining $40.0 million, which is an advance payment accounted for as a forward share repurchase contract, was recorded as within other current assets within the condensed consolidated balance sheet. The prepaid forward contract was initially valued at the transaction price of $40.0 million. The forward share repurchase contract was remeasured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our forward contract are primarily impacted by the Company's stock price.

On February 27, 2017, the Company entered into an amendment with HSBC to amend the definitions of the purchaser share cap and the seller share cap. There was no charge to the Company by HSBC to amend these terms. This amendment modifies the contract in which the new terms qualify the ASR contract to be reclassified to equity.

During the three months ended March 31, 2017, the fair value of the forward share repurchase contract decreased by $0.4 million from $19.7 million to $19.3 million. During the nine months ended March 31, 2017, the fair value of the forward share repurchase contract decreased by $20.7 million. The change in fair value was recorded in miscellaneous (expense) income, net.

The recurring Level 3 fair value measurements of our forward share repurchase contract asset include the following significant unobservable inputs:



	Forward Share
Unobservable Input	Repurchase Contract
Risk free rate	0.5%
Share price volatility	37.5%
Contract term	0.2 years

The following table provides a summary of the change in our valuation of the fair value of the forward accelerated share repurchase contract asset, which was determined by Level 3 inputs:



(in millions)
Balance at June 30, 2016	—
Additions of forward share repurchase contract	40.0
Change in fair value of forward share repurchase contract	(20.7		)
Reclass of forward accelerated share repurchase contract to equity	(19.3		)
Balance at March 31, 2017	$	—

Contingent consideration liabilities are re-measured to fair value each reporting period using projected financial targets, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected financial targets are based on our most recent internal operational budgets and may take into consideration alternate scenarios that could result in more or less profitability for the respective service line. Increases or decreases in projected financial targets and probabilities of payment may result in significant changes in the fair value measurements. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs in isolation may result in a significantly lower or higher fair value measurement.

In March 2017, we acquired TMAC. The purchase price for the TMAC acquisition was approximately $37.7 million, plus the potential to pay up to an additional $11.0 million at the end of a three year period ending December 31, 2019 if TMAC achieves specific financial targets. The contingent consideration related to the TMAC acquisition is measured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our contingent consideration liability is primarily impacted by the likelihood of achieving financial targets, but also by changes in discount periods and rates.

In October 2016, we acquired ExecuPharm. The purchase price for the ExcuPharm acquisition was approximately $148.9 million, plus the potential to pay up to an additional $20.0 million at the end of a two year period ending June 30, 2018 if ExecuPharm achieves specific financial targets. The contingent consideration related to the ExecuPharm acquisition is measured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our contingent consideration liability is primarily impacted by the likelihood of achieving financial targets, but also by changes in discount periods and rates.

In February 2016, we acquired Health Advances. The purchase price for the Health Advances acquisition was approximately $67.1 million, plus the potential to pay up to an additional $15.8 million over a thirty-six month period following the acquisition date if Health Advances achieves specific financial targets. The contingent consideration related to the Health Advances acquisition is measured at fair value with market conditions based on the use of a Monte-Carlo Simulation Model. Increases or decreases in the fair value of our contingent consideration liability is primarily impacted by the likelihood of achieving financial targets, but also from changes in discount periods and rates.

The recurring Level 3 fair value measurements of our contingent consideration liability include the following significant unobservable inputs:



Unobservable Input	Health Advances	ExecuPharm	TMAC
Risk free rate	1.3%	0.7%	1.5%
Revenue volatility	26%	29%	25%
Projected period of payment	Approximately 2 years	15 months	Approximately 3 years

The following table provides a summary of the change in our valuation of the fair value of the contingent consideration liability, which was determined by Level 3 inputs:



(in millions)
Balance at June 30, 2016	$	5.2
Additions of contingent consideration due to acquisitions	11.5
Change in fair value of contingent consideration	(0.8		)
Balance at March 31, 2017	$	15.9

As of March 31, 2017, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay was approximately $46.8 million.

For the three and nine months ended March 31, 2017, there were no transfers among Level 1, Level 2, or Level 3 categories. Additionally, there were no changes in the valuation techniques used to determine the fair values of our Level 2 or Level 3 assets or liabilities. For the three months ended March 31, 2017, the change in the fair value of the contingent consideration for Health Advances, LLC (“Health Advances”) of $2.7 million was recorded in selling, general and administrative expense. During the nine months ended March 31, 2017, the fair value of contingent consideration for Health Advances in the amount of $1.9 million decreased by $3.3 million from June 30, 2016. In addition to this, for the three and nine months ended March 31, 2017 the change in the fair value of the contingent consideration for ExecuPharm Holding Company, Inc. ("ExecuPharm") increased by $2.5 million to $11.9 million as at March 31, 2017. For the nine months ended March 31, 2016, the change in the fair value of the contingent consideration for ClinIntel Limited ("ClinIntel") of and $8.2 million was recorded in selling, general and administrative expense.

The fair value of the debt under the Notes was estimated to be $97.0 million as of March 31, 2017, and was determined using U.S. government treasury rates and Level 3 inputs, including a credit risk adjustment.

The carrying value of our current and long-term debt under the 2016 Credit Agreement approximates fair value because all of the debt bears variable-rate interest.