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Fair value measurement | 6 Months Ended
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Jun. 30, 2013
Fair value measurement | Note 9 — Fair value measurement For a description of the fair value hierarchy, see Note 11 to the Company’s 2012 consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2012. The following tables provide information regarding the financial assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2013 and December 31, 2012:
|  | Total carrying value at June 30, 2013 |  |  | Quoted prices in active markets (Level 1) |  |  | Significant other observable inputs (Level 2) |  |  | Significant unobservable inputs (Level 3) |
|  | (Dollars in thousands) |
Investments in marketable securities |  | $ | 5,376 |  |  | $ | 5,376 |  |  | $ | — |  |  | $ | — |
Derivative assets |  |  | 466 |  |  |  | — |  |  |  | 466 |  |  |  | — |
Derivative liabilities |  |  | 1,212 |  |  |  | — |  |  |  | 1,212 |  |  |  | — |
Contingent consideration liabilities |  |  | 32,473 |  |  |  | — |  |  |  | — |  |  |  | 32,473 |
|  | Total carrying value at December 31, 2012 |  |  | Quoted prices in active markets (Level 1) |  |  | Significant other observable inputs (Level 2) |  |  | Significant unobservable inputs (Level 3) |
|  | (Dollars in thousands) |
Investments in marketable securities |  | $ | 4,785 |  |  | $ | 4,785 |  |  | $ | — |  |  | $ | — |
Derivative assets |  |  | 1,279 |  |  |  | — |  |  |  | 1,279 |  |  |  | — |
Derivative liabilities |  |  | 598 |  |  |  | — |  |  |  | 598 |  |  |  | — |
Contingent consideration liabilities |  |  | 51,196 |  |  |  | — |  |  |  | — |  |  |  | 51,196 |
There were no transfers of financial assets or liabilities carried at fair value among Level 1, Level 2 or Level 3 within the fair value hierarchy during the six months ended June 30, 2013. The following table provides information regarding changes in Level 3 financial liabilities related to contingent consideration in connection with various Company acquisitions, including those described in Note 3, during the period ended June 30, 2013:
|  | Contingent consideration |
|  | 2013 |
|  | (Dollars in thousands) |
Balance — January 1, 2013 |  | $ | 51,196 |
Payment |  |  | (10,927 | )
Revaluations |  |  | (7,757 | )
Translation adjustment |  |  | (39 | )
Balance — June 30, 2013 |  | $ | 32,473 |
The Company reduced contingent consideration liabilities and selling, general and administrative expense by approximately $6.6 million and $8.1 million for the three and six month periods ended June 30, 2013, respectively, after determining that certain conditions for the payment of certain contingent consideration would not be satisfied. The carrying amount of long-term debt reported in the condensed consolidated balance sheet as of June 30, 2013 is $970.8 million. The Company uses a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, and risk profile to determine the fair value of its debt. The Company’s implied credit rating is a factor in determining the market interest yield curve. The following table provides the fair value of the Company’s debt by fair value hierarchy level as of June 30, 2013:
|  | Fair value of debt |
|  | (Dollars in thousands) |
Level 1 |  | $ | 808,750 |
Level 2 |  |  | 378,855 |
Total |  | $ | 1,187,605 |
In the third quarter of 2013, the Company refinanced its $375 million term loan. See Note 17 for further discussion on the refinancing. In the first quarter of 2012, the Company recorded a goodwill impairment charge of $332 million based on Level 3 inputs. See Note 5 for a discussion of the goodwill impairment. Valuation Techniques The Company’s financial assets valued based upon Level 1 inputs are comprised of investments in marketable securities held in trust, which are available to pay benefits under certain deferred compensation plans and other compensatory arrangements. The investment assets of the trust are valued using quoted market prices. The Company’s financial assets and financial liabilities valued based upon Level 2 inputs are comprised of foreign currency forward contracts. The Company uses forward rate contracts to manage currency transaction exposure. The fair value of the foreign currency forward exchange contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. The Company has taken into account the creditworthiness of the counterparties in measuring fair value. The Company’s financial liabilities valued based upon Level 3 inputs are comprised of contingent consideration arrangements pertaining to the Company’s acquisitions. The Company accounts for contingent consideration in accordance with applicable guidance related to business combinations. In connection with several of its acquisitions, the Company agreed to pay contingent consideration upon the achievement of specified objectives, including obtaining regulatory approvals, achieving sales targets and, in some instances, the passage of time (collectively, “milestone payments”), and therefore recorded contingent consideration liabilities at the time of the acquisitions. The Company is required to reevaluate the fair value of contingent consideration each reporting period based on new developments and record changes in fair value until such consideration is satisfied through payment upon the achievement of the specified objectives or is no longer payable due to failure to achieve the specified objectives. It is estimated that milestone payments will occur in 2013 and may extend until 2018 or later. As of June 30, 2013, the range of undiscounted amounts the Company could be required to pay for contingent consideration arrangements is between $5.0 million and $84.9 million. The Company determines the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on several factors including:
| • |  | estimated cash flows projected from the success of market launches;
| • |  | the estimated time and resources needed to complete the development of acquired technologies;
| • |  | the uncertainty of obtaining regulatory approvals within the required time periods; and
| • |  | the risk adjusted discount rate for fair value measurement.
The following table provides information regarding the valuation techniques and inputs used in determining the fair value of assets or liabilities categorized as Level 3 measurements:
|  | Valuation Technique |  | Unobservable Input |  | Range (Weighted Average) |
Contingent consideration |  | Discounted cash flow |  | Discount rate |  |  | 2%-10% (6%) |
|  |  |  | Probability of payment |  |  | 0%-100% (45%) |
As of June 30, 2013, of the $32.5 million of total recorded liabilities for contingent consideration, the Company has recorded approximately $12.4 million in Current portion of contingent consideration and the remaining $20.1 million in Other liabilities.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25499696&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=28364263&loc=d3e13504-108611 + Details
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