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Fair Value of Financial Instruments | 3 Months Ended
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Mar. 31, 2016
Fair Value of Financial Instruments |
Fair Value of Financial Instruments | 4.Fair Value of Financial Instruments The Company applies the following hierarchy to determine the fair value of financial instruments, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. The levels in the hierarchy are defined as follows:
| · Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
| · Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
| · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The valuation techniques that may be used by the Company to determine the fair value of Level 2 and Level 3 financial instruments are the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost). The following tables set forth the Company’s financial instruments that are measured at fair value on a recurring basis and presents them within the fair value hierarchy using the lowest level of input that is significant to the fair value measurement at March 31, 2016 and December 31, 2015 (in millions):
March 31, 2016 |  | Total |  | Quoted Prices in Active Markets Available (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |
Assets: |  |  |  |  |  |  |  |  |
Short-term investments |  | $ | 210.6 |  | $ | 210.6 |  | $ | — |  | $ | — |
Restricted cash |  | 1.7 |  | 1.7 |  | — |  | — |
Foreign exchange contracts |  | 1.1 |  | — |  | 1.1 |  | — |
Embedded derivatives in purchase and delivery contracts |  | 0.1 |  | — |  | 0.1 |  | — |
Long-term restricted cash |  | 2.7 |  | 2.7 |  | — |  | — |
Total assets recorded at fair value |  | $ | 216.2 |  | $ | 215.0 |  | $ | 1.2 |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | 4.6 |  | $ | — |  | $ | — |  | $ | 4.6 |
Foreign exchange contracts |  | 0.2 |  | — |  | 0.2 |  | — |
Embedded derivatives in purchase and delivery contracts |  | 0.4 |  | — |  | 0.4 |  | — |
Fixed price commodity contracts |  | 0.3 |  | — |  | 0.3 |  | — |
Total liabilities recorded at fair value |  | $ | 5.5 |  | $ | — |  | $ | 0.9 |  | $ | 4.6 |
December 31, 2015 |  | Total |  | Quoted Prices in Active Markets Available (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |
Assets: |  |  |  |  |  |  |  |  |
Short-term investments |  | $ | 201.2 |  | $ | 201.2 |  | $ | — |  | $ | — |
Restricted cash |  | 1.5 |  | 1.5 |  | — |  | — |
Embedded derivatives in purchase and delivery contracts |  | 0.5 |  | — |  | 0.5 |  | — |
Long-term restricted cash |  | 2.6 |  | 2.6 |  | — |  | — |
Total assets recorded at fair value |  | $ | 205.8 |  | $ | 205.3 |  | $ | 0.5 |  | $ | — |
Liabilities: |  |  |  |  |  |  |  |  |
Contingent consideration |  | $ | 4.6 |  | $ | — |  | $ | — |  | $ | 4.6 |
Foreign exchange contracts |  | 1.3 |  | — |  | 1.3 |  | — |
Embedded derivatives in purchase and delivery contracts |  | 0.5 |  | — |  | 0.5 |  | — |
Fixed price commodity contracts |  | 0.4 |  | — |  | 0.4 |  | — |
Total liabilities recorded at fair value |  | $ | 6.8 |  | $ | — |  | $ | 2.2 |  | $ | 4.6 |
The Company’s financial instruments consist primarily of cash equivalents, short-term investments, restricted cash, derivative instruments consisting of foreign exchange contracts, commodity contracts, derivatives embedded in certain purchase and sale contracts, accounts receivable, short-term borrowings, accounts payable, contingent consideration and long-term debt. The carrying amounts of the Company’s cash equivalents, short-term investments, restricted cash, accounts receivable, short-term borrowings and accounts payable approximate fair value due to their short-term nature. Derivative assets and liabilities are measured at fair value on a recurring basis. The Company’s long-term debt consists principally of a private placement arrangement entered into in 2012 with various fixed interest rates based on the maturity date. The fair value of the long-term fixed interest rate debt, which has been classified as Level 2, was $257.6 million and $252.1 million at March 31, 2016 and December 31, 2015, respectively, based on market and observable sources with similar maturity dates. Fair value treatment may be elected either upon initial recognition of an eligible asset or liability or, for an existing asset or liability, if an event triggers a new basis of accounting. The Company did not elect to remeasure any of its existing financial assets or liabilities and did not elect the fair value option for any financial assets or liabilities which originated during the three months ended March 31, 2016 or 2015. As part of certain historical acquisitions, the Company recorded contingent consideration liabilities that have been classified as Level 3 in the fair value hierarchy. The contingent consideration represents the estimated fair value of future payments to the former shareholders of applicable acquired companies based on achieving annual revenue and gross margin targets in certain years as specified in the purchase and sale agreements. The Company initially valued the contingent consideration by using a Monte Carlo simulation which models future revenue and costs of goods sold projections and discounts the average results to present value. There were no changes to the fair value of the contingent considerations recognized in earnings for the three months ended March 31, 2016. Changes to the fair value of the contingent consideration recognized in earnings for the three months ended March 31, 2015 was $0.1 million, and was recorded within Other Charges, net in the unaudited condensed consolidated statements of income and comprehensive income (loss). There was no activity or change in value in the contingent consideration liability as of March 31, 2016 compared to December 31, 2015. During the second quarter of 2014, the Company commenced a program to enter into time deposits with varying maturity dates ranging from one to twelve months, as well as call deposits for which the Company has the ability to redeem the invested amounts over a period of 31 to 95 days. The Company has classified these investments within cash and cash equivalents or short-term investments within the unaudited condensed consolidated balance sheet based on the call and maturity dates. As of March 31, 2016 there are no cash equivalents outstanding and $210.6 million of short-term investments. Short-term investments are classified as available-for-sale and are reported at fair value, with unrealized gains (losses) excluded from earnings and reported, net of tax, in accumulated other comprehensive income (loss) within the accompanying unaudited condensed consolidated balance sheet. There were no unrealized gains (losses) recorded during the three months ended March 31, 2016 and 2015. On a quarterly basis, the Company reviews its short-term investments to determine if there have been any events that could create an impairment. None were noted for the three months ended March 31, 2016 and 2015.

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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 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: 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 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 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 5: 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=35750535&loc=d3e13504-108611 Reference 6: 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=35750535&loc=d3e13433-108611 + Details
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