Fair Value of Financial Instruments

13. Fair Value Measurements.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The assets and liabilities measured at fair value on a recurring basis are as follows (in thousands):

	As of December 31, 2011
	Fair Value Measurements Using						Total
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
2011 Interest Rate Swap	$	-	$	608	$	-	$	608
Contingent consideration to be paid in cash for the acquisitions	$	-	$	-	$	9,856	$	9,856

	As of December 31, 2010
	Fair Value Measurements Using						Total
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
Contingent consideration to be paid in cash for the acquisitions	$	-	$	-	$	3,700	$	3,700

The 2011 Interest Rate Swap liability is measured using the income approach. The fair value reflects the estimated amounts that the Company would pay or receive based on the present value of the expected cash flows derived from market rates and prices. As such, this derivative instrument is classified within Level 2. There were no derivative instruments outstanding as of December 31, 2010.

The Company has obligations, to be paid in cash, to the former owners of acquired companies if certain future financial goals are met. The fair value of this contingent consideration is determined using an expected present value technique. Expected cash flows are determined using the probability - weighted average of possible outcomes that would occur should certain financial metrics be reached. There is no market data available to use in valuing the contingent consideration, therefore, the Company developed its own assumptions related to the future financial performance of the businesses to evaluate the fair value of these liabilities. As such, the contingent consideration is classified within Level 3. The liabilities for the contingent consideration were established at the time of the acquisition and are evaluated at each reporting period. The current liability is included in the Consolidated Balance Sheets in the current portion of accrued earn-outs and the non-current portion is included in accrued earn-outs.

Reconciliations of liabilities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3) are as follows (in thousands):

	Year Ended December 31,
	2011			2010
Contingent consideration for acquisitions
Balance at beginning of year	$	3,700		$	-
Additions for acquisitions		10,346			3,700
Payments on contingent consideration		(1,731	)		-
Settlements of contingent consideration		(1,369	)		-
Fair value adjustments		(640	)		-
Foreign currency translation adjustment		(450	)		-
Balance at end of year	$	9,856		$	3,700

During 2011, there were no fair value measurements of assets or liabilities on a non-recurring basis. The following table summarizes the fair value measurements of assets measured on a non-recurring basis during 2010 (in thousands):

	As of December 31, 2010
	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets	Significant Other Observable Inputs	Significant Unobservable Inputs
	(Level 1)	(Level 2)	(Level 3)	Total	Total Losses
Goodwill	$ -	$ -	$ 199,720	$ 199,720	$ 15,399

The Company determines the fair value of its reporting units primarily based on level 3 inputs such as discounted cash flows which are not observable from the market, directly or indirectly. The Company recognized a goodwill impairment charge of $15.4 million in the fourth quarter of 2010.

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, 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 Company 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 risk is 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.

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