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Note 7 - Fair Value Measurements
 3 Months Ended
Mar. 31, 2015
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

Note 7. Fair Value Measurements


Factors used in determining the fair value of our financial assets and liabilities are summarized into three broad categories:


 

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Level 1 – quoted prices in active markets for identical securities;


 

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Level 2 – other significant observable inputs, including quoted prices for similar securities, interest rates, prepayment spreads, credit risk; and


 

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Level 3 – significant unobservable inputs, including our own assumptions in determining fair value.


The inputs or methodology used for valuing financial assets and liabilities are not necessarily an indication of the risk associated with investing in them.


We use the income approach to determine the fair value of our interest rate swap using observable Level 2 market expectations at each measurement date and an income approach to convert estimated future cash flows to a single present value amount (discounted) assuming that participants are motivated, but not compelled, to transact. Level 2 inputs for the swap valuation are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates and credit risk at commonly quoted intervals). Mid-market pricing is used as a practical expedient for fair value measurements. Key inputs, including the cash rates for very short term borrowings, futures rates for up to two years and LIBOR swap rates beyond the derivative maturity, are used to predict future reset rates to discount those future cash flows to present value at the measurement date.


Inputs are collected from Bloomberg on the last market day of the period and used to determine the rate used to discount the future cash flows. The valuation of the interest rate swap also takes into consideration our own, as well as the counterparty’s, risk of non-performance under the contract. See Note 8 for more details regarding our derivative contracts.


We estimate the value of our equity-method investment that is recorded at fair value on a non-recurring basis based on a market valuation approach. We use prices and other relevant information generated primarily by recent market transactions involving similar or comparable assets. Because these valuations contain unobservable inputs, we classified the measurement of fair value of our equity-method investment as Level 3.


There were no changes to our valuation techniques during the three-month period ended March 31, 2015.


Assets and Liabilities Measured at Fair Value


Following are the disclosures related to our assets and (liabilities) that are measured at fair value (in thousands):


Fair Value at March 31, 2015

 

Level 1

   

Level 2

   

Level 3

 

Measured on a recurring basis:

                       

Derivative contracts, net

  $ -     $ (1,488 )   $ -  
                         

Measured on a non-recurring basis:

                       

Equity-method investment

  $ -     $ -     $ 39,871  

Fair Value at December 31, 2014

 

Level 1

   

Level 2

   

Level 3

 

Measured on a recurring basis:

                       

Derivative contracts, net

  $ -     $ (1,750 )   $ -  
                         

Measured on a non-recurring basis:

                       

Equity-method investment

  $ -     $ -     $ 33,282  

Based on operating losses recognized by the equity-method investment, we determined that an impairment of our investment had occurred. Accordingly, we performed a fair value calculation for this investment and determined that a $4.1 million impairment was required to be recorded as asset impairments in our Consolidated Statements of Operations for the three months ended March 31, 2015. See Note 11.


Fair Value Disclosures for Financial Assets and Liabilities


We determined the carrying value of cash equivalents, accounts receivable, trade payables, accrued liabilities and short-term borrowings approximate their fair values because of the nature of their terms and current market rates of these instruments. We believe the carrying value of our variable rate debt approximates fair value.


We have fixed rate debt and calculate the estimated fair value of our fixed rate debt using a discounted cash flow methodology. Using estimated current interest rates based on a similar risk profile and duration (Level 2), the fixed cash flows are discounted and summed to compute the fair value of the debt. As of March 31, 2015, this debt had maturity dates between July 2016 and October 2034. A summary of the aggregate carrying values and fair values of our long-term fixed interest rate debt is as follows (in thousands):


   

March 31,
2015

   

December 31,

2014

 

Carrying value

  $ 312,790     $ 257,780  

Fair value

    312,097       270,781