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Fair Value | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value |
10. | Fair Value
The Company holds mortgage-backed securities, fixed income securities, derivatives (see Note 8, Derivative Instruments) and certain other financial instruments which are carried at fair value. The Company determines fair value based upon quoted prices when available or through the use of alternative approaches, such as model pricing, when market quotes are not readily accessible or available. In determining the fair value of the Company’s obligations, various factors are considered, including: closing exchange or over-the-counter market price quotations; time value and volatility factors underlying options and derivatives; price activity for equivalent instruments; and the Company’s own credit standing. These valuation techniques may be based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:
• | Level 1 – Quoted prices for identical instruments in active markets.
• | Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
• | Level 3 – Instruments whose significant value drivers are unobservable.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We did not have any transfers between Level 1 and Level 2 of the fair value hierarchy during the three or nine months ended September 30, 2016. The following table presents the Company’s assets that are measured at fair value and the related hierarchy levels as of September 30, 2016:
|  |  | Fair Value Measurements at Reporting Date Using
| September 30, 2016 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Mortgage-backed securities | $ | 499 |  |  | $ | — |  |  | $ | 499 |  |  | $ | — |
Asset-backed securities | 688 |  |  | — |  |  | 688 |  |  | — |
Municipal bonds | 708 |  |  | — |  |  | 708 |  |  | — |
Fixed-income mutual fund | 22,265 |  |  | 22,265 |  |  | — |  |  | — |
Total available-for-sale securities | $ | 24,160 |  |  | $ | 22,265 |  |  | $ | 1,895 |  |  | $ | — |
Executive deferred compensation plan trust (a) | $ | 5,716 |  |  | $ | 5,716 |  |  | $ | — |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Foreign currency swaps (b) | $ | 9 |  |  | $ | — |  |  | $ | 9 |  |  | $ | — |
(a) | The fair value of these instruments is recorded in Other assets.
(b) | The fair value of these instruments is recorded in Accounts payable.
The following table presents the Company’s assets and liabilities that are measured at fair value and the related hierarchy levels as of December 31, 2015:
|  |  | Fair Value Measurements at Reporting Date Using
| December 31, 2015 |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Mortgage-backed securities | $ | 650 |  |  | $ | — |  |  | $ | 650 |  |  | $ | — |
Asset-backed securities | 848 |  |  | — |  |  | 848 |  |  | — |
Municipal bonds | 398 |  |  | — |  |  | 398 |  |  | — |
Fixed-income mutual fund | 16,666 |  |  | 16,666 |  |  | — |  |  | — |
Total available-for-sale securities | $ | 18,562 |  |  | $ | 16,666 |  |  | $ | 1,896 |  |  | $ | — |
Executive deferred compensation plan trust (a) | $ | 5,655 |  |  | $ | 5,655 |  |  | $ | — |  |  | $ | — |
Fuel price derivatives – unleaded fuel (b) | $ | 3,083 |  |  | $ | — |  |  | $ | 3,083 |  |  | $ | — |
Fuel price derivatives – diesel (b) | 1,924 |  |  | — |  |  | — |  |  | 1,924 |
Total fuel price derivatives | $ | 5,007 |  |  | $ | — |  |  | $ | 3,083 |  |  | $ | 1,924 |
Liabilities: |  |  |  |  |  |  |
Foreign currency swaps (c) | $ | 90 |  |  | $ | — |  |  | $ | 90 |  |  | $ | — |
(a) | The fair value of these instruments is recorded in Other assets.
(b) | The balance sheet presentation combines unleaded fuel and diesel fuel positions.
(c) | The fair value of these instruments is recorded in Accounts payable.
Available-for-sale securities and executive deferred compensation plan trust When available, the Company uses quoted market prices to determine the fair value of available-for-sale securities; such items are classified in Level 1 of the fair-value hierarchy. These securities primarily consist of an open-ended mutual fund which is invested in fixed-income securities and is held in order to satisfy certain regulatory requirements of WEX Bank. For mortgage-backed and asset-backed debt securities and bonds, the Company generally uses quoted prices for recent trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced using such methods are generally classified as Level 2. The obligations related to the deferred compensation plan trust are classified as Level 1 in the fair value hierarchy because the fair value is determined using quoted prices for identical instruments in active markets. Foreign currency contracts Derivatives include foreign currency forward and swap contracts. The Company's foreign currency forward and swap contracts are valued using an income approach (Level 2) based on the spot rate less the contract rate multiplied by the notional amount. We consider counterparty credit risk in the valuation of the Company's derivatives. This credit risk did not have a material impact on the valuation of the Company's derivatives during 2016 and 2015. Fuel price derivative instruments The majority of fuel price derivative instruments entered into by the Company were executed over-the-counter and were valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation technique and inputs depend on the type of derivative and the nature of the underlying instrument. The principal technique used to value these instruments was a comparison of the spot price of the underlying instrument to its related futures curve adjusted for the Company’s assumptions of volatility and present value, where appropriate. The fair values of derivative contracts reflected the expected cash the Company would pay or receive upon settlement of the respective contracts. The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, the spot price of the underlying instruments, volatility, and correlation. The item was placed in either Level 2 or Level 3 depending on the observability of the significant inputs to the model. Correlation and inputs with longer tenures are generally less observable. Fuel price derivative instruments – diesel. The assumptions used in the valuation of the diesel fuel price derivative instruments used both observable and unobservable inputs. There is a lack of price transparency with respect to forward prices for diesel fuel. Such unobservable inputs are significant to the diesel fuel derivative contract valuation methodology. After the first quarter of 2016, the Company no longer holds any fuel price derivatives. The following table presents a reconciliation of the beginning and ending balances for fuel-price derivative assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2015:
|  | Fuel Price Derivatives – Diesel
Beginning balance, July 1 2015 |  | $ | 6,078 |
Total gains and (losses) – realized/unrealized |  |
Included in earnings (a) |  | (1,633 | )
Included in other comprehensive income |  | — |
Purchases, issuances and settlements |  | — |
Transfers (in)/out of Level 3 |  | — |
Ending balance, September 30 2015 |  | $ | 4,445 |
(a) | Gains and losses for the three months ended September 30, 2015 are reported in net realized and unrealized losses on fuel price derivatives on the unaudited condensed consolidated statements of income.
The following table presents a reconciliation of the beginning and ending balances for fuel-price derivative assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended:
|  | September 30, 2016 |  | September 30, 2015
|  | Fuel Price Derivatives – Diesel |  | Fuel Price Derivatives – Diesel
Beginning balance, January 1, 2016 and 2015, respectively |  | $ | 1,924 |  |  | $ | 11,848 |
Total (losses) and gains – realized/unrealized |  |  |  |
Included in earnings (a) |  | (1,924 | ) |  | (7,403 | )
Included in other comprehensive income |  | — |  |  | — |
Purchases, issuances and settlements |  | — |  |  | — |
Transfers (in)/out of Level 3 |  | — |  |  | — |
Ending balance September 30, 2016 and 2015, respectively |  | $ | — |  |  | $ | 4,445 |
(a) | Gains and losses for the nine months ended September 30, 2016 and 2015 are reported in net realized and unrealized losses on fuel price derivatives on the unaudited condensed consolidated statements of income.
Debt We determine the fair value of the amount outstanding under our 2016 Credit Facility and Notes based on the market rates for the issuance of the Company's debt which are Level 2 inputs in the fair value hierarchy. The fair value of amounts outstanding under the 2016 Credit Facility approximate the carrying value. The Notes outstanding as of September 30, 2016 have a carrying value of $400,000, less loan origination fees of $4,649, and a fair value of $396,000. As of December 31, 2015 the carrying value of the $400,000 in Notes outstanding, less loan origination fees of $5,200, had a fair value of $366,000.

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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=66048111&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=73719730&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=73719730&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=73719730&loc=d3e13433-108611 + Details
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