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FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 2012
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

9.  FAIR VALUE MEASUREMENTS

 

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories:

 

·             Level 1 — Quoted unadjusted prices for identical instruments in active markets to which we have access at the date of measurement.

 

·             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 in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or prices vary substantially over time or among brokered market makers.

 

·             Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect our own assumptions regarding how market participants would price the asset or liability based on the best available information.

 

The following table presents our assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, with pricing levels as of the date of valuation (in thousands):

 

 

 

September 30, 2012

 

December 31, 2011

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Interest rate swaps asset (liability)

 

$

—

 

$

(10,665

)

$

—

 

$

—

 

$

(19,446

)

$

—

 

 

On a quarterly basis, our interest rate swaps are recorded at fair value utilizing a combination of the market approach and income approach to estimate fair value based on forward LIBOR curves.

 

The following table presents our assets and liabilities measured at fair value on a nonrecurring basis for the nine months ended September 30, 2012 and 2011, with pricing levels as of the date of valuation (in thousands):

 

 

 

Nine Months Ended September 30, 2012

 

Nine Months Ended September 30, 2011

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Impaired long-lived assets

 

$

—

 

$

—

 

$

32,355

 

$

—

 

$

—

 

$

812

 

Impaired assets —Discontinued operations

 

—

 

—

 

1,959

 

—

 

—

 

—

 

 

Our estimate of the fair value of the impaired long-lived assets was based on the expected net sale proceeds compared to other fleet units we recently sold, as well as our review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. Because we expect the disposition of the fleet assets we impaired during the second quarter of 2012 to take more than twelve months, we discounted the expected proceeds, net of selling and other carrying costs, using a weighted average disposal period of four years and a discount rate of 10.4%. Our estimate of the fair value of the impaired assets that are classified as discontinued operations was based on our expected proceeds, net of selling costs.