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Fair Value Measurements
 3 Months Ended
Mar. 31, 2014
Fair Value Measurements  
Fair Value Measurements

8.  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 March 31, 2014 and December 31, 2013, with pricing levels as of the date of valuation (in thousands):

 

 

 

March 31, 2014

 

December 31, 2013

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Interest rate swaps asset

 

$

—

 

$

421

 

$

—

 

$

—

 

$

322

 

$

—

 

Interest rate swaps liability

 

—

 

(3,492

)

—

 

—

 

(3,374

)

—

 

 

On a quarterly basis, the 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 during the three months ended March 31, 2014 and 2013, with pricing levels as of the date of valuation (in thousands):

 

 

 

Three Months Ended March 31, 2014

 

Three Months Ended March 31, 2013

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Impaired long-lived assets

 

$

—

 

$

—

 

$

368

 

$

—

 

$

—

 

$

1,216

 

Inventory write-down— Restructuring

 

—

 

—

 

2,331

 

—

 

—

 

—

 

Impaired long-lived assets—Discontinued operations

 

—

 

—

 

—

 

—

 

—

 

273

 

 

Our estimate of the impaired long-lived assets’ fair value was primarily based on either the expected net sale proceeds compared to other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. 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 8.6%. Our estimate of the fair value of the inventory associated with the restructuring of our make ready operations was based on expected net sale proceeds. See Note 10 for further discussion of the restructuring of our make ready operations. 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.