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Fair Value Measurements
 6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of judgment, and therefore cannot be determined with precision.

Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:

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

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

•
Cash and cash equivalents, restricted cash, operating lease related receivables, and accounts payable: The amounts reported in the accompanying Consolidated Balance Sheets approximate fair value due to their short-term nature.

•
Notes receivables: The carrying amount of the Company’s outstanding balance on its Notes receivables as of June 30, 2019 and December 31, 2018 was estimated to have a fair value of approximately $30.9 million and $0.2 million, respectively, based on the fair value of estimated future payments calculated using interest rates that approximate prevailing market rates at each period end (Level 2 inputs).

•
Debt obligations: The carrying amount of the Company’s outstanding balance on its Debt obligations as of June 30, 2019 and December 31, 2018 was estimated to have a fair value of approximately $1,265.0 million and $1,348.1 million respectively, based on the fair value of estimated future payments calculated using interest rates that approximate prevailing market rates at each period end (Level 2 inputs).

Assets Measured and Recorded at Fair Value on a Recurring Basis

As of June 30, 2019 and December 31, 2018, the Company measured the fair value of its interest rate swap of $100.0 million (notional amount) based on Level 2 inputs, due to the usage of inputs that can be corroborated by observable market data. The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance. The interest rate swap had a net fair value representing a $22 thousand net liability and a net asset of $1.7 million, as of June 30, 2019 and December 31, 2018, respectively. For the six months ended June 30, 2019 and 2018, $(0.4) million and $(0.1) million was realized through the income statement as an adjustment to Interest expense.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company determines fair value of long-lived assets held and used, such as Equipment held for operating lease and Equipment held for sale, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. The Company used Level 2 inputs to measure write-downs of equipment held for lease and equipment held for sale as of June 30, 2019 and December 31, 2018.
 
Assets Written Down to Fair Value
 
Total Losses
 
June 30, 2019
 
December 31, 2018
 
Six Months Ended June 30,
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
(in thousands)
Equipment held for lease
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
17,756

 
$
—

 
$
17,756

 
$
4,367

 
$
3,400

Equipment held for sale
—

 
3,450

 
—

 
3,450

 
—

 
472

 
—

 
472

 
—

 
178

Total
$
—

 
$
3,450

 
$
—

 
$
3,450

 
$
—

 
$
18,228

 
$
—

 
$
18,228

 
$
4,367

 
$
3,578



A write-down of $4.4 million was recorded during the six months ended June 30, 2019 for four engines due to a management decision to part-out the engines or sell the engines, in which the net book values exceeded the estimated proceeds. A write-down of $3.6 million was recorded during the six months ended June 30, 2018 for three engines due to a management decision to part-out the engines, in which the net book values exceeded the estimated proceeds.