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Note 5 - Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2015
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

Note 5.   Fair Value of Financial Instruments


Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Accordingly, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. The fair value of the hedge derivative asset was determined based on quotes from the counterparty which were verified by comparing them to the exchange on which the related futures are traded, adjusted for counterparty credit risk. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:


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Level 1. Observable inputs such as quoted prices in active markets;

●

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

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Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.


(in thousands)

               

Hedge derivative assets

 

March 31,

2015 (1)

   

December 31,

2014 (1)

 

Fair Value of Derivatives

  $ (21,751 )   $ (22,720 ) 

Quoted Prices in Active Markets (Level 1)

    -       -  

Significant Other Observable Inputs (Level 2)

  $ (21,751 )   $ (22,720 ) 

Significant Unobservable Inputs (Level 3)

    -       -  

 

(1)

Excludes cash collateral of $2.9 million and $5.0 million, respectively, provided by the Company to the counterparty.


Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, commodity contracts, accounts payable, and debt. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments. Included in accounts receivable is $15.5 million of factoring receivables at March 31, 2015, net of a $0.2 million allowance for bad debts. We advance approximately 85% to 95% of each receivable factored and retain the remainder as collateral for collection issues that might arise. The retained amounts are returned to the clients after the related receivable has been collected. At March 31, 2015, the retained amounts related to factored receivables totaled $0.5 million and were included in accounts payable in the condensed consolidated balance sheets. Our clients are smaller trucking companies that factor their receivables to us for a fee to facilitate faster cash flow. We evaluate each client's customer base under predefined criteria. The carrying value of the factored receivables approximates the fair value, as the receivables are generally repaid directly to us by the client's customer within 30-40 days due to the combination of the short-term nature of the financing transaction and the underlying quality of the receivables.


Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes. The fair value of our revenue equipment installment notes approximated the carrying value at March 31, 2015, as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings under our Credit Facility (as defined herein) approximate fair value due to the variable interest rate on that facility. Additionally, commodity contracts, which are accounted for as hedge derivatives, as discussed in Note 6, are valued based on quotes from the counterparty, which were verified by comparing them to the forward rate of the specific indices upon which the contract is being settled and adjusted for counterparty credit risk using available market information and valuation methodologies.