Note 10 - Fair Value Measurements |
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] |
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level inputs are quoted prices in active markets for identical assets or liabilities. 1 Level inputs are observable inputs other than quoted prices included in 2 Level that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are 1 not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level inputs are unobservable inputs that are supported by little or 3 no market activity and are significant to the fair value of the assets or liabilities.The Company's financial assets and liabilities as of December 31 that are measured at fair value on a recurring basis were as follows (in thousands):
Level 3 Measurement.Level fair value measurement. The Company used a binomial lattice model that assumes the holders will maximize their value by finding the optimal decision between redeeming at the redemption price or converting into shares of Common Stock. This model estimates the fair value of the conversion option as the differential in the fair value of the notes including the conversion option compared with the fair value of the notes excluding the conversion option. The significant observable inputs used in the fair value measurement include the price of Common Stock and the risk-free interest rate. The significant unobservable inputs are the estimated Company credit spread and Common Stock volatility, which were based on comparable companies in the marine transportation and energy industries.3 The estimated fair value of the Company's other financial assets and liabilities as of December 31 were as follows (in thousands):
The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company's long-term debt was estimated by using discounted cash flow analysis based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company's investments, at cost, in 50% or less owned companies because of the lack of a quoted market price and the inability to estimate fair value without incurring excessive costs. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.The Company's non-financial assets and liabilities that were measured at fair value during the years ended December 31 were as follows (in thousands):
Property and equipment. December 31, 2018 and 2017, the Company recognized impairment charges of $14.6 million and $27.5 million, respectively, associated with certain offshore support vessels (see Note 1 ). The Level fair values were determined based on the contracted sales prices of the property and equipment, sales prices of similar property and equipment or scrap value, as applicable. The 2 Level fair values were determined based on 3 third -party valuations using significant inputs that are unobservable in the market. Due to limited market transactions, the primary valuation methodology applied by the appraisers was an estimated cost approach less estimated economic depreciation for comparably aged and conditioned assets less estimated economic obsolescence based on market data or utilization and rates per day worked trending of the vessels since 2014. The significant unobservable inputs used in the fair value measurement for the AHTS fleet during 2018 listed above were contributed by MOI to wholly-owned subsidiaries of FGH and recorded at fair value. The Level 3 fair values were determined based on two separate third -party valuations using significant inputs that are unobservable in the market. Due to limited market transactions, the primary valuation methodology applied by both appraisers was an estimated cost approach less economic depreciation for comparable aged vessels. The Level 3 fair value of the vessels was based on a simple average between the two appraisals.Investments, at equity, in 50% or less owned companies. December 31, 2018, the Company marked its investments to zero in certain of its 50% of less owned companies. December 31, 2017, the Company marked its investments to fair value in certain of its 50% or less owned companies. The Level fair values were determined based on the purchase price of acquired interests or sales prices of similar equipment held in the venture. The 2 Level fair values were determined based on 3 third -party valuations using significant inputs that are unobservable in the market. The Company's partner declined to participate in a capital call from Falcon Global during 2017 and, as a consequence, the Company obtained 100% voting control of Falcon Global in accordance with the terms of the operating agreement (see Note 4 ). Upon the change in control, the Company's investment in Falcon Global was deemed to approximate fair value. |