Fair Value Measurements and Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principal or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable, and able and willing to transact for the asset or liability.

Valuation Hierarchy--A valuation hierarchy is used for presentation of the inputs to measure fair value. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are unadjusted quoted prices for similar assets and liabilities in active markets, unadjusted quoted prices for identical or similar assets in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Our assets and liabilities measured at fair value on a recurring basis at March 29, 2014, were as follows:



			Fair Value Measurements at March 29, 2014 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at March 29, 2014		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	12,323	$	12,323	$	—	$	—

Liabilities:
Deferred compensation	$	1,285	$	—	$	1,285	$	—

Our assets and liabilities measured at fair value on a recurring basis at December 31, 2013 were as follows:



			Fair Value Measurements at December 31, 2013 Using:
Assets and Liabilities Recorded at Fair Value on a Recurring Basis	Total Carrying Value at December 31, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Assets invested for self-insurance, classified as other assets, noncurrent	$	12,716	$	12,716	$	—	$	—

Liabilities:
Deferred compensation	$	1,144	$	—	$	1,144	$	—


M.	Fair Value Measurements and Financial Instruments (continued)

The assets invested for self-insurance are money market funds--classified as Level 1--based on quoted market prices of the identical underlying securities in active markets. The estimated fair value of the deferred compensation--classified as Level 2--is based on the value of the Company's common shares, determined by independent valuation.

Fair Value of Financial Instruments--Fair value information is required to be presented for all financial instruments, whether reported at fair value or historical carrying value.

The fair values of our current assets and current liabilities, including cash, accounts receivable, accounts payable, and accrued expenses among others, approximate their reported carrying values because of their short-term nature. The assets invested for self-insurance and derivative instruments are reported at fair value. Financial instruments classified as noncurrent liabilities and their carrying values and fair values were as follows:



	March 29, 2014				December 31, 2013
Financial Instruments Recorded at Historical Carrying Value	Carrying Value		Fair Value		Carrying Value		Fair Value
Revolving credit facility, noncurrent	$	45,700	$	45,700	$	20,000	$	20,000
Senior unsecured notes	30,000		29,018		30,000		28,219
Term loans, noncurrent	316		316		34		34
Total	$	76,016	$	75,034	$	50,034	$	48,253

The carrying value of our revolving credit facility approximates fair value as the interest rates on the amounts outstanding are variable. The fair value of our senior unsecured notes and our term loans is determined based on expected future weighted-average interest rates with the same remaining maturities--Level 2 inputs.

Market Risk and Derivative Financial Instruments

In the normal course of business, we are exposed to market risk related to changes in foreign currency exchange rates, changes in interest rates and changes in fuel prices. We do not hold or issue derivative financial instruments for trading or speculative purposes. We use derivative financial instruments from time-to-time to manage risks, in part, associated with changes in interest rates and changes in fuel prices.

Foreign Currency Exchange Rate Risk--We are exposed to market risk related to foreign currency exchange rate risk resulting from our operations in Canada, where we provide a comprehensive range of horticultural services. Our financial results could be affected by factors such as changes in the foreign currency exchange rate or differing economic conditions in the Canadian markets as compared with the markets for our services in the United States. Our earnings are affected by translation exposures from currency fluctuations in the value of the U.S. dollar as compared to the Canadian dollar. Similarly, the Canadian dollar-denominated assets and liabilities may result in financial exposure as to the timing of transactions and the net asset / liability position of our Canadian operations. Presently, we do not engage in hedging activities related to our foreign currency rate risk.


M.	Fair Value Measurements and Financial Instruments (continued)

Interest Rate Risk--We are exposed to market risk related to changes in interest rates on long-term debt obligations. We regularly monitor and measure our interest rate risk and, to the extent that we believe we are exposed, from time-to-time we have entered into interest rate swap contracts--derivative financial instruments--with the objective of altering interest rate exposures related to a portion of variable debt.

Fuel Derivatives--From time-to-time we have entered into fuel derivatives as “economic hedges” related to fuel consumed by Davey Tree service vehicles. The objectives of the economic hedges are to fix the price of a portion of our fuel needs and mitigate the earnings and cash flow volatility attributable to the risk of changing prices.

The following table sets forth quantitative information related to our derivatives instruments and where amounts were recorded in our consolidated financial statements.



	Three Months Ended
	March 29, 2014		March 30, 2013
Economic Hedges - Derivatives Not Designated as Hedging Instruments
Fuel Derivatives:
Change in fair value, recognized in results of operations, as a reduction in operating costs and expenses	$	—	$	238