Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2014

Note 11—Fair Value of Financial Instruments

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three level hierarchy has been established for valuing assets and liabilities based on how transparent (observable) the inputs are that are used to determine fair value, with the inputs considered most observable categorized as Level 1 and those that are the least observable categorized as Level 3. Hierarchy levels are defined as follows:


Level 1:		Quoted prices in active markets for identical assets and liabilities;
Level 2:		Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and
Level 3:		Unobservable inputs that are supported by little or no market data which require the reporting entity to develop its own assumptions.

The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013 and indicates the fair value hierarchy of the valuation techniques utilized to determine such values. For some assets, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. When this is the case, the asset is categorized based on the level of the most significant input to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and considers factors specific to the assets being valued.

	June 30, 2014

	Fair Value Measurements Using
	Fair Value Measurements Using						Total Fair Value
(in thousands)	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Interest rate swaps	$	—	$	1,019	$	—	$	1,019

	December 31, 2013

	Fair Value Measurements Using
	Fair Value Measurements Using						Total Fair Value
(in thousands)	Level 1		Level 2		Level 3		Total Fair Value
Assets:
Interest rate cap	$	—	$	1	$	—	$	1
Liabilities:
Interest rate swaps	$	—	$	3,080	$	—	$	3,080

The Company uses quoted dealer prices for similar contracts in active over-the-counter markets for determining fair value of Level 2 financial assets and liabilities.

The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

Cash and cash equivalents, receivables and accounts payable—The carrying amounts reported in the balance sheet approximate fair value.

Debt—All of the Company's outstanding debt is carried at cost. There were no borrowings outstanding under the Revolver at June 30, 2014 or December 31, 2013. The estimated fair value of the Company's debt is based on observable market data (Level 2). The carrying amounts and fair values of the Company's long-term debt (excluding capital obligations, equipment financing agreements and a discount on the Revolver of $7,437 as of June 30, 2014) are presented below (in thousands):

	June 30, 2014				December 31, 2013

	Carrying Amount		Fair Value		Carrying Amount		Fair Value
2011 term loan A(1)	$	—	$	—	$	401,052	$	403,517
2011 term loan B(2)	$	964,684	$	912,152	$	968,581	$	959,838
9.875% senior notes(3)	$	462,200	$	287,138	$	496,831	$	431,250
8.50% senior notes	$	450,000	$	255,375	$	450,000	$	374,625
9.50% senior secured notes(4)	$	447,656	$	455,625	$	447,492	$	474,750
9.50% add-on senior secured notes(5)	$	202,828	$	202,500	$	—	$	—
11.0%/12.0% senior secured PIK toggle notes	$	350,000	$	288,750	$	—	$	—

(1): Net of debt discount of $5,514 as of December 31, 2013.
(2): Net of debt discount of $13,494 and $9,597 as of June 30, 2014 and December 31, 2013, respectively.
(3): Net of debt discount of $2,800 and $3,169 as of June 30, 2014 and December 31, 2013, respectively.
(4): Net of debt discount of $2,344 and $2,508 as of June 30, 2014 and December 31, 2013, respectively.
(5): Includes a premium of $2,828 as of June 30, 2014.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details