Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts and unbilled receivables, notes receivable, accounts payable, accrued multi-client data library royalties, investment in a convertible note from a privately-owned U.S.-based technology company and long-term debt. The carrying amounts of cash and cash equivalents, accounts and unbilled receivables, notes receivable, accounts payable and accrued multi-client data library royalties approximate fair value due to the highly liquid nature of these instruments.

The carrying amounts of the Company’s long-term debt as of June 30, 2013 and December 31, 2012 were $183.7 million and $105.3 million, respectively, compared to its fair values of $173.2 million and $105.3 million as of June 30, 2013 and December 31, 2012, respectively. The fair value of the long-term debt was calculated using a market approach based upon Level 2 inputs, including a price quote from a major financial institution, as of June 30, 2013. As of December 31, 2012, Level 3 inputs were used, including an estimated interest rate reflecting then-current market conditions.

The following table provides additional information related to assets measured at fair value on a recurring basis at June 30, 2013 and December 31, 2012. The reference to level within the table relates to the level of inputs used to determine fair value, which the key inputs are then described below. The table is as follows (amounts in thousands):

	Level 1		Level 2		Level 3
As of June 30, 2013:
Investment in convertible note	$	—	$	—	$	3,972
As of December 31, 2012:
Investment in convertible notes	—		—		8,195

Investment in Convertible Notes. In May 2011, the Company purchased a convertible note from a privately-owned U.S.-based technology company. The original principal amount of the note is $6.5 million, and it bears interest at a rate of 4% per annum. On April 25, 2013, the Company converted the note and accrued interest into 1,533,858 common shares of the investee which resulted in a post-conversion equity ownership percentage interest in the investee of 16%. At April 25, 2013, prior to conversion, the note and accrued interest had a fair value of $6.9 million compared to a book value of $7.0 million resulting in a realized loss of $(0.1) million. The Company performed a fair value analysis with respect to its investment in the convertible note and interest using Level 3 inputs. These inputs included an income approach, using a discounted cash flow model; a market approach, using peer company multiples; as well as a market approach, including terms and likelihood of an investment event.

In March 2012, the Company and the investee entered into an agreement for the Company to make available to the investee a credit facility in an amount of up to $4.0 million. This credit facility originally had a term of one year with an option to extend its term by one year, which was agreed to by the Company and the investee effective March 16, 2013. The credit facility indebtedness now matures on March 15, 2014. The credit facility allows for conversion of the outstanding balance of the promissory note under the credit facility into common shares of the investee. As of June 30, 2013, the investee had drawn $4.0 million under this credit arrangement.

The Company performed a fair value analysis with respect to its investment in the convertible note using Level 3 inputs. These inputs included an income approach, using a discounted cash flow model; a market approach, using peer company multiples; as well as a market approach, including the terms and likelihood of an investment event. As of June 30, 2013, the fair value of this investment was approximately $4.0 million; which was equal to its carrying value.