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Fair Value Measurements
6 Months Ended
Jun. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
 
Fair value is defined as 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. The fair value accounting rules establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: 
 
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
Level 3.  Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and liabilities measured at fair value are based on one or more of three valuation approaches as follows: 

(a)
Market Approach.  Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
(b)
Cost Approach.  Amount that would be required to replace the service capacity of an asset (replacement cost).
(c)
Income Approach.  Techniques to convert expected future cash flows to a single present amount based on market expectations (including present value techniques, option-pricing and excess earnings models).
 
Our financial instruments include cash and cash equivalents, receivables, accounts payable, long-term debt and various derivative instruments. The carrying amount of cash and cash equivalents, trade and other current receivables as well as accounts payable approximates fair value due to the short-term nature of these instruments. The net carrying amount of our long-term note receivable also approximates its fair value. The following tables provide additional information relating to other financial instruments measured at fair value on a recurring basis (in thousands): 
 
Fair Value Measurements at
June 30, 2017 Using
 
 
 
 
 
Level 1
 
Level 2 (1)
 
Level 3
 
Total
 
Valuation
Approach
Assets:
 
 
 
 
 
 
 
 
 
Interest rate swaps
$

 
$
363

 
$

 
$
363

 
(c)
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Foreign exchange contracts

 
26,887

 

 
26,887

 
(c)
Interest rate swaps

 
181

 

 
181

 
(c)
Total liability
$

 
$
26,705

 
$

 
$
26,705

 
 
 
 
Fair Value Measurements at
December 31, 2016 Using
 
 
 
 
 
Level 1
 
Level 2 (1)
 
Level 3
 
Total
 
Valuation
Approach
Assets:
 
 
 
 
 
 
 
 
 
Interest rate swaps
$

 
$
451

 
$

 
$
451

 
(c)
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Foreign exchange contracts

 
38,170

 

 
38,170

 
(c)
Interest rate swaps

 
751

 

 
751

 
(c)
Total net liability
$

 
$
38,470

 
$

 
$
38,470

 
 
(1)
Unless otherwise indicated, the fair value of our Level 2 derivative instruments reflects our best estimate and is based upon exchange or over-the-counter quotations whenever they are available. Quoted valuations may not be available due to location differences or terms that extend beyond the period for which quotations are available. Where quotes are not available, we utilize other valuation techniques or models to estimate market values. These modeling techniques require us to make estimations of future prices, price correlation and market volatility and liquidity based on market data. Our actual results may differ from our estimates, and these differences could be positive or negative. See Note 14 for further discussion on fair value of our derivative instruments.
 
The carrying values and estimated fair values of our long-term debt are as follows (in thousands): 
 
June 30, 2017
 
December 31, 2016
 
Carrying
Value (1)
 
Fair
Value (2)
 
Carrying
Value (1)
 
Fair
Value (2)
 
 
 
 
 
 
 
 
Term Loan (previously scheduled to mature June 2018)
$

 
$

 
$
192,258

 
$
192,258

Nordea Q5000 Loan (matures April 2020)
178,571

 
176,228

 
196,429

 
192,746

Term Loan (matures June 2020)
100,000

 
100,000

 

 

MARAD Debt (matures February 2027)
80,149

 
90,419

 
83,222

 
92,049

2022 Notes (mature May 2022)
125,000

 
116,719

 
125,000

 
130,156

2032 Notes (mature March 2032)
60,115

 
59,814

 
60,115

 
59,965

Total debt
$
543,835

 
$
543,180

 
$
657,024

 
$
667,174


(1)
Carrying value includes current maturities and excludes the related unamortized debt discount and debt issuance costs. See Note 6 for additional disclosures on our long-term debt.
(2)
The estimated fair value of the 2022 Notes and the 2032 Notes was determined using Level 1 inputs under the market approach. The fair value of the prior term loan previously scheduled to mature June 2018, the Nordea Q5000 Loan and the MARAD Debt was estimated using Level 2 fair value inputs under the market approach, which was determined using a third party evaluation of the remaining average life and outstanding principal balance of the indebtedness as compared to other obligations in the marketplace with similar terms.