Fair Value Measurements

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 Using
	Level 1		Level 2 ⁽¹⁾		Level 3		Total		Valuation Approach
Assets:
Interest rate swaps	$	—	$	374	$	—	$	374	(c)

Liabilities:
Foreign exchange contracts	—		19,508		—		19,508		(c)
Interest rate swaps	—		82		—		82		(c)
Total liability	$	—	$	19,216	$	—	$	19,216



	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):



	September 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)	169,643		168,583		196,429		192,746
Term Loan (matures June 2020)	98,750		99,120		—		—
MARAD Debt (matures February 2027)	77,000		83,928		83,222		92,049
2022 Notes (mature May 2022)	125,000		123,281		125,000		130,156
2032 Notes (mature March 2032)	60,115		60,077		60,115		59,965
Total debt	$	530,508	$	534,989	$	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 Nordea Q5000 Loan, the MARAD Debt, the Term Loan maturing June 2020 and our previous term loan that was scheduled to mature June 2018 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.

- 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.

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