Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Note 20 — Fair Value Measurements

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 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 fair value of our derivative instruments (Note 21) 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. The fair value of our interest rate swaps is calculated as the discounted cash flows of the difference between the rate fixed by the hedging instrument and the LIBOR forward curve over the remaining term of the hedging instrument. The fair value of our foreign currency exchange contracts is calculated as the discounted cash flows of the difference between the fixed payment specified by the hedging instrument and the expected cash inflow of the forecasted transaction using a foreign currency forward curve. These modeling techniques require us to make estimations of future prices, price correlation, volatility and liquidity based on market data. The following tables provide additional information relating to those financial instruments measured at fair value on a recurring basis (in thousands):



	Fair Value at December 31, 2019								Valuation Approach
	Level 1		Level 2		Level 3		Total		Valuation Approach
Assets:
Interest rate swaps	$	—	$	44	$	—	$	44	(c)

Liabilities:
Foreign exchange contracts — hedging instruments	—		401		—		401		(c)
Foreign exchange contracts — non-hedging instruments	—		601		—		601		(c)
Total net liability	$	—	$	958	$	—	$	958



	Fair Value at December 31, 2018								Valuation Approach
	Level 1		Level 2		Level 3		Total		Valuation Approach
Assets:
Interest rate swaps	$	—	$	1,064	$	—	$	1,064	(c)

Liabilities:
Foreign exchange contracts — hedging instruments	—		6,211		—		6,211		(c)
Foreign exchange contracts — non-hedging instruments	—		3,984		—		3,984		(c)
Total net liability	$	—	$	9,131	$	—	$	9,131

The principal amount and estimated fair value of our long-term debt are as follows (in thousands):



	December 31,
	2019				2018
	Principal Amount ⁽¹⁾		Fair Value ^{(2) (3)}		Principal Amount ⁽¹⁾		Fair Value ^{(2) (3)}

Term Loan (previously scheduled to mature June 2020)	$	—	$	—	$	33,693	$	33,314
Term Loan (matures December 2021)	33,250		32,959		—		—
Nordea Q5000 Loan (matures April 2020)	89,286		89,398		125,000		122,500
MARAD Debt (matures February 2027)	63,610		68,643		70,468		74,406
2022 Notes (mature May 2022)	125,000		134,225		125,000		114,298
2023 Notes (mature September 2023)	125,000		162,188		125,000		114,688
Total debt	$	436,146	$	487,413	$	479,161	$	459,206


(1)	Principal amount includes current maturities and excludes the related unamortized debt discount and debt issuance costs. See Note 8 for additional disclosures on our long-term debt.

(2)

The estimated fair value of the 2022 Notes and the 2023 Notes was determined using Level 1 fair value inputs under the market approach. The fair value of the term loans, 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.

(3)

The principal amount and estimated fair value of the 2022 Notes and the 2023 Notes are for the entire instrument inclusive of the conversion feature reported in shareholders’ equity.

- 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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