Fair Value Measurements

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 13. Fair Value Measurements

We present fair value measurements and disclosures applicable to both our financial and nonfinancial assets and liabilities that are measured and reported on a fair value basis. Fair value is an exit price representing the expected amount we would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date. We have followed consistent methods and assumptions to estimate the fair values as more fully described in our Annual Report on Form 10-K for the year ended December 31, 2015, which we filed with the SEC on March 15, 2016.

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, derivatives and long-term debt. At March 31, 2016, the carrying values of all of these financial instruments, except the long-term debt with fixed interest rates, approximated fair value. The fair value of floating-rate debt approximates the carrying amount because the interest rates paid are based on short-term maturities. The fair value of our fixed-rate long-term debt is estimated based on the Bloomberg algorithm taking into to account similar sized and industry debt (a Level 2 category fair value measurement). As of March 31, 2016, the fair value of our fixed-rate debt was $222.7 million.

Recurring Fair Value Measurements

The following table summarizes the assets and liabilities measured at fair value on a recurring basis for our interest rate swap derivative financial instrument:

				Fair Value Measurements at March 31, 2016
Description	March 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative Asset—current	$	463		$	—	$	463		$	—
Derivative Asset—noncurrent		950			—		950			—
Derivative Liability—current		(2,258	)		—		(2,258	)		—
Derivative Liability—noncurrent		(3,172	)		—		(3,172	)		—
	$	(4,017	)	$	—	$	(4,017	)	$	—
				Fair Value Measurements at December 31, 2015
Description	December 31, 2015			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Derivative Asset—current	$	388		$	—	$	388		$	—
Derivative Asset—noncurrent		368			—		368			—
Derivative Liability—current		(2,098	)		—		(2,098	)		—
Derivative Liability—noncurrent		(1,673	)		—		(1,673	)		—
	$	(3,015	)	$	—	$	(3,015	)	$	—

Our policy is to manage interest expense using a mix of fixed and variable rate debt. To manage this mix effectively, we may enter into interest rate swaps in which we agree to exchange the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

Our $150.0 million interest rate swap went into effect on December 29, 2015, at which time our interest rate was effectively 6.966% until December 31, 2018. The hedge instrument will be 100% effective and as such the mark to market gains or losses on this hedge will be included in accumulated other comprehensive income (loss) to the extent effective, and reclassified into interest expense over the term of the related debt instruments.

The interest rate swap derivative is classified as Level 2. Level 2 fair value is based on estimates using standard pricing models. These standard pricing models use inputs which are derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces. Counterparties to these derivative contracts are highly rated financial institutions which we believe carry only a minimal risk of nonperformance.

We have elected to present the derivative contracts on a gross basis in the Condensed Consolidated Balance Sheet included within other current and non-current assets and other current and non-current liabilities. Had we chosen to present the derivative contract on a net basis, we would have a derivative in a net liability position of $4.0 million as of March 31, 2016. We do not have any cash collateral due under such agreements.

As of March 31, 2016, we reported a loss in accumulated other comprehensive income (“AOCI”) of $4.0 million related to the interest rate swaps. In connection with periodic settlements and related reclassification of other comprehensive income, we recognized $0.5 million of net hedging losses on the interest rate swaps in the interest expense line on the Condensed Consolidated Statements of Operations during the three months ended March 31, 2016. If there are no changes in the interest rates for the next twelve months, we expect $1.8 million to be reclassified out of AOCI to interest expense. See the following “Derivatives’ Hedging Relationships” section for the impact of the interest rate swaps on our Condensed Consolidated Financial Statements.

Derivatives’ Hedging Relationships

	Amount of after tax of gain/ (loss) recognized in Other Comprehensive Income on Derivatives (effective portion)						Location of gain/(loss) reclassified from Accumulated Other Comprehensive Income into Income (effective portion)	Pre-tax amount of gain/(loss) reclassified from Accumulated Other Comprehensive Income into Income (effective portion)
Derivatives’ Cash Flow Hedging Relationships	March 31, 2016			December 31, 2015				March 31, 2016			December 31, 2015
Forward starting interest rate swap contract	$	(4,017	)	$	(3,015	)	Interest Expense	$	(461	)	$	—
	$	(4,017	)	$	(3,015	)		$	(461	)	$	—

As of March 31, 2016, we did not own derivative instruments that were classified as fair value hedges or trading securities. In addition, as of March 31, 2016, we did not own derivative instruments containing credit risk contingencies.