Fair Value Measurement Disclosures

12 Months Ended

Dec. 31, 2013

Fair Value Measurement Disclosures

(16) Fair Value Measurement Disclosures

(a) Fair Value of Financial Instruments

Cash and cash equivalents, receivables, as well as accounts payable and accrued expenses, and other current liabilities, as reflected in the consolidated financial statements, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of our other long-term debt instruments, approximate their carrying amounts as the interest rates approximate our current borrowing rate for similar debt instruments of comparable maturity, or have variable interest rates.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The estimated fair values of our financial instruments are as follows (in millions):

			December 31
			2013				2012
	Fair Value Hierarchy		Gross carrying amount		Fair  value		Gross carrying amount		Fair  value
12.5% senior secured notes due 2017		Level 2	$	275.0	$	297.7	$	275.0	$	296.8
10 3/4% Series B cumulative exchangeable redeemable preferred stock		Level 3		126.6		37.8		121.7		46.2
Promissory note payable, included in other long-term debt		Level 3		5.5		4.5		5.8		4.4
Promissory note payable, included in other long-term debt		Level 3	$	2.7	$	2.7	$	5.3	$	5.2

The fair value estimates of these financial instruments were based upon either: (a) market quotes from a major financial institution taking into consideration the most recent market activity, or (b) a discounted cash flow analysis taking into consideration current rates.

From time to time, certain assets or liabilities may be recorded at fair value on a non-recurring basis. On October 15, 2013, the series B preferred stock and accumulated and unpaid dividends were adjusted to fair value on a non-reoccurring basis.  In the valuation of the series B preferred stock, a Level 3 fair value measurement was conducted.  Using a weighted Yield Method, Discounted Cash Flow Method, and Option Pricing Method, the fair value was determined to be $39.5 million as of October 15, 2013.  

Included in the below table are the significant assumptions that were used in the valuation methodologies:  

	Discount Rate			Long-Term Growth Rate			Required Rate of Return			Risk Free Rate			Volatility			Discount for Lack of Marketability			Level 3 Fair Value		Weight			Weighted Fair Value
Yield Method		—			—			20.20	%		—			—			31.50	%	$	45.3		12.50	%	$	5.7
Discounted Cash Flow Method		10.50	%		2.50	%		—			—			—			31.50	%		57.1		12.50	%		7.1
Option Pricing Method		—			—			—			0.68	%		109.80	%		—			32.3		75.00	%		24.2
Total																								$	37.0
Plus: Repurchase of Series B Preferred Stock  (October 15, 2013)																									2.5
Total Fair Value at October 15, 2013																								$	39.5

(b) Fair Value of Derivative Instruments

The following tables represent required quantitative disclosures regarding fair values of our derivative instruments (in thousands).

			Fair value measurements at
			December 31, 2013
			Liabilities
Description	December 31,2013 carrying value and balance sheet location of derivative instruments		Quoted prices in active markets for  identical instruments(Level 1)		Significant other observable inputs(Level 2)		Significant unobservable inputs(Level 3)
Derivative designed as a cash flow hedging instrument:
Interest rate swap liability	$	602		—	$	602		—

			Fair value measurements at
			December 31, 2012
			Liabilities
Description	December 31, 2012 carrying value and balance sheet location of derivative instruments		Quoted prices in active markets for identical instruments (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs(Level 3)
Derivative designed as a cash flow hedging instrument:
Interest rate swap liability	$	816		—	$	816		—

The interest rate swap fair value is derived from the present value of the difference in cash flows based on the forward-looking LIBOR yield curve rates, as compared to our fixed rate applied to the hedged amount through the term of the agreement, less adjustments for credit risk.

	December 31
	2013		2012
	(In thousands)
Interest rate swap:
Gain (loss) recognized in other comprehensive loss (effective portion)	$	214		(76	)