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FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2014

2. FAIR VALUE MEASUREMENTS

We account for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

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Level 1: Quoted prices in active markets for identical assets or liabilities;

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Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

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Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows (in thousands):


	Level 1		Level 2		Level 3		Total
September 30, 2014:
Interest rate swap (note 4)	$	—	$	715	$	—	$	715
Asset retirement obligations(1)		—		—		3,770		3,770

December 31, 2013:
Money market funds(2)	$	5,006	$	—	$	—	$	5,006
Interest rate swap (note 4)		—		777		—		777
Asset retirement obligations(1)		—		—		2,357		2,357

(1)

We calculate the fair value of asset retirement obligations by discounting the estimated amount using the current Treasury bill rate adjusted for our credit non-performance. We include current asset retirement obligations of $1.3 million and $1.4 million in “Other current liabilities” in the consolidated balance sheets for September 30, 2014 and December 31, 2013, respectively. We include long-term asset retirement obligations of $2.5 million and $1.0 million in “Other long-term liabilities” in the consolidated balance sheets for September 30, 2014 and December 31, 2013, respectively.

(2)	Included in “Cash and cash equivalents” in the consolidated balance sheet as of December 31, 2013. Unrealized gains and losses on money market funds were nominal due to the short-term nature of the investments.

The following table provides a summary of changes in our Level 3 asset retirement obligations for the nine months ended September 30, 2014 (in thousands):


Balance, January 1, 2014	$	2,357
Accrued estimated obligation, less fair value adjustment (note 5)		1,338
Accretion		165
Payments		(90	)
Balance, September 30, 2014	$	3,770

The fair values of our other Level 3 liabilities, estimated using a discount cash flow analysis based on incremental borrowing rates for similar types of borrowing arrangements, are as follows (in thousands):


	September 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loan	$	297,750	$	291,676	$	300,000	$	293,125
Revolving credit facility		5,000		4,731		—		—

- 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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