FAIR VALUE MEASUREMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

Fair Value Measurements

The Company has developed valuation techniques based upon observable and unobservable inputs to calculate the fair value of non-current monetary assets and liabilities. Observable inputs reflect market data obtained from independent sources and unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

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Level 1- Quoted prices for identical instruments in active markets.

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Level 2- Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

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Level 3- Significant inputs to the valuation model are unobservable.

Financial assets and liabilities are classified within the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured, as well as their level within the fair value hierarchy.

The fair values of cash equivalents, restricted cash, other short-term monetary assets and liabilities and capital leases approximate carrying values due to their nature. The estimated fair value of the Company’s 6.25% Convertible Notes due 2018 (“6.25% Notes”) Notes of $9,913 at June 30, 2017, was estimated based on quoted market prices for identical instruments on dates different from the market trade date value (Level 2). The carrying value of the 6.25% Notes at June 30, 2017 was $9,913. The estimated fair value and carrying value of the Company’s 6.25% Notes was $91,729 at December 31, 2016. The carrying values of the Company’s senior credit facilities and other long-term obligations of $180,956 and $90,075 at June 30, 2017 and December 31, 2016, respectively, approximate fair value primarily as a result of the stated interest rates of the 2017 Senior Credit Facility and 2015 Senior Credit Facilities approximating current market rates (Level 2).

The following table presents the Company’s financial liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, at each hierarchical level:


	June 30, 2017								December 31, 2016
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Other assets:
Interest rate swaps	$	126	$	—	$	126	$	—	$	—	$	—	$	—	$	—
Other long-term liabilities:
Interest rate swaps	$	—	$	—	$	—	$	—	$	100	$	—	$	100	$	—

Derivative Financial Instruments

The Company currently uses interest rate swaps to manage variable interest rate risk. At low LIBOR rates, payments under the swaps increase the Company’s cash interest expense.

The outstanding amount of the swaps as of a period end are reported on the balance sheet at fair value, represented by the estimated amount the Company would receive or pay to terminate the swaps, and are valued using models based on readily observable market parameters for all substantial terms of the contracts.

Under the terms of the 2017 Senior Credit Facility, the Company was required enter into or obtain an interest rate hedge sufficient to effectively fix or limit the interest rate on borrowings under the Agreement of a minimum of $90,000 with a weighted average life of at least two years within ninety days of March 28, 2017. Subsequent to repayment of the principal amounts outstanding under its 2015 Senior Credit Facilities on March 28, 2017, the Company redesignated its existing pay-fixed, receive-floating interest rate swap with a remaining notional amount of $42,058 at March 31, 2017 and an interest rate of 6.333%, inclusive of a 5.0% LIBOR spread, as a hedge of variable interest rate payments under its 2017 Senior Credit Facility. The notional amount of this swap, which terminates on December 31, 2017, was $41,365 at June 30, 2017. On June 14, 2017, the Company entered into an additional pay-fixed, receive-floating interest rate swap in the initial notional amount of $48,635, increasing to $90,000 on December 29, 2017, with an interest rate of 6.49425%, inclusive of a 5.0% LIBOR spread, and a maturity date of June 28, 2019. Changes in fair value of these interest rate swaps are recorded to accumulated other comprehensive loss and are reclassified to interest expense when the hedged transaction is recognized in earnings. See Note 6 “Long-Term Obligations” and Note 8 “Accumulated Other Comprehensive Loss.”

The Company’s two interest rate swaps at June 30, 2017 are with the same counterparty, are hedges of the same variable rate borrowing instrument and are subject to a master netting arrangement. The fair value of the two derivatives has been reported on a net basis on the balance sheet at June 30, 2017. The following table provides a gross presentation, the effects of offsetting, and the net presentation of these derivative instruments as of June 30,2017. The net amount of the derivative asset can be reconciled to the fair value disclosures.


	Gross Amount Recognized		Gross Amount Offset on the Balance Sheet			Net Amount Presented on the Balance Sheet
Other assets	$	137	$	(11	)	$	126
Other long-term liabilities	$	11	$	(11	)	$	—

The following table presents the notional amount, fair value and balance sheet classification of the Company’s derivative financial instruments designated as cash flow hedges as of June 30, 2017 and December, 31, 2016:


	Balance Sheet Location		Notional Amount		Fair Value
At June 30, 2017:
Interest rate swaps		Other assets	$	90,000	$	126
At December 31, 2016:
Interest rate swaps		Other long-term liabilities	$	42,750	$	100

The following table presents gains and losses before income taxes on the Company’s interest rate swaps designated as cash flow hedges for the three and six-month periods ending June 30, 2017 and 2016:


	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Gain (loss) recognized in accumulated other comprehensive loss	$	131		$	(49	)	$	156		$	(174	)
Loss reclassified from accumulated other comprehensive loss		(24	)		(26	)		(49	)		(53	)
Gain recognized in interest expense (ineffective portion and amount excluded from effectiveness testing)		—			—			—			—