4 .	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:

●

Level

- Quoted prices for identical instruments in active markets.

●

Level

- 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.

●

Level

- 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 financing leases approximate carrying values due to their nature. The carrying values of the Company’s senior credit facilities and other long-term obligations of

$180,166

and

$172,494

June 30, 2019

and

December 31, 2018,

respectively, approximate fair value primarily as a result of the stated interest rates of the

2019

Senior Credit Facility approximating current market rates (Level

The following table presents the Company’s financial assets measured at fair value on a recurring basis as of

June 30, 2019

and

December 31, 2018,

at each hierarchical level. There were

transfers into or out of Levels

and

during the

first

six

months of

2019:

	June 30, 2019								December 31, 2018
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Other assets:
Interest rate swaps	$	40	$	-	$	40	$	-	$	458	$	-	$	458	$	-

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, and at high LIBOR rates, they have the opposite effect.

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. They are valued using models based on readily observable market parameters for all substantial terms of the contracts and are classified within Level

of the fair value hierarchy.

Under the terms of the

2019

Senior Credit Facility, the Company is required to 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. In

2017,

as required under the terms of its

2017

Senior Credit Facility, the Company entered into a pay-fixed, receive-floating interest rate swap in the notional amount of

$90,000,

with an interest rate of

6.49425%,

inclusive of a

5.0%

LIBOR spread, and a maturity date of

June 28, 2019

Upon repayment of the outstanding principal balance of the

2017

Senior Credit Facility on

January 15, 2019,

this swap was assigned to the

2019

Senior Credit Facility through its maturity date of

June 28, 2019.

June 28, 2019,

the Company entered into

two

pay-fixed, receive-floating, interest rate swaps. Each swap is in the notional amount of

$67,500,

has an interest rate of

6.1735%

inclusive of a

4.5%

LIBOR spread, and a maturity date of

June 30, 2022

The swaps are with different counter parties. Changes in fair value of interest rate swaps are recorded to accumulated other comprehensive loss and reclassified to interest expense when the hedged transaction is recognized in earnings. Cash payments and receipts associated with interest rate swaps are classified as cash flows from operating activities. See Note

“

Long-Term Obligations

” and Note

“

Accumulated Other Comprehensive Loss

”

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, 2019

and

December, 31, 2018.

The fair values of both interest rate swaps were assets at

June 30, 2019

and were hedges of the same interest rate risk.

		Notional		Fair
	Balance Sheet Location	Amount		Value
At June 30, 2019:
Interest rate swaps	Other assets	$	135,000	$	40

At December 31, 2018:
Interest rate swaps	Other assets	$	90,000	$	458

The following table presents gains before income taxes on the Company’s interest rate swaps designated as a cash flow hedge for the

three

and

six

-month periods ending

June 30, 2019

and

2018.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Gain recognized in accumulated other comprehensive loss	$	47	$	107	$	34	$	412
Gain reclassified from accumulated other comprehensive loss to income		224		97		451		122

The following table presents the effect of cash flow hedge accounting on the Company’s Statements of Comprehensive Income for the

three

and

six

-month periods ending

June 30, 2019

and

2018:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Recorded as Interest Expense:
Hedged interest payments	$	(1,603	)	$	(1,575	)	$	(3,197	)	$	(3,062	)
Gain on interest rate swap		224			97			451			122