Fair Value Measurements

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Accounting Standards Codification (ASC) Topic 820, Fair Value Measurement (ASC 820), defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2 — Observable inputs other than Level 1 prices 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 for the assets or liabilities; and

Level 3 — Unobservable inputs for which there is little or no market data and that are significant to the fair value of the assets or liabilities.

The tables below present the Company’s financial assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurements as of June 30, 2020
	Total		Level 1		Level 2		Level 3
	(in thousands)
Cash equivalents	$	280,701	$	280,701	$	—	$	—
Short-term investments
Corporate debt securities	86,905		—		86,905		—
U.S. government and agency securities	59,285		—		59,285		—
Other fixed income securities	22,220		—		22,220		—
Total short-term investments	168,410		—		168,410		—
Fuel derivative contracts	337		—		337		—
Foreign currency derivatives	1,105		—		1,105		—
Total assets measured at fair value	$	450,553	$	280,701	$	169,852	$	—
Foreign currency derivatives	113		—		113		—
Total liabilities measured at fair value	$	113	$	—	$	113	$	—

	Fair Value Measurements as of December 31, 2019
	Total		Level 1		Level 2		Level 3
	(in thousands)
Cash equivalents	$	216,491	$	205,943	$	10,548	$	—
Short-term investments
Corporate debt securities	100,713		—		100,713		—
U.S. government and agency securities	75,481		—		75,481		—
Other fixed income securities	69,405		—		69,405		—
Total short-term investments	245,599		—		245,599		—
Fuel derivative contracts	5,878		—		5,878		—
Foreign currency derivatives	4,424		—		4,424		—
Total assets measured at fair value	$	472,392	$	205,943	$	266,449	$	—
Foreign currency derivatives	593		—		593		—
Total liabilities measured at fair value	$	593	$	—	$	593	$	—

Cash equivalents. The Company's Level 1 cash equivalents consist of money market securities. The carrying amounts approximate fair value because of the short-term maturity of these assets. The Company's Level 2 cash equivalents consist primarily of debt securities. These instruments are valued using quoted prices for similar assets in active markets.

Short-term investments. Short-term investments are valued based on a market approach using industry standard valuation techniques that incorporate inputs such as quoted prices for similar assets, interest rates, benchmark curves, credit ratings, and other observable inputs. As of June 30, 2020, corporate debt securities have remaining maturities of two years or less, U.S. government and agency securities have maturities of approximately two years or less, and other fixed-income securities of one year or less.

Fuel derivative contracts.  The Company’s fuel derivative contracts consist of crude oil call options, which are not traded on a public exchange. The fair value of these instruments is determined based on inputs available or derived from public markets including contractual terms, market prices, yield curves, and measures of volatility among others.

Foreign currency derivatives.  The Company’s foreign currency derivatives consist of Japanese Yen and Australian Dollar forward contracts and are valued primarily based upon data readily observable in public markets.

The table below presents the Company’s debt measured at fair value: 

Fair Value of Debt
June 30, 2020										December 31, 2019
Carrying		Fair Value								Carrying		Fair Value
Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
(in thousands)
$	868,998	$	800,710	$	—	$	—	$	800,710	$	610,397	$	605,286	$	—	$	—	$	605,286

The fair value estimates of the Company’s debt were based on the discounted amount of future cash flows using the Company’s current incremental rate of borrowing for similar instruments.

The carrying amounts of cash, other receivables, and accounts payable approximate fair value due to the short-term nature of these financial instruments.

As discussed in Note 2 above, the Company recognized an impairment charge on its long-lived assets of approximately $30.9 million during the three and six months ended June 30, 2020. The impairment charges were calculated using Level 3 fair value inputs based primarily upon forecasted future cash flows, recent market transactions, published pricing guides and our assessment of existing market conditions based on industry knowledge.