Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instrument Detail [Abstract]

FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated fair values of our financial instruments as of December 31 are as follows:



	2015				2014
(Dollars in thousands)	CARRYING AMOUNT		FAIR VALUE		CARRYING AMOUNT		FAIR VALUE
Cash and short-term investments (Level 1)	$	7,925	$	7,925	$	31,012	$	31,012
Net derivative asset related to interest rate swaps (Level 2)	$	581	$	581	$	793	$	793
Long-term debt (including current portion of long-term debt and fair value adjustments related to fair value swaps) (Level 2)	$	603,881	$	626,021	$	625,668	$	657,943
Company owned life insurance (COLI) (Level 3)	$	687	$	687	$	877	$	877

A framework has been established for measuring fair value, which provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below.


Level 1	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.


Level 2	Inputs to the valuation methodology include:


•	Quoted prices for similar assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in inactive markets;


•	Inputs other than quoted prices that are observable for the asset or liability; and


•	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observed for substantially the full term of the asset or liability.


Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

For cash and short-term investments, the carrying amount approximates fair value due to the short-term nature of these financial instruments. The fair value of the interest rate swaps was determined using discounted cash flow analysis on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate forward curves. The fair value of our long-term debt is estimated based upon the quoted market prices for the same or similar debt issues, or estimated based on average market prices for comparable debt when there is no quoted market price. Contract value of our COLI, the amount at which it could be redeemed, is used as a practical expedient to estimate fair value because market prices are not readily available.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We record all derivatives on our balance sheet at fair value. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk in a fair value hedge.

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.

FAIR VALUE HEDGES OF INTEREST RATE RISK

As of December 31, 2015, we had six separate interest rate swaps with notional amounts totaling $74.3 million associated with $24.3 million of our medium-term notes and $50.0 million of our senior notes. The objective of these swaps is to manage our exposure to fluctuations in market interest rates on our debt balances. The swaps convert interest payments with fixed rates ranging between 7.50% and 8.89% to a variable rate of 3-month LIBOR plus a spread between 5.84% and 6.52%. The interest rate swaps terminate at various dates between February 2016 and November 2019.

BALANCE SHEET AND INCOME EFFECTS OF DERIVATIVES

The fair values of derivative instruments on our Consolidated Balance Sheets as of December 31 are as follows:



	DERIVATIVE ASSETS
		2015		2014
(Dollars in thousands)	BALANCE SHEET LOCATION	FAIR VALUE		FAIR VALUE
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets, current	$	7	$	—
Interest rate contracts	Other assets, non-current	574		793
Total derivatives designated as hedging instruments		$	581	$	793

The effect of derivatives on the Consolidated Statements of Income for the years ended December 31, 2015, 2014 and 2013 are as follows:



	LOCATION OF GAIN RECOGNIZED IN INCOME	AMOUNT OF GAIN RECOGNIZED IN INCOME
(Dollars in thousands)	LOCATION OF GAIN RECOGNIZED IN INCOME	2015		2014		2013
Derivatives designated in fair value hedging relationships:
Interest rate contracts
Realized gain on hedging instruments¹	Interest expense	$	1,534	$	979	$	960
Net gain recognized in income from fair value hedges		$	1,534	$	979	$	960


¹	The realized gain on hedging instruments consist of net cash settlements and interest accruals on the interest rate swaps during the period, which are recognized in interest expense.

COMPANY OWNED LIFE INSURANCE

We are the beneficiary of insurance policies on the lives of certain of our current and past officers and employees. We have recognized the amount that could be realized upon surrender of the insurance policies in other assets in our Consolidated Balance Sheets. COLI income is included in selling, general and administrative expenses in the Consolidated Statements of Income and was not significant for the years ended December 31, 2015, 2014 and 2013. Cash receipts and disbursements are recorded as investing activities in the Consolidated Statements of Cash Flows.

- 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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