Fair value of Financial Instruments

6 Months Ended

Jun. 30, 2013

Fair value of financial instruments

Fair value of financial instruments

7. Fair value of financial instruments

ASC 820 requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

Level 1 — Quoted prices for identical assets and liabilities in active markets.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs for the asset or liability.

In accordance with ASC 820, the fair value of the 87/8% Senior Secured Second Lien Notes due 2017, and the 97/8% Senior Subordinated Notes due 2017 was based on prices quoted from third-party financial institutions (Level 2). At June 30, 2013, the fair values are as follows (in thousands):

	Fair Value		Carrying Value
$350.0 million Senior Secured Second Lien Notes due January 15, 2017	$	328,125	$	348,752
$376.3 million Senior Subordinated Notes due April 15, 2017	$	235,156	$	374,667

At December 31, 2012, the fair values are as follows (in thousands):

	Fair Value		Carrying Value
$350.0 million Senior Secured Second Lien Notes due January 15, 2017	$	344,750	$	348,577
$376.3 million Senior Subordinated Notes due April 15, 2017	$	265,256	$	374,461

As of June 30, 2013 and December 31, 2012, the Company held certain items that are required to be measured at fair value on a recurring basis including interest rate swap agreements and foreign currency derivative contracts. Cash and cash equivalents are reflected in the financial statements at their carrying value, which approximate their fair value due to their short maturity.  The carrying values of the Company’s long-term debt other than Senior Subordinated Notes and Senior Secured Second Lien Notes approximates fair value due to the length of time to maturity and/or the existence of interest rates that approximate prevailing market rates.  There have been no transfers between levels of valuation hierarchies for the six months ended June 30, 2013 and 2012.

The following items are measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820, as of June 30, 2013 and December 31, 2012:

			Fair Value Measurements at Reporting Date Using
(in thousands):	June 30, 2013		Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency derivative contracts	$	247	$	—	$	247	$	—

			Fair Value Measurements at Reporting Date Using
(in thousands):	December 31, 2012		Quoted Prices in Active Markets for Identical Assets(Level 1)		Significant Other  Observable Inputs(Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets
Foreign currency derivative contracts	$	319	$	—	$	319	$	—

The estimated fair value of the Company’s interest rate swaps were determined using the income approach that considers various inputs and assumptions, including LIBOR swap rates, cash flow activity, yield curves and other relevant economic measures, all of which are observable market inputs that are classified under Level 2 of the fair value hierarchy. The fair value also incorporates valuation adjustments for credit risk.

The estimated fair value of the Company’s foreign currency derivative agreements considered various inputs and assumptions, including the applicable spot rate, forward rates, maturity, implied volatility and other relevant economic measures, all of which are observable market inputs that are classified under Level 2 of the fair value hierarchy.  The valuation technique used is an income approach with the best market estimate of what will be realized on a discounted cash flow basis.