Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2015

Fair Value of Financial Instruments

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

The market approach is applied for recurring fair value measurements and endeavors to utilize the best available information. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value balances are classified based on the observability of those inputs.

A fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). Level 2 measurements utilize observable inputs in markets other than active markets.

In estimating the fair value of the financial instruments presented, we used the following methods and assumptions:

Cash and cash equivalents

For cash and cash equivalents, we believe that the carrying value is a reasonable estimate of fair value due to the short-term nature of the instruments.

Restricted cash

Restricted cash is comprised of certificates of deposit that are pledged for various letters of credit. We deem the carrying value to be a reasonable estimate of fair value due to the nature of these instruments.

Marketable securities

Marketable securities are classified as available-for-sale securities and are valued using quoted prices in active markets for similar assets.

Long-term debt

The fair value of long-term debt was estimated based on the current rates available to us for similar debt of the same remaining maturities and consideration of our default and credit risk.

Interest rate swap agreements

The fair value of the interest rate swap agreements was estimated based on market-value quotes received from the counterparties to the agreements.

The fair values of our financial instruments as of September 30, 2015 are presented in the following table:



	Fair Value Measurements Using
(in thousands)	Level 1		Level 2		Fair Value
Financial Assets:
Cash and cash equivalents	$	160,257	$	—	$	160,257
Restricted cash	—		10,864		10,864
Marketable securities	22,613		—		22,613
Total Financial Assets	$	182,870	$	10,864	$	193,734

Financial Liabilities:
Total debt	$	—	$	1,359,109	$	1,359,109

Derivatives:
Liability for interest rate swap agreements	$	—	$	8,818	$	8,818

The fair values of our financial instruments as of December 31, 2014 are presented in the following table:



	Fair Value Measurements Using
(in thousands)	Level 1		Level 2		Fair Value
Financial Assets:
Cash and cash equivalents	$	104,677	$	—	$	104,677
Restricted cash	—		12,360		12,360
Marketable securities	22,264		—		22,264
Total Financial Assets	$	126,941	$	12,360	$	139,301

Financial Liabilities:
Total debt	$	—	$	1,323,201	$	1,323,201

Derivatives:
Liability for interest rate swap agreements	$	—	$	3,781	$	3,781

The following table presents non-financial instruments that were measured at fair value, on a nonrecurring basis, as of September 30, 2015 and impairment losses for the three and nine months ended September 30, 2015:



	As of September 30, 2015
(in thousands)	Fair Value Measurements Using						Impairment Losses
	Level 1		Level 2		Level 3		For the Three Months Ended September 30, 2015		For the Nine Months Ended September 30, 2015
Property and equipment, net	$	—	$	—	$	—	$	—	$	58

The following table presents non-financial instruments that were measured at fair value, on a nonrecurring basis, as of September 30, 2014 and impairment losses for the three and nine months ended September 30, 2014:



	As of September 30, 2014
(in thousands)	Fair Value Measurements Using						Impairment Losses
	Level 1		Level 2		Level 3		For the Three Months Ended September 30, 2014		For the Nine Months Ended September 30, 2014
Property and equipment, net	$	—	$	—	$	—	$	666	$	988
Goodwill, net	—		—		—		—		3,900
Investment in affiliates, net	—		—		—		—		360
	$	—	$	—	$	—	$	666	$	5,248

We recorded non-cash impairment charges of $0.7 million for the three months ended September 30, 2014, and $0.1 million and $1.0 million for the nine months ended September 30, 2015 and 2014, respectively, in our property and equipment, net, primarily related to internally developed software. In addition, we recorded non-cash impairment charges of $3.9 million for the nine months ended September 30, 2014 in our goodwill, net related to our technology solutions, solutions express and outsourcing services businesses. Lastly, we recorded non-cash impairment charges of $0.4 million for the nine months ended September 30, 2014 in our investment in affiliates, net, due to other-than-temporary loss in value from the absence of an ability to recover the carrying amount of the investment.

- 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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