Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company used the following methods and assumptions in estimating fair value disclosure for financial instruments:

Cash and cash equivalents The carrying amounts reported in the balance sheets approximate fair value due to the short-term maturity or variable rates of these instruments.

Debt The fair value of the Company’s fixed-rate debt was based on open bid/ask quotations of those notes at December 31, 2012 and June 30, 2013. The carrying amount of variable-rate borrowings at June 30, 2013 approximates fair value estimated based on current market rates and credit spreads for similar debt instruments.

Derivative instruments Fair value was determined based on the income approach and standard valuation techniques to convert future amounts to a single present amount and approximates the net gains and losses that would have been realized if the contracts had been settled at each period-end.

The estimated fair values of the Company’s financial instruments are as follows:

	December 31, 2012				June 30, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	$	39,977	$	39,977	$	47,003	$	47,003
Fixed-rate debt	188,434		174,800		188,607		191,900
Variable-rate debt	335,261		335,261		337,921		337,921
Derivative instruments - asset position	—		—		—		—
Derivative instruments - liability position	219		219		140		140

ASC 820, “Fair Value Measurement,” applies to all assets and liabilities that are being measured and reported at fair value on a recurring basis. ASC 820 requires disclosure that establishes a framework for measuring fair value in generally accepted accounting principles by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1	Quoted market prices in active markets for identical assets or liabilities.
Level 2	Observable market based inputs or unobservable inputs, including identical securities in inactive markets or similar securities in active markets, that are corroborated by market data.
Level 3	Unobservable inputs that are not corroborated by market data.

None of the Company’s instruments has transferred from one level to another.

The following table summarizes the valuation of the Company’s financial instruments that are reported at fair value on a recurring basis by the above ASC 820 pricing levels as of December 31, 2012:

	Total		Quoted market prices in active markets (Level 1)		Significant other observable  inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash and cash equivalents	$	39,977	$	39,977	$	—	$	—
Interest rate contracts - liability position	219		—		219		—

The following table summarizes the valuation of the Company’s financial instruments that are reported at fair value on a recurring basis by the above ASC 820 pricing levels as of June 30, 2013:

	Total		Quoted market prices in active markets (Level 1)		Significant other observable  inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash and cash equivalents	$	47,003	$	47,003	$	—	$	—
Interest rate contracts - liability position	140		—		140		—

The Company’s derivative instruments are primarily pay-fixed, receive-variable interest rate swaps and caps based on the LIBOR swap rate. The Company has elected to use the income approach to value these derivatives, using observable Level 2 market expectations at measurement date and standard valuation techniques to convert future amounts to a single present amount assuming that participants are motivated, but not compelled to transact. Level 2 inputs for interest rate swap and cap valuations are limited to quoted prices for similar assets or liabilities in active markets (specifically futures contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable for the asset or liability (specifically LIBOR cash and swap rates at commonly quoted intervals and implied volatilities for options). ASC 820 states that the fair value measurement of an asset or liability must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of the counterparty’s creditworthiness and the Company’s creditworthiness has also been factored into the fair value measurement of the derivative instruments. For additional information please see Note 9 of the Notes to the Condensed Consolidated Financial Statements.