Fair value measurements

9 Months Ended

Sep. 30, 2014

9. Fair value measurements

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Non-financial assets and liabilities of the Company measured at fair value include any long-lived assets or equity method investments that are impaired in a currently reported period. The authoritative guidance also describes three levels of inputs that may be used to measure fair value:


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

Level 2	—	observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3	—	unobservable inputs in which there is little or no market data available, which require the reporting entity to develop its own assumptions

The Company’s financial instruments include cash equivalents, restricted cash, certificates of deposit, treasury securities, collective trust funds, trade accounts receivable, other investments, accounts payable, long-term secured debt, deferred compensation plan liabilities and derivative securities. The carrying value of restricted cash, accounts receivable and accounts payable approximate fair value due to the short-term maturities of these instruments. The Company’s credit facilities carry a floating rate of interest, and therefore, the carrying value is considered to approximate the fair value.

The Company’s collective trust funds, treasury securities, certificates of deposit, deferred compensation plan liabilities and derivative securities are the only financial instruments recorded at fair value on a recurring basis. The fair value of treasury securities and certificates of deposit are determined based on quoted prices in active markets for identical assets, therefore, the Company has categorized these instruments as Level 1 financial instruments. The cross-currency derivative instrument consists of an over-the-counter contract, which is not traded on a public exchange. The fair value of this derivative swap contract, the common stock warrants, other investments, the Company’s collective trust funds and the Company’s deferred compensation plan liabilities are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets, therefore, the Company has categorized these instruments as Level 2 financial instruments. Changes in the fair value of collective trust funds and deferred compensation plan liabilities are recorded in Other income (expense). The Company also considers counterparty credit risk and its own credit risk in its determination of estimated fair values. The Company has consistently applied these valuation techniques in all periods presented.

The fair value of the Company’s financial assets and liabilities on a recurring basis were as follows:


(U.S. Dollars in thousands)	Balance September 30, 2014			Level 1		Level 2			Level 3
Assets
Collective trust funds	$	1,635		$	—	$	1,635		$	—
Treasury securities		610			610		—			—
Certificates of deposit		1,595			1,595		—			—
Derivative securities		2,167			—		2,167			—
Other investments		1,250			—		1,250			—

Total	$	7,257		$	2,205	$	5,052		$	—

Liabilities
Deferred compensation plan	$	(1,927	)	$	—	$	(1,927	)	$	—

Total	$	(1,927	)	$	—	$	(1,927	)	$	—


(U.S. Dollars in thousands)	Balance December 31, 2013			Level 1			Level 2			Level 3
	(Restated)
Assets
Collective trust funds	$	1,667		$	—		$	1,667		$	—
Treasury securities		660			660			—			—
Certificates of deposit		1,562			1,562			—			—
Derivative securities		107			—			107			—

Total	$	3,996		$	2,22 2		$	1,774		$	—

Liabilities
Deferred compensation plan	$	(2,506	)	$	—		$	(2,506	)	$	—
Derivative securities
Cross-currency hedge		(1,036	)		—			(1,036	)		—

Total	$	(3,542	)	$	(2,506	)	$	(3,542	)	$	—

- 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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