Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments

v2.4.0.8
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
Certain of our assets and liabilities are required to be measured at fair value on a recurring basis. For purposes of recording fair value adjustments for certain financial and non-financial assets and liabilities, and determining fair value disclosures, we estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability.
The fair value measurement and disclosure requirements of FASB Accounting Standards Codification Topic No. 820, Fair Value Measurement and Disclosures (ASC 820) requires inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows:

•
Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;
•
Level 2 — Direct or indirect observable inputs, including quoted prices or other market data, for similar
assets or liabilities in active markets or identical assets or liabilities in less active markets;
•
Level 3 — Unobservable inputs that require significant judgment for which there is little or no market data.
When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the entire measurement even though we may also have utilized significant inputs that are more readily observable. The amounts reported in our consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximate fair value. The carrying amount of our interest rate swap agreements represents the estimated fair value, measured using Level 2 inputs. At June 30, 2013 the swap agreements had expired and as of December 31, 2012, the carrying amount of our interest rate swap agreements was a liability of less than $0.1 million, recorded in accrued liabilities on our consolidated balance sheets.

Fair value of our debt instruments is determined using Level 2 inputs. Fair values and related carrying values of our debt instruments were as follows for the periods indicated:
 
  
June 30, 2013
 
December 31, 2012
 
Carrying Amount
 
Fair Value
 
Carrying  Amount
 
Fair Value
 
(in thousands)
Long-term Debt
 
 
 
 
 
 
 
9.125% Notes
$
425,000

 
$
449,438

 
$
425,000

 
$
453,688

Total
$
425,000

 
$
449,438

 
$
425,000

 
$
453,688


The following table summarizes information regarding our financial liabilities that are measured at fair value on a recurring basis as of June 30, 2013, segregated by level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
Liabilities:
Level 1

Level 2

Level 3

Total
Deposits in escrow
$
—


$
—


$
5,000


$
5,000

Total Liabilities
$
—


$
—


$
5,000


$
5,000


The table above includes contingent consideration deposited in escrow for assets not acquired in the ITS Acquisition. The fair value is contingent upon certain future liabilities that could become due by ITS in certain jurisdictions. Any payments in relation to these liabilities will be deducted from the $5.0 million escrow amount and the net balance of the escrow will be paid to the Seller. The fair value measurement of the contingent consideration is based on inputs that are not observable in the market and therefore represent level 3 inputs.
The table above excludes assets and liabilities measured on a one-time non-recurring basis that were acquired as part of the ITS Acquisition. See Note 2 - Acquisition of ITS, for more information. The assets acquired and liabilities assumed in the ITS Acquisition were recorded at fair value in accordance with U.S. GAAP. Acquisition date fair values represent either Level 2 fair value measurements (current assets and liabilities, property, plant and equipment) or Level 3 fair value measurements (intangible assets).
Market conditions could cause an instrument to be reclassified from Level 1 to Level 2, or Level 2 to Level 3. There were no transfers between levels of the fair value hierarchy or any changes in the valuation techniques used during the six months ended June 30, 2013.