Fair Value Measurements and Derivative Financial Instruments | 5. FAIR VALUE MEASUREMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS Fair Value Measurements The Company has developed valuation techniques based upon observable and unobservable inputs to calculate the fair value of non-current monetary assets and liabilities. Observable inputs reflect market data obtained from independent sources and unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: • Level 1- Quoted prices for identical instruments in active markets. • Level 2- Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable. • Level 3- Significant inputs to the valuation model are unobservable. Financial assets and liabilities are classified within the fair value hierarchy in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured, as well as their level within the fair value hierarchy. The fair values of cash equivalents, restricted cash, other short-term monetary assets and liabilities and capital leases approximate carrying values due to their nature. The estimated fair value of the Company’s 6.25% Convertible Notes due 2018 (“6.25% Notes”) Notes of $86,222 at June 30, 2016, was estimated based on quoted market prices for identical instruments on dates different from the market trade date value (Level 2). The carrying value of the 6.25% Notes at June 30, 2016 was $90,760. The estimated fair value and carrying value of the Company’s 6.25% Notes were $97,769 and $99,359, respectively at December 31, 2015. The carrying values of the Company’s 2015 Senior Credit Facilities and other long-term obligations of $92,010 and $93,746 at June 30, 2016 and December 31, 2015, respectively, approximate fair value primarily as a result of the stated interest rates of the 2015 Senior Credit Facilities approximating current market rates (Level 2). The following table presents the Company’s financial liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015, at each hierarchical level: June 30, 2016 December 31, 2015 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Other long-term liabilities: Interest rate swaps $ (178 ) $ — $ (178 ) $ — $ (79 ) $ — $ (79 ) $ — Derivative Financial Instruments The Company currently uses interest rate swaps to manage variable interest rate risk. At low LIBOR rates, payments under the swaps increase the Company’s cash interest expense. The outstanding amount of the swaps as of a period end are reported on the balance sheet at fair value, represented by the estimated amount the Company would receive or pay to terminate the swaps, and are valued using models based on readily observable market parameters for all substantial terms of the contracts. As a component of the Company’s cash flow hedging strategy and to comply with the terms of the 2015 Senior Credit Facilities, on November 27, 2015, the Company entered into a pay-fixed, receive-floating interest rate swap in the notional amount of $44,827 with an interest rate of 5.833%, inclusive of a 4.5% LIBOR spread, and a maturity date of December 31, 2017. Hedge designation for this swap was established on December 18, 2015. The change in fair value between the swap’s acquisition date and designation date of $83 was charged to interest expense. Changes in fair value subsequent to the designation date are recorded to accumulated other comprehensive loss and are reclassified to interest expense when the hedged transaction is recognized in earnings. See Note 9 “ Accumulated Other Comprehensive Loss The notional amounts of pay-fixed, receive-floating interest rate swaps at June 30, 2015 were $115,500 and $77,000 with interest rates of 7.220% and 7.225%, respectively, inclusive of a 4.75% LIBOR spread. These swaps began on June 30, 2012 and expired on September 30, 2015. On December 4, 2014, upon the announcement of the sale of its wireless operations, $240,472 of the Company’s 2010 Senior Credit Facility was expected to be repaid. Hedge accounting treatment on the interest rate swap in the notional amount of $115,500 was discontinued because it became “possible” that the interest payments on which the swap were intended to hedge would not occur. At February 2, 2015, 95.5% or $110,268 of the $115,500 swap was deemed ineffective and, therefore, changes in fair value through the swap’s expiration on September 30, 2015 were recorded to interest expense. Through June 30, 2015, $541 was credited to interest expense for the ineffective portion. The following table presents the notional amount, fair value and balance sheet classification of the Company’s derivative financial instruments designated as cash flow hedges as of June 31, 2016 and December, 31, 2015: Notional Fair Balance Sheet Location Amount Value At June 30, 2016: Interest rate swaps Other long-term liabilities $ 43,788 $ 178 At December 31, 2015: Interest rate swaps Other long-term liabilities $ 44,827 $ 79 The following table presents gains and losses before income taxes on the Company’s interest rate swaps designated as cash flow hedges for the three and six-month periods ending June 30, 2016 and 2015: Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 (Loss) gain recognized in accumulated other comprehensive loss $ (49 ) $ 198 $ (174 ) $ 397 (Loss) gain reclassified from accumulated other comprehensive loss (effective portion) (26 ) 10 (53 ) 1,970 Gain recognized in interest expense (ineffective portion and amount excluded from effectiveness testing) — 274 — 541 |