AMN 2017 Annual Report

45 rate of 0.983% per annum and receives a variable rate equal to floating one-month LIBOR. The agreement would have expired on March 30, 2018. In connection with the Company’s issuance of $325,000 aggregate principal amount of 5.125% Senior Notes due 2024 (the “Notes”) and the use of a portion of the proceeds thereof to repay $138,438 of certain indebtedness under the Term Loans on October 3, 2016, the Company reduced the interest rate swap notional amount to $40,000 in the fourth quarter of 2016. As a result, $238 was recorded to interest expense reflecting the settlement amount with the counterparty to reduce the notional amount. See additional information in Note (8), “Notes Payable and Credit Agreement.” At December 31, 2016, the interest rate swap agreement had a fair value of $24, which is included in other assets in the audited consolidated balance sheet as of December 31, 2016. The Company had formally documented the hedging relationship and accounted for this arrangement as a cash flow hedge. On May 3, 2017, the Company terminated the remaining interest rate swap after further repayment of the Term Loans. As a result, $85 was received upon termination of the contract. The Company recognizes all derivatives on the balance sheet at fair value based on quotes from an independent pricing service. Gains or losses resulting from changes in the values of the arrangement are recorded in other comprehensive income, net of tax, until the hedged item is recognized in earnings. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instrument that is used in the hedging transaction is highly effective in offsetting changes in fair values or cash flows of the hedged item. When it is determined that a derivative instrument is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively and recognizes subsequent changes in market value in earnings. (4) Fair Value Measurement Fair value represents 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. When determining fair value, the Company considers the principal or most advantageous market in which the Company would conduct a transaction, in addition to the assumptions that market participants would use when pricing the related assets or liabilities, including non-performance risk. A three-level hierarchy prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are as follows: Level 1 —Quoted prices in active markets for identical assets or liabilities. Level 2 —Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Assets and Liabilities Measured on a Recurring Basis The Company’s restricted cash equivalents that serve as collateral for the Company’s outstanding letters of credit typically consist of money market funds that are measured at fair value based on quoted prices, which are Level 1 inputs. As of December 31, 2017, the Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company consist of commercial paper that is measured at observable market prices for identical securities that are traded in less active markets, which are Level 2 inputs. Of the $28,708 commercial paper as of December 31, 2017, $6,074 had original maturities greater than three months, which were considered available-for-sale securities. As of December 31, 2016, the Company had $25,610 commercial paper issued and outstanding, of which $11,152 had original maturities greater than three months and were considered available-for-sale securities. The Company’s interest rate swap was measured at fair value using a discounted cash flow analysis that included the contractual terms, including the period to maturity, and Level 2 observable market-based inputs, including interest rate curves. The fair value of the swap was determined by netting the discounted future fixed cash receipts payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates (forward curves) derived from observable market interest rate yield curves. The valuation also considered credit risk adjustments that