| FAIR VALUE MEASUREMENTS |
FAIR VALUE MEASUREMENTS The tables below present information about the Company's financial assets and liabilities measured and recorded at fair value on a recurring basis and indicate the fair value hierarchy of the inputs utilized to determine the fair values as of September 30, 2013 and December 31, 2012.
| | | | | | | | | | | | | | | | | | As of September 30, 2013 | | Level 1 | | Level 2 | | Level 3 | | Total | Assets: | | | | | | | | Money market funds | $ | 5,856 |
| | $ | — |
| | $ | — |
| | $ | 5,856 |
| Commodity contracts | 8,319 |
| | — |
| | — |
| | 8,319 |
| Derivatives included with intermediation agreement obligations | — |
| | 29,563 |
| | — |
| | 29,563 |
| Liabilities: | | | | | | | | Commodity contracts | — |
| | 14,587 |
| | — |
| | 14,587 |
| Derivatives included with inventory supply arrangement obligations | — |
| | 1,291 |
| | — |
| | 1,291 |
| Catalyst lease obligations | — |
| | 40,323 |
| | — |
| | 40,323 |
|
| | | | | | | | | | | | | | | | | | As of December 31, 2012 | | Level 1 | | Level 2 | | Level 3 | | Total | Assets: | | | | | | | | Money market funds | $ | 175,786 |
| | $ | — |
| | $ | — |
| | $ | 175,786 |
| Commodity contracts | 3,303 |
| | — |
| | — |
| | 3,303 |
| Derivatives included with inventory supply arrangement obligations | — |
| | 5,595 |
| | — |
| | 5,595 |
| Liabilities: | | | | | | | | Catalyst lease obligations | — |
| | 43,442 |
| | — |
| | 43,442 |
| Commodity contracts | — |
| | 1,872 |
| | — |
| | 1,872 |
| Contingent consideration for refinery acquisition | — |
| | — |
| | 21,358 |
| | 21,358 |
|
The valuation methods used to measure financial instruments at fair value are as follows: | | • | Money market funds categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted market prices and included within cash and cash equivalents. |
| | • | The commodity contracts categorized in Level 1 of the fair value hierarchy are measured at fair value based on quoted prices in an active market. The commodity contracts categorized in Level 2 of the fair value hierarchy are measured at fair value using a market approach based upon future commodity prices for similar instruments quoted in active markets. |
| | • | The derivatives included with inventory supply arrangement obligations, derivatives included with intermediation agreement obligations and the catalyst lease obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based upon commodity prices for similar instruments quoted in active markets. |
| | • | The contingent consideration for refinery acquisition obligation at December 31, 2012 is categorized in Level 3 of the fair value hierarchy and is estimated using a discounted cash flow model based on management's estimate of the future cash flows of the Toledo refinery; a risk free rate of return of 0.16%; credit rate spread of 4.38%; and a discount rate of 4.54%. During the three and nine months ended September 30, 2013, there was no change in fair value, as the obligation was known and was paid in full on April 30, 2013. |
The table below summarizes the changes in fair value measurements categorized in Level 3 of the fair value hierarchy: | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2013 | | 2012 | | 2013 | | 2012 | Balance at beginning of period | $ | — |
| | $ | 122,924 |
| | $ | 21,358 |
| | $ | 122,232 |
| Purchases | — |
| | — |
| | — |
| | — |
| Settlements | — |
| | (103,643 | ) | | (21,358 | ) | | (103,643 | ) | Unrealized loss included in earnings | — |
| | 692 |
| | — |
| | 1,384 |
| Transfers into Level 3 | — |
| | — |
| | — |
| | — |
| Transfers out of Level 3 | — |
| | — |
| | — |
| | — |
| Balance at end of period | $ | — |
| | $ | 19,973 |
| | $ | — |
| | $ | 19,973 |
|
There were no transfers between levels during the three and nine months ended September 30, 2013 and 2012, respectively. Fair value of debt The table below summarizes the fair value and carrying value as of September 30, 2013 and December 31, 2012.
| | | | | | | | | | | | | | | | | | September 30, 2013 | | December 31, 2012 | | Carrying value | | Fair value | | Carrying value | | Fair value | Senior secured notes (a) | $ | 667,242 |
| | $ | 684,918 |
| | $ | 666,538 |
| | $ | 700,963 |
| Revolver (b) | 15,000 |
| | 15,000 |
| | — |
| | — |
| Catalyst leases (c) | 40,323 |
| | 40,323 |
| | 43,442 |
| | 43,442 |
| Long-term debt | $ | 722,565 |
| | $ | 740,241 |
| | $ | 709,980 |
| | $ | 744,405 |
|
(a) The estimated fair value, categorized as a Level 2 measurement, was calculated based on the present value of future expected payments utilizing implied current market interest rates based on quoted prices of the senior secured notes. (b) The estimated fair value approximates carrying value, categorized as a Level 2 measurement, as these borrowings bear interest based upon short-term floating market interest rates. (c) Catalyst leases are valued using a market approach based upon commodity prices for similar instruments quoted in active markets and are categorized as a Level 2 measurement. The Company has elected the fair value option for accounting for its catalyst lease repurchase obligations as the Company's liability is directly impacted by the change in fair value of the underlying catalyst. |