XML 35 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Derivative Instruments (Notes)
 3 Months Ended
Mar. 31, 2017
Derivative Instruments [Abstract]  
Derivative Instruments
Derivative Instruments

From time to time, we enter into forward fuel contracts to limit the exposure to price fluctuations for physical purchases of finished products in the normal course of business. We use derivatives to reduce normal operating and market risks with a primary objective in derivative instrument use being the reduction of the impact of market price volatility on our results of operations.

Typically, we enter into forward fuel contracts with major financial institutions in which we fix the purchase price of finished grade fuel for a predetermined number of units with fulfillment terms of less than 90 days.

From time to time, we may also enter into interest rate hedging agreements to limit floating interest rate exposure under the Second Amended and Restated Credit Agreement. Our initial credit facility required us to maintain interest rate hedging arrangements on at least 50% of the amount funded on November 7, 2012 under the credit facility, which was required to be in place for at least a three-year period beginning no later than March 7, 2013. Accordingly, effective February 25, 2013, we entered into an interest rate hedge in the form of a LIBOR interest rate cap for a term of three years for a total notional amount of $45.0 million, thereby meeting the requirements in effect at that time. These requirements were eliminated in connection with the Amended and Restated Credit Agreement in July 2013, but the interest rate hedge remained in place in accordance with its term through its maturity date in February 2016.
The following table presents the fair value of our derivative instruments as of March 31, 2017 and December 31, 2016. The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under our master netting arrangements, including any cash collateral on deposit with our counterparties. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements. As a result, the asset and liability amounts below may differ from the amounts presented in our accompanying consolidated balance sheets. During the three months ended March 31, 2017 and March 31, 2016, we did not elect hedge accounting treatment for these derivative positions. As a result, all changes in fair value are marked to market in the accompanying condensed consolidated statements of income and comprehensive income.

(in thousands)
 
 
 
March 31, 2017
 
December 31, 2016
Derivative Type
 
Balance Sheet Location
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivatives:
 
 
 
 
 
 
 
 
OTC commodity swaps (1)
 
Other current assets
 
$
10

 
$
(223
)
 
$
9

 
$
(82
)
Total gross value of derivatives
 
10

 
(223
)
 
9

 
(82
)
Less: Counterparty netting and cash collateral (2)
 
(72
)
 
(223
)
 
9

 
621

Total net fair value of derivatives
 
$
82

 
$
—

 
$
—

 
$
(703
)
            

(1) As of March 31, 2017 and December 31, 2016, we had open derivative contracts representing 103,000 barrels and 93,000 barrels, respectively, of refined petroleum products.

(2) As of March 31, 2017, $0.3 million of cash collateral was held by counterparty brokerage firms and has been netted with the net derivative positions with each counterparty. As of December 31, 2016, we had a cash deficit of $0.6 million netted with the net derivative positions of one of our counterparties.

Recognized gains (losses) associated with our derivatives for the three months ended March 31, 2017 and 2016 were as follows (in thousands):
 
 
 
 
Three Months Ended March 31,
Derivative Type
Income Statement Location
 
2017
 
2016
Commodity derivatives
Cost of goods sold
 
510

 
(177
)