Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2017

The fair values of the assets acquired and liabilities assumed as a result of the Wyoming Refining acquisition were estimated as of July 14, 2016, the date of the acquisition, using valuation techniques described in notes (1) through (5) described below.



				Valuation
	Fair Value			Technique
	(in thousands)
Net working capital	$	(11,092	)	(1)
Property, plant, and equipment	254,367			(2)
Goodwill	66,449			(3)
Long-term debt	(68,136		)	(4)
Other non-current liabilities	(32,222		)	(5)
Total	$	209,366


(1)	Current assets acquired and liabilities assumed were recorded at their net realizable value.

(2)

The fair value of property, plant, and equipment was estimated using the cost approach. Under the cost approach, the total replacement cost of the property is determined based on industry sources with adjustments for regional factors. The total cost is then adjusted for depreciation based on the physical age of the assets and obsolescence. The fair value of the land was estimated using the sales comparison approach. Under this approach, the sales prices of similar properties are adjusted to account for differences in land characteristics. We consider this to be a Level 3 fair value measurement.


(3)	The excess of the purchase price paid over the fair value of the identifiable assets acquired and liabilities assumed is allocated to goodwill.


(4)	Long-term debt was recorded at carrying value. The carrying value of long-term debt approximated fair value due to its floating interest rate.

(5)

Other non-current liabilities include environmental liabilities and the underfunded status of the Wyoming Refining defined benefit plan. The underfunded status of the defined benefit plan represents the difference between the fair value of the plan's assets and the projected benefit obligations. Environmental liabilities are based on management’s best estimates of probable future costs using current available information. We consider this to be a Level 3 fair value measurement.

The fair values of the assets acquired and liabilities assumed as a result of the Mid Pac acquisition were estimated as of April 1, 2015, the date of the acquisition, using valuation techniques described in notes (1) through (7) described below.



				Valuation
	Fair Value			Technique
	(in thousands)
Net working capital	$	15,989		(1)
Property, plant, and equipment	40,997			(2)
Land	34,800			(3)
Goodwill	26,942			(4)
Intangible assets	33,647			(5)
Other non-current assets	1,228			(7)
Deferred tax liability	(16,759		)	(6)
Other non-current liabilities	(7,235		)	(7)
Total	$	129,609


(1)	Current assets acquired and liabilities assumed were recorded at their net realizable value.

(2)

The fair value of the property, plant, and equipment was estimated using the cost approach. Under the cost approach, the total replacement cost of the property is determined based on industry sources with adjustments for regional factors. The total cost is then adjusted for depreciation based on the physical age of the assets and obsolescence. We consider this to be a Level 3 fair value measurement.


(3)	The fair value of the land was estimated using the sales comparison approach. Under this approach, the sales prices of similar properties are adjusted to account for differences in land characteristics. We consider this to be a Level 3 fair value measurement.


(4)	The excess of the purchase price paid over the fair value of the identifiable assets acquired and liabilities assumed is allocated to goodwill.

(5)

The fair value of customer relationships was estimated using the Excess Earnings Method. Significant inputs used in this model include estimated revenue attributable to the customer relationship and estimated attrition rates. The fair value of the trade names and trademarks was estimated using the Relief from Royalty Method. Significant inputs used in this model include estimated revenue attributable to the trade names and trademarks and a royalty rate. We consider this to be a Level 3 fair value measurement.


(6)	The deferred tax liability was determined based on the differences between the tax bases of the assets acquired and liabilities assumed and the values of those assets and liabilities recognized on our consolidated balance sheets as of the date of acquisition.


(7)	Other non-current assets and liabilities were recorded at their estimated net present value. We consider this to be a Level 3 fair value measurement.

Fair Value, Assets Measured on Recurring Basis

The following table provides information on the fair value amounts (in thousands) of these derivatives as of December 31, 2017 and 2016 and their placement within our consolidated balance sheets.



		December 31,
	Balance Sheet Location	2017			2016
		Asset (Liability)
Commodity derivatives (1)	Prepaid and other current assets	$	2,814		$	—
Commodity derivatives (1)	Other long-term assets	—			2,748
Commodity derivatives	Other accrued liabilities	(39		)	(595		)
J. Aron repurchase obligation derivative	Obligations under inventory financing agreements	(19,564		)	(20,000		)
Interest rate derivatives	Prepaid and other current assets	1,482			161
Interest rate derivatives	Other long-term assets	2,328			3,377
Interest rate derivatives	Other accrued liabilities	—			(94		)

_________________________________________________________


(1)	Does not include cash collateral of $0.2 million and $2.7 million recorded in Prepaid and other current assets and $7.0 million and $7.0 million in Other long-term assets as of December 31, 2017 and 2016, respectively.

Fair value amounts by hierarchy level as of December 31, 2017 and 2016 are presented gross in the tables below (in thousands):



	December 31, 2017
	Level 1			Level 2			Level 3			Gross Fair Value			Effect of Counter-party Netting			Net Carrying Value on Balance Sheet (1)
Assets
Commodity derivatives	$	557		$	21,907		$	—		$	22,464		$	(19,650	)	$	2,814
Interest rate derivatives	—			3,810			—			3,810			—			3,810
Total	$	557		$	25,717		$	—		$	26,274		$	(19,650	)	$	6,624

Liabilities
Common stock warrants	$	—		$	—		$	(6,808	)	$	(6,808	)	$	—		$	(6,808	)
Commodity derivatives	(596		)	(19,093		)	—			(19,689		)	19,650			(39		)
J. Aron repurchase obligation derivative	—			—			(19,564		)	(19,564		)	—			(19,564		)
Total	$	(596	)	$	(19,093	)	$	(26,372	)	$	(46,061	)	$	19,650		$	(26,411	)



	December 31, 2016
	Level 1			Level 2			Level 3			Gross Fair Value			Effect of Counter-party Netting			Net Carrying Value on Balance Sheet (1)
Assets
Commodity derivatives	$	190		$	26,095		$	—		$	26,285		$	(23,537	)	$	2,748
Interest rate derivatives	—			3,602			—			3,602			(64		)	3,538
Total	$	190		$	29,697		$	—		$	29,887		$	(23,601	)	$	6,286

Liabilities
Common stock warrants	$	—		$	—		$	(5,134	)	$	(5,134	)	$	—		$	(5,134	)
Commodity derivatives	(54		)	(24,078		)	—			(24,132		)	23,537			(595		)
J.Aron repurchase obligation derivative	—			—			(20,000		)	(20,000		)	—			(20,000		)
Interest rate derivatives	—			(158		)	—			(158		)	64			(94		)
Total	$	(54	)	$	(24,236	)	$	(25,134	)	$	(49,424	)	$	23,601		$	(25,823	)

_________________________________________________________


(1)	Does not include cash collateral of $7.2 million and $9.7 million as of December 31, 2017 and 2016, respectively included on our consolidated balance sheets.

Reconcilliation of Level 3 Derivative Instruments, Fair Value

A roll forward of Level 3 derivative instruments measured at fair value on a recurring basis is as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Beginning balance	$	(25,134	)	$	(25,867	)	$	(21,254	)
Settlements	—			16,810			7,691
Acquired	—			—			(2,844		)
Total unrealized income (loss) included in earnings	(1,238		)	(16,077		)	(9,460		)
Ending balance	$	(26,372	)	$	(25,134	)	$	(25,867	)

Schedule of Carrying Value and Fair Value of Long Term Debt and Other Financial Instruments

The carrying value and fair value of long-term debt and other financial instruments as of December 31, 2017 and 2016 is as follows (in thousands):



	Carrying Value		Fair Value (1)
December 31, 2017
5.00% Convertible Senior Notes due 2021 (3)	$	95,486	$	149,007
7.75% Senior Secured Notes due 2025	289,326		300,423
Common stock warrants	6,808		6,808



December 31, 2016
Hawaii Retail Credit Agreement (2)	$	93,853	$	93,853
5.00% Convertible Senior Notes due 2021 (3)	91,029		122,229
Term Loan	57,426		62,367
Par Wyoming Holdings Term Loan (2)	65,908		65,908
Wyoming Refining Senior Secured Term Loan (2)	55,480		55,480
Wyoming Refining Senior Secured Revolver (2)	6,700		6,700
Common stock warrants	5,134		5,134

_________________________________________________________


(1)	The fair values of these instruments are considered Level 3 measurements in the fair value hierarchy with the exception of the fair value measurements of the 5.00% Convertible Senior Notes and the 7.75% Senior Secured Notes, which are considered Level 2 measurements as discussed below.


(2)	Fair value approximated carrying value due to the debt's floating rate interest which approximates current market value.


(3)	The carrying value of the 5.00% Convertible Senior Notes excludes the fair value of the equity component, which was classified as equity upon issuance.