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Fair Value Measurements
9 Months Ended
Sep. 30, 2011
Fair Value Measurements 
Fair Value Measurements

7.     Fair Value Measurements

 

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis (in thousands):

 

As of September 30, 2011

 

 

Level 1

 

Level 2

 

Level 3

 

Sub-Total

 

Netting
and
Collateral

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

28,889

 

$

81,682

 

$

—

 

$

110,571

 

$

(89,894

)

$

20,677

 

Foreign currency contracts

 

—

 

4,096

 

—

 

4,096

 

(920

)

3,176

 

Hedged item inventories

 

—

 

(3,864

)

—

 

(3,864

)

—

 

(3,864

)

Hedged item commitments

 

—

 

3,490

 

—

 

3,490

 

(304

)

3,186

 

Total

 

$

28,889

 

$

85,404

 

$

—

 

$

114,293

 

$

(91,118

)

$

23,175

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

30,144

 

$

70,796

 

$

—

 

$

100,940

 

$

(95,064

)

$

5,876

 

Foreign currency contracts

 

—

 

1,191

 

—

 

1,191

 

(920

)

271

 

Hedged item commitments

 

—

 

988

 

—

 

988

 

(304

)

684

 

Earn-out

 

—

 

—

 

5,007

 

5,007

 

—

 

5,007

 

Total

 

$

30,144

 

$

72,975

 

$

5,007

 

$

108,126

 

$

(96,288

)

$

11,838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

32

 

$

—

 

$

—

 

$

32

 

$

—

 

$

32

 

Commodity contracts

 

753

 

14,139

 

123

 

15,015

 

(7,000

)

8,015

 

Foreign currency contracts

 

—

 

461

 

—

 

461

 

(277

)

184

 

Hedged item inventories

 

—

 

2,518

 

—

 

2,518

 

—

 

2,518

 

Hedged item commitments

 

—

 

797

 

—

 

797

 

(265

)

532

 

Total

 

$

785

 

$

17,915

 

$

123

 

$

18,823

 

$

(7,542

)

$

11,281

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

2,226

 

$

14,926

 

$

33

 

$

17,185

 

$

(8,391

)

$

8,794

 

Foreign currency contracts

 

—

 

574

 

—

 

574

 

(277

)

297

 

Hedged item inventories

 

—

 

361

 

—

 

361

 

(265

)

96

 

Earn-out

 

—

 

—

 

5,012

 

5,012

 

—

 

5,012

 

Total

 

$

2,226

 

$

15,861

 

$

5,045

 

$

23,132

 

$

(8,933

)

$

14,199

 

 

Fair value of commodity contracts and hedged item commitments is derived using forward prices that take into account commodity prices, basis differentials, interest rates, credit risk ratings, option volatility and currency rates.  Fair value of hedged item inventories is derived using spot commodity prices and basis differentials.  Fair value of foreign currency forwards is derived using forward prices that take into account interest rates, credit risk ratings and currency rates.

 

For our derivative contracts, we may enter into master netting, collateral and offset agreements with counterparties. These agreements provide us the ability to offset a counterparty’s rights and obligations, request additional collateral when necessary or liquidate the collateral in the event of counterparty default. We net fair value of cash collateral paid or received against fair value amounts recognized for net derivative positions executed with the same counterparty under the same master netting or offset agreement.

 

There were no amounts recognized for the obligation to return or reclaim cash collateral that have been offset against fair value assets included within netting and collateral in the above table as of December 31, 2010.   The amounts recognized for the obligation to return and reclaim cash collateral that have been offset against fair value assets and liabilities included within netting and collateral in the above table were $1.0 million and $6.1 million, respectively, as of September 30, 2011.

 

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis that utilized Level 3 inputs for the periods presented (in thousands):

 

 

 

Balance,
Beginning
of Period,
Assets
(Liabilities)

 

Realized and
Unrealized
Gains Included
in Earnings

 

Settlements

 

Balance, End
of Period

 

Change in
Unrealized
Gains Relating
to Instruments
Still Held at end
of Period

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earn-out

 

$

(5,156

)

$

149

 

$

—

 

$

(5,007

)

$

149

 

Total

 

$

(5,156

)

$

149

 

$

—

 

$

(5,007

)

$

149

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earn-out

 

$

(6,225

)

$

252

 

$

—

 

$

(5,973

)

$

252

 

Total

 

$

(6,225

)

$

252

 

$

—

 

$

(5,973

)

$

252

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts, net

 

$

90

 

$

—

 

$

(90

)

$

—

 

$

—

 

Earn-out

 

(5,012

)

5

 

—

 

(5,007

)

5

 

Total

 

$

(4,922

)

$

5

 

$

(90

)

$

(5,007

)

$

5

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts, net

 

$

(2

)

$

—

 

$

2

 

$

—

 

$

—

 

Foreign currency contracts, net

 

(152

)

—

 

152

 

—

 

—

 

Earn-out

 

(6,728

)

755

 

—

 

(5,973

)

755

 

Total

 

$

(6,882

)

$

755

 

$

154

 

$

(5,973

)

$

755

 

 

Our policy is to recognize transfers between Level 1, 2 or 3 as of the beginning of the reporting period in which the event or change in circumstances caused the transfer to occur.  There were no transfers between Level 1, 2 or 3 during the periods presented.  In addition, there were no Level 3 purchases, sales or issuances for the periods presented.  The unrealized gains on the Earn-out shown in the above table represent foreign currency gains recorded during the three and nine months ended September 30, 2011.