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Derivatives | 3 Months Ended
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Mar. 31, 2012
Derivatives |
Derivatives |
2. Derivatives We enter into financial derivative contracts in order to mitigate the risk of market price fluctuations in aviation, marine and land fuel, to offer our customers fuel pricing alternatives to meet their needs and to mitigate the risk of fluctuations in foreign currency exchange rates. We also enter into proprietary derivative transactions, primarily intended to capitalize on arbitrage opportunities related to basis or time spreads related to fuel products we sell. We have applied the normal purchase and normal sales exception (“NPNS”), as provided by accounting guidance for derivative instruments and hedging activities, to certain of our physical forward sales and purchase contracts. While these contracts are considered derivative instruments under the guidance for derivative instruments and hedging activities, they are not recorded at fair value, but rather are recorded in our consolidated financial statements when physical settlement of the contracts occurs. If it is determined that a transaction designated as NPNS no longer meets the scope of the exception, the fair value of the related contract is recorded as an asset or liability on the consolidated balance sheet and the difference between the fair value and the contract amount is immediately recognized through earnings. The following describes our derivative classifications: Cash Flow Hedges. Includes certain of our foreign currency forward contracts we enter into in order to mitigate the risk of currency exchange rate fluctuations. Fair Value Hedges. Includes derivatives we enter into in order to hedge price risk associated with our inventory and certain firm commitments relating to fixed price purchase and sale contracts. Non-designated Derivatives. Includes derivatives we primarily enter into in order to mitigate the risk of market price fluctuations in aviation, marine and land fuel in the form of swaps or futures as well as certain fixed price purchase and sale contracts and proprietary trading. In addition, non-designated derivatives are also entered into to hedge the risk of currency rate fluctuations. As of March 31, 2012, our derivative instruments, at their respective fair value positions were as follows (in thousands, except mark-to-market prices):
Hedge Strategy |  | Settlement Period |  | Derivative Instrument |  | Notional |  | Unit |  | Mark-to- Market Prices |  | Mark-to- Market |
Fair Value Hedge |  | 2012 |  | Commodity contracts for firm commitment hedging (long) |  | 992 |  | GAL |  | $ | 0.18 |  | $ | 179 |
|  | 2012 |  | Commodity contracts for firm commitment hedging (short) |  | 3,780 |  | GAL |  | (0.08 | ) | (318 | )
|  | 2012 |  | Commodity contracts for inventory hedging (short) |  | 50,384 |  | GAL |  | 0.06 |  | 2,848 |
|  | 2012 |  | Commodity contracts for inventory hedging (short) |  | 72 |  | MT |  | 6.36 |  | 458 |
|  |  |  |  |  |  |  |  |  |  |  | $ | 3,167 |
Non-Designated |  | 2012 |  | Commodity contracts (long) |  | 128,366 |  | GAL |  | $ | 0.08 |  | $ | 10,610 |
|  | 2012 |  | Commodity contracts (short) |  | 199,585 |  | GAL |  | (0.11 | ) | (21,789 | )
|  | 2012 |  | Commodity contracts (long) |  | 2,678 |  | MT |  | 49.70 |  | 133,103 |
|  | 2012 |  | Commodity contracts (short) |  | 2,235 |  | MT |  | (47.07 | ) | (105,170 | )
|  | 2013 |  | Commodity contracts (long) |  | 4,516 |  | GAL |  | 0.24 |  | 1,106 |
|  | 2013 |  | Commodity contracts (short) |  | 9,670 |  | GAL |  | (0.05 | ) | (470 | )
|  | 2013 |  | Commodity contracts (long) |  | 73 |  | MT |  | 23.38 |  | 1,707 |
|  | 2013 |  | Commodity contracts (short) |  | 31 |  | MT |  | (42.23 | ) | (1,309 | )
|  | 2014 |  | Commodity contracts (long) |  | 3 |  | MT |  | 20.33 |  | 61 |
|  | 2014 |  | Commodity contracts (short) |  | 6 |  | MT |  | (11.67 | ) | (70 | )
|  | 2012 |  | Foreign currency contracts (long) |  | 8,636 |  | CAD |  | (0.00 | ) | (29 | )
|  | 2012 |  | Foreign currency contracts (short) |  | 15,236 |  | CAD |  | (0.00 | ) | (11 | )
|  | 2012 |  | Foreign currency contracts (long) |  | 2,289,069 |  | CLP |  | (0.00 | ) | (43 | )
|  | 2012 |  | Foreign currency contracts (long) |  | 636 |  | EUR |  | 0.02 |  | 14 |
|  | 2012 |  | Foreign currency contracts (short) |  | 16,000 |  | EUR |  | (0.00 | ) | (50 | )
|  | 2012 |  | Foreign currency contracts (long) |  | 14,947 |  | GBP |  | 0.01 |  | 208 |
|  | 2012 |  | Foreign currency contracts (short) |  | 90,806 |  | GBP |  | (0.01 | ) | (1,160 | )
|  | 2012 |  | Foreign currency contracts (long) |  | 164,573 |  | MXN |  | (0.00 | ) | (104 | )
|  | 2012 |  | Foreign currency contracts (short) |  | 69,684 |  | MXN |  | 0.00 |  | 44 |
|  | 2012 |  | Foreign currency contracts (long) |  | 27 |  | AUD |  | (0.04 | ) | (1 | )
|  | 2012 |  | Foreign currency contracts (short) |  | 269 |  | AUD |  | 0.02 |  | 5 |
|  | 2012 |  | Foreign currency contracts (long) |  | 893 |  | BRL |  | 0.03 |  | 26 |
|  | 2012 |  | Foreign currency contracts (short) |  | 2,623 |  | BRL |  | (0.02 | ) | (63 | )
|  | 2012 |  | Foreign currency contracts (short) |  | 11,001 |  | DKK |  | (0.00 | ) | (2 | )
|  | 2012 |  | Foreign currency contracts (short) |  | 21,800,000 |  | COP |  | (0.00 | ) | (23 | )
|  | 2013 |  | Foreign currency contracts (long) |  | 10,430 |  | GBP |  | 0.00 |  | 24 |
|  | 2013 |  | Foreign currency contracts (short) |  | 23,315 |  | GBP |  | 0.00 |  | 41 |
|  |  |  |  |  |  |  |  |  |  |  | $ | 16,655 |
The following table presents information about our derivative instruments measured at fair value and their locations on the consolidated balance sheets (in thousands):
|  |  |  | As of |
|  |  |  | March 31, |  | December 31, |
|  | Balance Sheet Location |  | 2012 |  | 2011 |
Derivative assets: |  |  |  |  |  |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Commodity contracts |  | Other current assets |  | $ | 4,213 |  | $ | 528 |
Commodity contracts |  | Accrued expenses and other current liabilities |  | — |  | 22 |
|  |  |  | 4,213 |  | 550 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
Commodity contracts |  | Other current assets |  | 153,230 |  | 59,185 |
Commodity contracts |  | Non-current other assets |  | 2,225 |  | 2,065 |
Commodity contracts |  | Accrued expenses and other current liabilities |  | 6,985 |  | 3,231 |
Commodity contracts |  | Other long-term liabilities |  | 43 |  | 40 |
Foreign currency contracts |  | Other current assets |  | 254 |  | 1,912 |
Foreign currency contracts |  | Non-current other assets |  | 98 |  | 1,082 |
Foreign currency contracts |  | Accrued expenses and other current liabilities |  | 883 |  | — |
Foreign currency contracts |  | Other long-term liabilities |  | 35 |  | — |
|  |  |  | 163,753 |  | 67,515 |
|  |  |  | $ | 167,966 |  | $ | 68,065 |
Derivative liabilities: |  |  |  |  |  |  |
Derivatives designated as hedging instruments |  |  |  |  |  |  |
Commodity contracts |  | Other current assets |  | $ | 1,026 |  | $ | 1,519 |
Commodity contracts |  | Accrued expenses and other current liabilities |  | — |  | 21 |
|  |  |  | 1,026 |  | 1,540 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
Commodity contracts |  | Other current assets |  | 95,140 |  | 37,713 |
Commodity contracts |  | Non-current other assets |  | 241 |  | 2 |
Commodity contracts |  | Accrued expenses and other current liabilities |  | 48,564 |  | 16,434 |
Commodity contracts |  | Other long-term liabilities |  | 779 |  | 1,213 |
Foreign currency contracts |  | Other current assets |  | 66 |  | 413 |
Foreign currency contracts |  | Non-current other assets |  | 102 |  | 481 |
Foreign currency contracts |  | Accrued expenses and other current liabilities |  | 2,080 |  | 124 |
Foreign currency contracts |  | Other long-term liabilities |  | 146 |  | — |
|  |  |  | 147,118 |  | 56,380 |
|  |  |  | $ | 148,144 |  | $ | 57,920 |
The following table presents the effect and financial statement location of our derivative instruments and related hedged items in fair value hedging relationships on our consolidated statements of income and comprehensive income (in thousands):
|  |  |  | Realized and Unrealized Gain (Loss) |  |  |  |  |  | Realized and Unrealized Gain (Loss) |
Derivatives |  | Location |  | 2012 |  | 2011 |  | Hedged Items |  | Location |  | 2012 |  | 2011 |
Three months ended March 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | Revenue |  | $ | 265 |  | $ | 10,687 |  | Firm commitments |  | Revenue |  | $ | (201 | ) | $ | (11,433 | )
Commodity contracts |  | Cost of revenue |  | (1,417 | ) | (7,461 | ) | Firm commitments |  | Cost of revenue |  | 739 |  | 8,037 |
Commodity contracts |  | Cost of revenue |  | (26,329 | ) | (40,259 | ) | Inventories |  | Cost of revenue |  | 29,428 |  | 47,341 |
|  |  |  | $ | (27,481 | ) | $ | (37,033 | ) |  |  |  |  | $ | 29,966 |  | $ | 43,945 |
There were no gains or losses for the three months ended March 31, 2012 and 2011 that were excluded from the assessment of the effectiveness of our fair value hedges. The following table presents the effect and financial statement location of our derivative instruments not designated as hedging instruments on our consolidated statements of income and comprehensive income (in thousands):
|  |  |  | Realized and Unrealized |
Derivatives |  | Location |  | Gain (Loss) |
|  |  |  | 2012 |  | 2011 |
Three months ended March 31, |  |  |  |  |  |  |
Commodity contracts |  | Revenue |  | $ | (223 | ) | $ | 1,558 |
Commodity contracts |  | Cost of revenue |  | 7,021 |  | 663 |
Foreign currency contracts |  | Revenue |  | (1,552 | ) | — |
Foreign currency contracts |  | Other income (expense), net |  | (1,662 | ) | (1,909 | )
|  |  |  | $ | 3,584 |  | $ | 312 |
We enter into derivative instrument contracts which may require us to periodically post collateral. Certain of these derivative contracts contain clauses that are similar to credit-risk-related contingent features, including material adverse change, general adequate assurance and internal credit review clauses that may require additional collateral to be posted and/or settlement of the instruments in the event an aforementioned clause is triggered. The triggering events are not a quantifiable measure; rather they are based on good faith and reasonable determination by the counterparty that the triggers have occurred. The net liability position for such contracts, the collateral posted and the amount of assets required to be posted and/or to settle the positions should a contingent feature be triggered was $2.3 million as of March 31, 2012.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5580258-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5618551-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5624163-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5708773-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6935481&loc=d3e41638-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5624171-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6935481&loc=d3e41620-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6935481&loc=d3e41641-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6887037&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6887037&loc=d3e80784-113994 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5579240-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6935481&loc=d3e41635-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5624258-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=6935481&loc=SL5579245-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 45 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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