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Fair Value Measurements
 9 Months Ended
Sep. 30, 2012
Fair Value Measurements  
Fair Value Measurements

8.              Fair Value Measurements

 

The carrying amounts of cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses and other current liabilities approximate fair value based on the short-term maturities of these instruments.  We believe the carrying values of our debt and notes receivable approximate fair value since these instruments bear interest either at variable rates or fixed rates which are not significantly different than market rates.  Based on the fair value hierarchy, our debt of $287.2 million as of September 30, 2012 and $287.1 million as of December 31, 2011 and our notes receivable of $7.0 million as of September 30, 2012 and $6.8 million as of December 31, 2011 are categorized in Level 3.

 

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

 

 

 

Level 1

 

Level 2

 

Level 3

 

Sub-Total

 

Netting
and
Collateral

 

Total

 

As of September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

31,312

 

$

106,622

 

$

1,747

 

$

139,681

 

$

(101,945

)

$

37,736

 

Foreign currency contracts

 

—

 

5,190

 

—

 

5,190

 

(5,020

)

170

 

Hedged item inventories

 

—

 

575

 

—

 

575

 

—

 

575

 

Total

 

$

31,312

 

$

112,387

 

$

1,747

 

$

145,446

 

$

(106,965

)

$

38,481

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

32,699

 

$

96,007

 

$

—

 

$

128,706

 

$

(101,695

)

$

27,011

 

Foreign currency contracts

 

—

 

8,393

 

—

 

8,393

 

(5,020

)

3,373

 

Hedged item inventories

 

—

 

1,445

 

—

 

1,445

 

—

 

1,445

 

Total

 

$

32,699

 

$

105,845

 

$

—

 

$

138,544

 

$

(106,715

)

$

31,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

14,038

 

$

51,033

 

$

—

 

$

65,071

 

$

(43,275

)

$

21,796

 

Foreign currency contracts

 

—

 

2,994

 

—

 

2,994

 

(893

)

2,101

 

Hedged item inventories

 

—

 

3,216

 

—

 

3,216

 

—

 

3,216

 

Hedged item commitments

 

—

 

206

 

—

 

206

 

—

 

206

 

Total

 

$

14,038

 

$

57,449

 

$

—

 

$

71,487

 

$

(44,168

)

$

27,319

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

10,148

 

$

46,754

 

$

—

 

$

56,902

 

$

(43,291

)

$

13,611

 

Foreign currency contracts

 

—

 

1,018

 

—

 

1,018

 

(893

)

125

 

Hedged item inventories

 

—

 

24

 

—

 

24

 

—

 

24

 

Earn-out

 

—

 

—

 

4,194

 

4,194

 

—

 

4,194

 

Total

 

$

10,148

 

$

47,796

 

$

4,194

 

$

62,138

 

$

(44,184

)

$

17,954

 

 

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.  Commodity contracts categorized in Level 3 are due to the significance of the unobservable model inputs to their respective fair values. The unobservable model inputs, such as basis differentials, are based on the difference between the historical prices of our prior transactions and the underlying observable data.  Fair value of hedged item inventories is derived using spot commodity prices and basis differentials.  Fair value of foreign currency contracts 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.

 

As of September 30, 2012, we had $4.9 million of cash collateral deposits held by financial counterparties included in other current assets in the accompanying consolidated balance sheets.  In addition, as of September 30, 2012, we have offset $0.2 million of cash collateral received from customers against the total amount of commodity fair value assets in the above table.   As of December 31, 2011, we had $11.8 million of cash collateral deposits held by financial counterparties and there were no significant amounts of cash collateral that were offset against the total commodity fair value assets and liabilities in the above table.

 

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):

 

 

 

Beginning
of Period

 

Total Gains
(Losses)
Included in
Earnings

 

Settlements

 

End
of Period

 

Change in
Unrealized
Gains Relating
to Assets and
Liabilities that
are Held at end
of Period

 

Location of Total Gains
(Losses) Included in
Earnings

 

Three months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

—

 

$

2,060

 

$

313

 

$

1,747

 

$

1,747

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Earn-out

 

$

5,156

 

$

149

 

$

—

 

$

5,007

 

$

149

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

—

 

$

2,060

 

$

313

 

$

1,747

 

$

1,747

 

Revenue

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Earn-out

 

$

4,194

 

$

(110

)

$

4,304

 

$

—

 

$

—

 

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

90

 

$

—

 

$

90

 

$

—

 

$

—

 

Revenue

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Earn-out

 

$

5,012

 

$

5

 

$

—

 

$

5,007

 

$

5

 

Other income (expense), net

 

 

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 significant Level 3 purchases, sales or issuances for the periods presented.