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 September 30, 2014, our derivative instruments, at their respective fair value positions were as follows (in thousands, except weighted average fixed price and weighted average mark-to-market amount):



							Weighted
							Average
					Weighted		Mark-to-
	Settlement				Average		Market		Fair Value
Hedge Strategy	Period	Derivative Instrument	Notional	Unit	Fixed Price		Amount		Amount

Fair Value Hedge	2014	Commodity contracts for inventory hedging (long)	267	BBL	$	106.35	$	(2.850)	$	(761)
	2014	Commodity contracts for inventory hedging (short)	4,853	BBL		72.52		2.912		14,130
	2015	Commodity contracts for inventory hedging (short)	10	BBL		113.17		1.300		13
									$	13,382

Non-Designated	2014	Commodity contracts (long)	14,323	BBL	$	81.37	$	(4.211)	$	(60,319)
	2014	Commodity contracts (short)	13,783	BBL		91.92		5.316		73,275
	2015	Commodity contracts (long)	17,690	BBL		70.99		(1.803)		(31,900)
	2015	Commodity contracts (short)	12,864	BBL		98.41		3.234		41,604
	2016	Commodity contracts (long)	744	BBL		91.37		(3.231)		(2,404)
	2016	Commodity contracts (short)	392	BBL		95.86		3.926		1,539
	2017	Commodity contracts (long)	56	BBL		24.20		(0.214)		(12)
	2017	Commodity contracts (short)	11	BBL		70.94		5.909		65
	2018	Commodity contracts (long)	18	BBL		25.66		—		—
										21,848

	2014	Foreign currency contracts (long)	10,746	AUD		0.93		(0.060)		(641)
	2014	Foreign currency contracts (short)	8,664	AUD		0.91		0.051		445
	2014	Foreign currency contracts (long)	5,183	BRL		2.28		(0.030)		(157)
	2014	Foreign currency contracts (long)	7,690	CAD		1.09		(0.026)		(201)
	2014	Foreign currency contracts (short)	36,225	CAD		1.09		0.028		1,014
	2014	Foreign currency contracts (long)	1,847,698	CLP		587.54		(0.000)		(180)
	2014	Foreign currency contracts (short)	2,385,660	CLP		583.07		0.000		261
	2014	Foreign currency contracts (long)	19,179,268	COP		1,923.93		(0.000)		(580)
	2014	Foreign currency contracts (short)	22,970,683	COP		1,926.57		0.000		705
	2014	Foreign currency contracts (long)	35,110	DKK		5.60		(0.010)		(349)
	2014	Foreign currency contracts (long)	11,303	EUR		1.33		(0.072)		(818)
	2014	Foreign currency contracts (short)	39,442	EUR		1.33		0.079		3,124
	2014	Foreign currency contracts (long)	84,016	GBP		1.67		(0.046)		(3,889)
	2014	Foreign currency contracts (short)	135,006	GBP		1.67		0.061		8,169
	2014	Foreign currency contracts (short)	110,129	INR		61.29		0.000		25
	2014	Foreign currency contracts (long)	466,074	JPY		103.49		(0.000)		(140)
	2014	Foreign currency contracts (short)	735,479	JPY		103.18		0.001		443
	2014	Foreign currency contracts (long)	1,381,969	MXN		13.18		(0.002)		(2,594)
	2014	Foreign currency contracts (short)	1,240,477	MXN		13.17		0.002		2,395
	2014	Foreign currency contracts (long)	23,081	NOK		6.24		(0.004)		(81)
	2014	Foreign currency contracts (short)	65,802	NOK		6.25		0.004		280
	2014	Foreign currency contracts (short)	5,676	PLN		3.15		0.019		107
	2014	Foreign currency contracts (short)	28,950	RON		3.32		0.020		591
	2014	Foreign currency contracts (long)	11,651	SGD		1.25		(0.017)		(195)
	2014	Foreign currency contracts (short)	19,956	SGD		1.25		0.016		323
	2014	Foreign currency contracts (long)	77,303	ZAR		10.82		(0.004)		(290)
	2014	Foreign currency contracts (short)	117,356	ZAR		10.94		0.004		498
	2014	Foreign currency contracts (short)	112	CHF		0.91		0.054		6
	2014	Foreign currency contracts (long)	221,819	KRW		1,019.73		(0.000)		(7)
	2015	Foreign currency contracts (long)	600	GBP		1.66		(0.040)		(24)
	2015	Foreign currency contracts (short)	33,150	GBP		1.66		0.033		1,094
	2016	Foreign currency contracts (short)	5,125	GBP		1.65		0.028		141
	2017	Foreign currency contracts (short)	250	GBP		1.67		0.064		16
										9,491
									$	31,339

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
		September 30,		December 31,
	Balance Sheet Location	2014		2013
Derivative assets:
Derivatives designated as hedging instruments
Commodity contracts	Other current assets	$	11,207	$	735
Commodity contracts	Accrued expenses and other current liabilities		3,170		—
			14,377		735
Derivatives not designated as hedging instruments
Commodity contracts	Other current assets		90,585		47,062
Commodity contracts	Identifiable intangible and other non-current assets		9,837		1,642
Commodity contracts	Accrued expenses and other current liabilities		46,130		1,141
Commodity contracts	Other long-term liabilities		6,981		874
Foreign currency contracts	Other current assets		16,912		5,003
Foreign currency contracts	Identifiable intangible and other non-current assets		469		—
Foreign currency contracts	Accrued expenses and other current liabilities		2,476		3,483
			173,390		59,205
		$	187,767	$	59,940

Derivative liabilities:
Derivatives designated as hedging instruments
Commodity contracts	Other current assets	$	501	$	1,544
Commodity contracts	Accrued expenses and other current liabilities		494		—
			995		1,544
Derivatives not designated as hedging instruments
Commodity contracts	Other current assets		19,213		26,876
Commodity contracts	Identifiable intangible and other non-current assets		472		894
Commodity contracts	Accrued expenses and other current liabilities		97,135		15,473
Commodity contracts	Other long-term liabilities		14,865		1,228
Foreign currency contracts	Other current assets		6,035		2,867
Foreign currency contracts	Identifiable intangible and other non-current assets		7		—
Foreign currency contracts	Accrued expenses and other current liabilities		4,324		8,789
Foreign currency contracts	Other long-term liabilities		—		147
			142,051		56,274
		$	143,046	$	57,818

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						Realized and Unrealized
Derivative		Gain (Loss)				Hedged		Gain (Loss)
Instruments	Location	2014		2013		Items	Location	2014		2013

Three months ended September 30,
Commodity contracts	Cost of revenue	$	36,273	$	(12,032)	Inventories	Cost of revenue	$	(36,227)	$	10,937

Nine months ended September 30,
Commodity contracts	Cost of revenue	$	34,572	$	7,593	Inventories	Cost of revenue	$	(44,869)	$	(7,224)

There were no gains or losses for the three and nine months ended September 30, 2014 and 2013 that were excluded from the assessment of the effectiveness of our fair value hedges.

There were no cash flow hedging activities during the three and nine months ended September 30, 2014 and the cash flow hedging activities during the three and nine months ended September 30, 2013 were not significant.

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
		Gain (Loss)
Derivatives	Location	2014		2013

Three months ended September 30,
Commodity contracts	Revenue	$	19,775	$	6,589
Commodity contracts	Cost of revenue		760		(521)
Foreign currency contracts	Revenue		2,901		(1,992)
Foreign currency contracts	Other income (expense), net		8,874		(6,105)
		$	32,310	$	(2,029)

Nine months ended September 30,
Commodity contracts	Revenue	$	43,918	$	26,096
Commodity contracts	Cost of revenue		9,805		893
Foreign currency contracts	Revenue		1,564		748
Foreign currency contracts	Other income (expense), net		5,549		(2,263)
		$	60,836	$	25,474

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. As of September 30, 2014, the net liability position for such contracts is $23.6 million, the collateral posted is $2.2 million and the amount of assets required to be posted and/or to settle the positions should a credit-risk contingent feature be triggered is $21.4 million. As of December 31, 2013, the net liability position for derivative instrument contracts that contain credit-risk contingent features was not significant.