Fair Value Measurements

9 Months Ended

Sep. 30, 2014

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 $767.3 million and $463.7 million as of September 30, 2014 and December 31, 2013, respectively, and our notes receivable of $14.0 million and $20.9 million as of September 30, 2014 and December 31, 2013, respectively, are categorized in Level 3.

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



									Netting
									and
	Level 1		Level 2		Level 3		Sub-Total		Collateral		Total
As of September 30, 2014
Assets:
Commodity contracts	$	53,208	$	111,443	$	3,259	$	167,910	$	(79,332)	$	88,578
Foreign currency contracts		—		19,857		—		19,857		(8,518)		11,339
Inventories		—		11		—		11		(11)		—
Cash surrender value of life insurance		—		1,686		—		1,686		—		1,686
Mutual funds		412		—		—		412		—		412
Total	$	53,620	$	132,997	$	3,259	$	189,876	$	(87,861)	$	102,015
Liabilities:
Commodity contracts	$	62,655	$	69,936	$	89	$	132,680	$	(111,135)	$	21,545
Foreign currency contracts		—		10,366		—		10,366		(8,518)		1,848
Inventories		—		12,233		—		12,233		(11)		12,222
Total	$	62,655	$	92,535	$	89	$	155,279	$	(119,664)	$	35,615

As of December 31, 2013
Assets:
Commodity contracts	$	11,574	$	39,880	$	—	$	51,454	$	(35,983)	$	15,471
Foreign currency contracts		—		8,486		—		8,486		(6,350)		2,136
Inventories		—		1,690		—		1,690		(207)		1,483
Total	$	11,574	$	50,056	$	—	$	61,630	$	(42,540)	$	19,090
Liabilities:
Commodity contracts	$	14,032	$	31,983	$	—	$	46,015	$	(31,329)	$	14,686
Foreign currency contracts		—		11,803		—		11,803		(6,350)		5,453
Inventories		—		207		—		207		(207)		—
Total	$	14,032	$	43,993	$	—	$	58,025	$	(37,886)	$	20,139

The two investment assets of cash surrender value of life insurance and mutual funds are in connection with the NQDC plan and were included in identifiable intangible and other non-current assets in the accompanying consolidated balance sheets.

The following table presents information regarding the balance sheet location of our commodity and foreign currency contracts net assets and liabilities (in thousands):



		As of
	September 30, 2014		December 31, 2013
Commodity Contracts
Assets:
Other current assets	$	79,213	$	14,723
Identifiable intangible and other non-current assets		9,365		748
Total net assets	$	88,578	$	15,471

Liabilities:
Accrued expenses and other current liabilities	$	13,661	$	14,332
Other long-term liabilities		7,884		354
Total net liabilities	$	21,545	$	14,686

Foreign Currency Contracts
Assets:
Other current assets	$	10,877	$	2,136
Identifiable intangible and other non-current assets		462		—
Total net assets	$	11,339	$	2,136

Liabilities:
Accrued expenses and other current liabilities	$	1,848	$	5,306
Other long-term liabilities		—		147
Total net liabilities	$	1,848	$	5,453

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, 2014, we had $43.9 million of cash collateral deposits held by financial counterparties, of which $34.7 million have been offset against the total amount of commodity fair value liabilities in the above table and the remaining $9.2 million is included in other current assets in the accompanying consolidated balance sheets. In addition, as of September 30, 2014, we have offset $2.9 million of cash collateral received from customers against the total amount of commodity fair value assets in the above table. As of December 31, 2013, we had $13.0 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 liabilities in the above table. Additionally, as of December 31, 2013, we had offset $4.7 million of cash collateral deposits received from customers against the total amount of commodity fair value assets 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		Realized and Unrealized Gains (Losses) Included in Earnings		Settlements		End of Period		Change in Unrealized Gains (Losses) Relating to Assets and Liabilities that are Held at end of Period		Location of Realized and Unrealized Gains (Losses) Included in Earnings

Three months ended September 30, 2014
Assets:
Commodity contracts	$	5,826	$	4,053	$	6,620	$	3,259	$	1,950	Revenue
Liabilities:
Commodity contracts	$	—	$	(89)	$	—	$	89	$	(89)	Revenue

Three months ended September 30, 2013
Liabilities:
Commodity contracts	$	89	$	69	$	20	$	—	$	—	Cost of revenue

Nine months ended September 30, 2014
Assets:
Commodity contracts	$	—	$	9,879	$	6,620	$	3,259	$	3,259	Revenue
Liabilities:
Commodity contracts	$	—	$	(89)	$	—	$	89	$	(89)	Revenue

Nine months ended September 30, 2013
Liabilities:
Commodity contracts	$	—	$	(20)	$	20	$	—	$	—	Cost of revenue

The nature of inputs that are considered Level 3 are modeled inputs. 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 as well as certain risk related to non-performance. The effect on our income before income taxes of a 10% change in the model input for non-performance risk would not be significant.

There were no transfers between Level 1, 2 or 3 during the periods presented. In addition, there were no significant Level 3 settlements, purchases, sales or issuances for the periods presented.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details