Fair Value Measurements

12 Months Ended

Dec. 31, 2014

10. 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 $689.9 million as of December 31, 2014 and $463.7 million as of December 31, 2013 and our notes receivable of $7.0 million as of December 31, 2014 and $20.9 million as of December 31, 2013 are categorized in Level 3.

The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2014 and 2013 (in thousands):


									Netting and
	Level 1		Level 2		Level 3		Sub-Total		Collateral		Total
2014
Assets:
Commodity contracts	$	173,688	$	495,628	$	4,150	$	673,466	$	(367,984)	$	305,482
Foreign currency contracts		—		21,757		—		21,757		(11,970)		9,787
Cash surrender value of life insurance		—		2,224		—		2,224		—		2,224
Total	$	173,688	$	519,609	$	4,150	$	697,447	$	(379,954)	$	317,493
Liabilities:
Commodity contracts	$	306,360	$	329,887	$	1,353	$	637,600	$	(595,565)	$	42,035
Foreign currency contracts		—		11,970		—		11,970		(11,970)		—
Inventories		—		22,889		—		22,889		—		22,889
Total	$	306,360	$	364,746	$	1,353	$	672,459	$	(607,535)	$	64,924
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		—		1,483		—		1,483		—		1,483
Total	$	11,574	$	49,849	$	—	$	61,423	$	(42,333)	$	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
Total	$	14,032	$	43,786	$	—	$	57,818	$	(37,679)	$	20,139

The cash surrender value of life insurance is in connection with the NQDC plan and was 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 December 31,
	2014		2013
Commodity Contracts
Assets:
Short-term derivative assets, net	$	294,316	$	14,723
Identifiable intangible and other non-current assets		11,166		748
Total net assets	$	305,482	$	15,471
Liabilities:
Accrued expenses and other current liabilities	$	41,346	$	14,332
Other long-term liabilities		689		354
Total net liabilities	$	42,035	$	14,686
Foreign Currency Contracts
Assets:
Short-term derivative assets, net	$	9,283	$	2,136
Identifiable intangible and other non-current assets		504		—
Total net assets	$	9,787	$	2,136
Liabilities:
Accrued expenses and other current liabilities	$	—	$	5,306
Other long-term liabilities		—		147
Total net liabilities	$	—	$	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 December 31, 2014, we had $301.0 million of cash collateral deposits held by financial counterparties, of which $274.3 million have been offset against the total amount of commodity fair value liabilities in the above table and the remaining $26.7 million is included in other current assets in the accompanying consolidated balance sheets. In addition, as of December 31, 2014, we have offset $46.7 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):


			Realized and								Change in Unrealized		Location of Realized
			Unrealized Gains								Gains Relating to		and Unrealized
			(Losses)								Assets and Liabilities		Gains (Losses)
	Beginning		Included in					Transfers	End		that are Held at		Included in
	of Period		Earnings		Settlements		into Level 3		of Period		End of Period		Earnings
2014
Assets:
Commodity contracts	$	—	$	12,702	$	8,969	$	417	$	4,150	$	4,150	Revenue
Liabilities:
Commodity contracts	$	—	$	(1,439)	$	86	$	—	$	(1,353)	$	(1,353)	Cost of revenue
2013
Liabilities:
Commodity contracts	$	—	$	(20)	$	20	$	—	$	—	$	—	Cost of revenue

The nature of inputs that are considered Level 3 are model inputs. Commodity contracts categorized in Level 3 are placed there 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 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.

- 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.

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