| Derivative Financial Instruments |
7. DERIVATIVE FINANCIAL INSTRUMENTS
At June 30, 2014, the Company’s consolidated balance sheet reflects unrealized losses, net of tax, of $13.9 million in accumulated other comprehensive loss. The Company expects that all of the unrealized losses at June 30, 2014 will be reclassified into operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount ultimately realized in operating income, however, will differ as commodity prices change.
Fair Values of Derivative Instruments
The following table provides information about the fair values of the Company’s derivative financial instruments and the line items on the consolidated balance sheets in which the fair values are reflected (in thousands):
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Asset Derivatives'
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Liability Derivatives'
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Fair Value
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Fair Value
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June 30,
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December 31,
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June 30,
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December 31,
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2014
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2013
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2014
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2013
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Derivative financial instruments (1)
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$
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(6,723)
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(2)
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$
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(28,466)
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(3)
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$
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-
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$
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-
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Accrued and other liabilities
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-
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-
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12,085
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4,612
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Total
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$
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(6,723)
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$
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(28,466)
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$
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12,085
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$
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4,612
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(1) Derivative financial instruments as reflected on the consolidated balance sheets are net of related margin deposit assets of $69.4 million and $77.1 million at June 30, 2014 and December 31, 2013, respectively.
(2) Balance at June 30, 2014 includes $42.2 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.
(3)Balance at December 31, 2013 includes $47.1 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.
Refer to Note 3 - Fair Value Disclosures, which also contains fair value information related to derivative financial instruments.
Effect of Derivative Instruments on Consolidated Statements of Operations and Consolidated Statements of Stockholders’ Equity and Comprehensive Income
The following tables provide information about gains or losses recognized in income and other comprehensive income on the Company’s derivative financial instruments and the line items in the consolidated financial statements in which such gains and losses are reflected (in thousands):
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Gains (Losses) on Derivative Instruments Not
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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Designated in a Hedging Relationship
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2014
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2013
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2014
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2013
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Revenues
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$
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(4,884)
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$
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(2,815)
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$
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13,366
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$
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(14,482)
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Cost of goods sold
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3,560
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190
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2,398
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11,207
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Net increase (decrease) recognized in earnings before tax
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$
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(1,324)
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$
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(2,625)
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$
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15,764
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$
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(3,275)
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Gains (Losses) Due to Ineffectiveness
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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of Cash Flow Hedges
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2014
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2013
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2014
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2013
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Revenues
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$
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264
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$
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(20)
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$
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(82)
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$
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(27)
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Cost of goods sold
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(1,610)
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1
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(750)
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(24)
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Net increase (decrease) recognized in earnings before tax
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$
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(1,346)
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$
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(19)
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$
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(832)
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$
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(51)
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Gains (Losses) Reclassified from Accumulated
Other Comprehensive Income (Loss)
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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into Net Income
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2014
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2013
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2014
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2013
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Revenues
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$
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(125,177)
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$
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(23,841)
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$
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(213,323)
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$
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(34,220)
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Cost of goods sold
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30,686
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(6,034)
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34,259
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(6,867)
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Net decrease recognized in earnings before tax
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$
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(94,491)
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$
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(29,875)
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$
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(179,064)
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$
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(41,087)
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Effective Portion of Cash Flow
Hedges Recognized in
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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Other Comprehensive Income (Loss)
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2014
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2013
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2014
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2013
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Commodity Contracts
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$
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32,035
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$
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(25,891)
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$
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(191,267)
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$
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(47,030)
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Gains (Losses) from Fair Value
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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Hedges of Inventory
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2014
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2013
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2014
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2013
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Revenues (effect of change in inventory value)
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$
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-
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$
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(301)
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$
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-
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$
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-
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Revenues (effect of fair value hedge)
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-
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301
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-
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-
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Cost of goods sold (effect of change in inventory value)
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(693)
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-
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2,453
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-
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Cost of goods sold (effect of fair value hedge)
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729
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-
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(2,049)
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-
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Ineffectiveness recognized in earnings before tax
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$
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36
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$
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-
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$
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404
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$
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-
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There were no gains or losses due to the discontinuance of cash flow hedge or fair value hedge treatment during the three and six months ended June 30, 2014 and 2013.
The following table summarizes volumes of open commodity derivative positions as of June 30, 2014 (in thousands):
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June 30, 2014
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Exchange Traded
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Non-Exchange Traded
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Derivative Instruments
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Net Long & (Short) (1)
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Long (2)
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(Short) (2)
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Unit of Measure
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Commodity
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Futures
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(2,095)
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Bushels
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Corn, Soybeans and Wheat
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Futures
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54,550
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(3)
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Bushels
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Corn
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Futures
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11,970
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Gallons
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Ethanol
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Futures
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(282,156)
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(3)
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Gallons
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Ethanol
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Futures
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(150)
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mmBTU
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Natural Gas
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Futures
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(2,092)
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(4)
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mmBTU
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Natural Gas
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Futures
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(1,800)
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Pounds
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Cattle
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Options
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744
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Bushels
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Corn, Soybeans and Wheat
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Options
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17,575
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Gallons
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Ethanol
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Options
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4,893
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Pounds
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Soybean Oil
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Forwards
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8,241
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(4,697)
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Bushels
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Corn and Soybeans
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Forwards
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11,299
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(101,570)
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Gallons
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Ethanol
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Forwards
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76
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(535)
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Tons
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Distillers Grains
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Forwards
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2,496
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(125,472)
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Pounds
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Corn Oil
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(1)
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Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis. |
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(2)
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Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts. |
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(3)
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Futures used for cash flow hedges. |
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(4)
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Futures used for fair value hedges. |
Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Revenues and cost of goods sold under such contracts are summarized in the table below for the periods indicated (in thousands):
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2014
|
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2013
|
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2014
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2013
|
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Revenues
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$
|
962
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$
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7,779
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$
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4,582
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$
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9,762
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Cost of goods sold
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1,134
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7,636
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5,878
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9,598
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