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Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2016
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments

8.  DERIVATIVE FINANCIAL INSTRUMENTS



At September 30, 2016, the company’s consolidated balance sheet reflected unrealized losses of $0.1 million, net of tax, in accumulated other comprehensive income (loss). The company expects these losses will be reclassified in operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will differ as commodity prices change.



Fair Values of Derivative Instruments



The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):











 

 

 

 

 

 

 

 

 

 

 

 



 

Asset Derivatives'

 

Liability Derivatives'



 

Fair Value

 

Fair Value



 

September 30,

 

December 31,

 

September 30,

 

December 31,



 

2016

 

2015

 

2016

 

2015

Derivative financial instruments (1)

 

$

 29,785 

(2)

$

 22,882 

(3)

$

 -

 

$

 -

Accrued and other liabilities

 

 

 -

 

 

 -

 

 

 20,831 

 

 

 8,245 

Other liabilities

 

 

 -

 

 

 -

 

 

 15 

 

 

 -

Total

 

$

 29,785 

 

$

 22,882 

 

$

 20,846 

 

$

 8,245 



(1) Derivative financial instruments as reflected on the consolidated balance sheets are net of related margin deposit assets of $8.8 million and $7.7 million at September 30, 2016 and December 31, 2015, respectively.

(2) Balance at September 30, 2016 includes $4.2 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

(3)Balance at December 31, 2015 includes $2.3 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.





Refer to Note 4 - Fair Value Disclosures, which 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 gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) on Derivative Instruments Not

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 Designated in a Hedging Relationship

 

2016

 

2015

 

2016

 

2015

Revenues

 

$

 (1,084)

 

$

 (9,431)

 

$

 6,187 

 

$

 (9,597)

Cost of goods sold

 

 

 (39)

 

 

 20,992 

 

 

 (8,740)

 

 

 2,783 

Net increase (decrease) recognized in earnings before tax

 

$

 (1,123)

 

$

 11,561 

 

$

 (2,553)

 

$

 (6,814)







 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) Due to Ineffectiveness

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

of Cash Flow Hedges

 

2016

 

2015

 

2016

 

2015

Revenues

 

$

 34 

 

$

 14 

 

$

 (5)

 

$

 (45)

Cost of goods sold

 

 

 96 

 

 

 (23)

 

 

 (65)

 

 

 -

Net increase (decrease) recognized in earnings before tax

 

$

 130 

 

$

 (9)

 

$

 (70)

 

$

 (45)







 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) Reclassified from Accumulated
Other Comprehensive Income (Loss)

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

into Net Income

 

2016

 

2015

 

2016

 

2015

Revenues

 

$

 25,254 

 

$

 935 

 

$

 12,029 

 

$

 4,643 

Cost of goods sold

 

 

 (28,548)

 

 

 515 

 

 

 (15,904)

 

 

 (5,763)

Net increase (decrease) recognized in earnings before tax

 

$

 (3,294)

 

$

 1,450 

 

$

 (3,875)

 

$

 (1,120)







 

 

 

 

 

 

 

 

 

 

 

 

Effective Portion of Cash Flow
Hedges Recognized in

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Other Comprehensive Income (Loss)

 

2016

 

2015

 

2016

 

2015

Commodity Contracts

 

$

 3,250 

 

$

 5,914 

 

$

 (2,157)

 

$

 14,799 







 

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) from Fair Value

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

Hedges of Inventory

 

2016

 

2015

 

2016

 

2015

Revenues (effect of change in inventory value)

 

$

 (40)

 

$

 -

 

$

 1,379 

 

$

 -

Cost of goods sold (effect of change in inventory value)

 

 

 (470)

 

 

 376 

 

 

 7,712 

 

 

 (1,994)

Revenues (effect of fair value hedge)

 

 

 40 

 

 

 -

 

 

 (1,379)

 

 

 -

Cost of goods sold (effect of fair value hedge)

 

 

 918 

 

 

 842 

 

 

 (7,648)

 

 

 4,742 

Ineffectiveness recognized in earnings before tax

 

$

 448 

 

$

 1,218 

 

$

 64 

 

$

 2,748 



There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the three and nine months ended September 30, 2016 and 2015. 



The open commodity derivative positions as of September 30, 2016, are as follows (in thousands):







 

 

 

 

 

 

 

 

 

 

September 30, 2016



 

Exchange Traded

 

Non-Exchange Traded

 

 

 

 

Derivative
Instruments

 

Net Long &
(Short) (1)

 

Long (2)

 

(Short) (2)

 

Unit of
Measure

 

Commodity



 

 

 

 

 

 

 

 

 

 

Futures

 

 (30,405)

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Futures

 

 18,905 

(3)

 

 

 

 

Bushels

 

Corn

Futures

 

 (7,950)

(4)

 

 

 

 

Bushels

 

Corn

Futures

 

 13,986 

 

 

 

 

 

Gallons

 

Ethanol

Futures

 

 (95,760)

(3)

 

 

 

 

Gallons

 

Ethanol

Futures

 

 (7,773)

 

 

 

 

 

mmBTU

 

Natural Gas

Futures

 

 (8,730)

(4)

 

 

 

 

mmBTU

 

Natural Gas

Futures

 

 (200)

 

 

 

 

 

Pounds

 

Livestock

Futures

 

 (80,440)

(3)

 

 

 

 

Pounds

 

Livestock

Futures

 

 (966)

 

 

 

 

 

Barrels

 

Crude Oil

Futures

 

 7,560 

 

 

 

 

 

Pounds

 

Soybean Oil

Futures

 

 6,342 

 

 

 

 

 

Gallons

 

Denaturant

Options

 

 (488)

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Options

 

 (23,798)

 

 

 

 

 

Gallons

 

Ethanol

Options

 

 (1,838)

 

 

 

 

 

Pounds

 

Livestock

Options

 

 96 

 

 

 

 

 

Barrels

 

Crude Oil

Options

 

 56 

 

 

 

 

 

mmBTU

 

Natural Gas

Options

 

 340 

 

 

 

 

 

Pounds

 

Sugar

Forwards

 

 

 

 40,871 

 

 (1,405)

 

Bushels

 

Corn and Soybeans

Forwards

 

 

 

 5,594 

 

 (107,750)

 

Gallons

 

Ethanol

Forwards

 

 

 

 143 

 

 (343)

 

Tons

 

Distillers Grains

Forwards

 

 

 

 41,648 

 

 (79,215)

 

Pounds

 

Corn Oil

Forwards (4)

 

 

 

 -

 

 (26,993)

 

Pounds

 

Corn Oil

Forwards

 

 

 

 15,827 

 

 (806)

 

mmBTU

 

Natural Gas

Forwards

 

 

 

 1,532 

 

 (614)

 

Barrels

 

Crude Oil



 

 

 

 

 

 

 

 

 

 



(1)

Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.

(2)

Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.

(3)

Futures used for cash flow hedges.

(4)

Futures or non-exchange traded forwards 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. Included in revenues are net gains on energy trading contracts of $2.7 million and $5.7 million for the three and nine months ended September 30, 2016, respectively, and net gains of $2.9 million and $10.7 million for the three and nine months ended September 30, 2015, respectively.