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Derivatives Hedges and Financial Instruments | 12 Months Ended
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Dec. 31, 2018
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivatives Hedges and Financial Instruments | 10. Derivatives Hedges and Financial Instruments For the periods presented, the following significant instrument is accounted for on a fair value basis: Embedded Derivative Certain embedded features (“embedded derivative”) relating to the redemption of the Series E Redeemable Preferred, which includes certain contingent redemption features and the participation rights value have been bifurcated from the Series E Redeemable Preferred and recorded as a liability. As the result of the financing transaction relating to the Senior Secured Notes and the letter agreement relating to the Series E Redeemable Preferred as discussed in Notes 7 and 11, we estimate that the contingent redemption features have fair value at December 31, 2018 since we estimate that it is probable that a portion of the shares of this preferred stock would be redeemed prior to October 25, 2023. For certain other embedded features, we estimated no fair value at December 31, 2018 based on our assessment that there is a remote probability that these features will be exercised. At December 31, 2018, the fair value of the embedded derivative was valued using discounted cash flow models and primarily based on the difference in the present value of estimated future cash flows with no redemptions prior to October 25, 2023 compared to certain redemptions deemed probable during the same period and applying the effective dividend rate of the Series E Redeemable Preferred. At December 31, 2017, we estimated that contingent redemption features had no fair value based on a remote probability of redeeming any shares of this preferred stock prior to previous put date. In addition, at December 31, 2018 and 2017, the fair value of the embedded derivative included the valuation of the participation rights, which was based on the equivalent of 303,646 shares of our common stock at $5.52 and $8.76 per share, respectively. The following is a summary of the classifications of valuations of fair value: Level 1 - The valuations of contracts classified as Level 1 are based on quoted prices in active markets for identical contracts. At December 31, 2018 and 2017, we did not have any contracts classified as Level 1. Level 2 - The valuations of contracts classified as Level 2 are based on quoted prices for similar contracts and valuation inputs other than quoted prices that are observable for these contracts. At December 31, 2018 and 2017, we did not have any significant contracts classified as Level 2. Level 3 – The valuations of assets and liabilities classified as Level 3 are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. At December 31, 2018 and 2017, the valuations of the embedded derivative are classified as Level 3. This derivative is valued using market information, management’s redemption assumptions, the underlying number of shares as defined in the terms of the Series E Redeemable Preferred, and the market price of our common stock. In addition, no valuation input adjustments were considered necessary relating to nonperformance risk for the embedded derivative. The line items identified as “Other” relate to carbon credits issued by the Climate Action Reserve in relation to a greenhouse gas reduction program performed at the Baytown Facility. At December 31, 2018, the valuation ($2.35 per carbon credit) of the carbon credits and the contractual obligations associated with these carbon credits is classified as Level 3 and is based on the most recent sales transaction and reevaluated for market changes, if any, and on the range of ask/bid prices obtained from a broker adjusted for minimal market volume activity. At December 31, 2017, we did not have any carbon credits or related contractual obligations associated with carbon credits. The valuation is using undiscounted cash flows based on management’s assumption that the carbon credits would be sold, and the associated contractual obligations would be extinguished in the near term. 10. Derivatives Hedges and Financial Instruments (continued) The following details our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2018 and 2017:
|  |  |  |  |  | Fair Value Measurements at December 31, 2018 Using |  |  |  |  |
Description |  | Total Fair Value at December 31, 2018 |  |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  |  | Total Fair Value at December 31, 2017 |
|  | (In Thousands) |
Assets - Supplies, prepaid items and other: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other |  | $ | 533 |  |  | $ | — |  |  | $ | — |  |  | $ | 533 |  |  | $ | — |
Total |  | $ | 533 |  |  | $ | — |  |  | $ | — |  |  | $ | 533 |  |  | $ | — |
Liabilities - Current and noncurrent accrued and other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Embedded derivative |  | $ | (1,642 | ) |  | $ | — |  |  | $ | — |  |  | $ | (1,642 | ) |  | $ | (2,660 | )
Other |  |  | (533 | ) |  |  | — |  |  |  | — |  |  |  | (533 | ) |  |  | — |
Total |  | $ | (2,175 | ) |  | $ | — |  |  | $ | — |  |  | $ | (2,175 | ) |  | $ | (2,660 | )
The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
|  | Assets |  |  | Liabilities |
|  | 2018 |  |  | 2017 |  |  | 2016 |  |  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (In Thousands) |
Beginning balance |  | $ | — |  |  | $ | — |  |  | $ | 1,154 |  |  | $ | (2,660 | ) |  | $ | (2,557 | ) |  | $ | (1,154 | )
Transfers into Level 3 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,817 | )
Transfers out of Level 3 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total realized and unrealized gains (losses) included in operating results |  |  | 2,214 |  |  |  | 2,031 |  |  |  | 1,256 |  |  |  | (606 | ) |  |  | (1,690 | ) |  |  | 802 |
Purchases |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Issuances |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (229 | ) |  |  | — |  |  |  | — |
Sales |  |  | (1,681 | ) |  |  | (2,031 | ) |  |  | (2,410 | ) |  |  | — |  |  |  | — |  |  |  | — |
Settlements |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,320 |  |  |  | 1,587 |  |  |  | 3,612 |
Ending balance |  | $ | 533 |  |  | $ | — |  |  | $ | — |  |  | $ | (2,175 | ) |  | $ | (2,660 | ) |  | $ | (2,557 | )
Total gains (losses) for the period included in operating results attributed to the change in unrealized gains or losses on assets and liabilities still held at the reporting date |  | $ | 533 |  |  | $ | — |  |  | $ | — |  |  | $ | (1,780 | ) |  | $ | (103 | ) |  | $ | (983 | )
10. Derivatives Hedges and Financial Instruments (continued) Net gains (losses) included in operating results and the statement of operations classifications are as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | (In Thousands) |
Total net gains (losses) included in operating results: |  |  |  |  |  |  |  |  |  |  |  |
Cost of sales - Undesignated commodities contracts |  | $ | — |  |  | $ | — |  |  | $ | 140 |
Cost of sales - Undesignated foreign exchange contracts |  |  | — |  |  |  | — |  |  |  | 5 |
Other income, net - Other |  |  | 361 |  |  |  | 444 |  |  |  | 532 |
Non-operating other income (expense) - embedded derivative |  |  | 1,247 |  |  |  | (103 | ) |  |  | (983 | )
Total net gains (losses) included in operating results |  | $ | 1,608 |  |  | $ | 341 |  |  | $ | (306 | )
At December 31, 2018 and 2017, we did not have any financial instruments with fair values significantly different from their carrying amounts (excluding issuance costs, if applicable). The fair value of financial instruments is not indicative of the overall fair value of our assets and liabilities since financial instruments do not include all assets, including intangibles, and all liabilities. Also, see discussions concerning the utilization of fair value in conjunction with the evaluation certain assets and liabilities initially accounted for on a fair value basis under Note 6 – Asset Retirement Obligations.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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