v3.19.3.a.u2

DERIVATIVES AND FAIR VALUE MEASUREMENTS | 12 Months Ended
--- | ---
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
FAIR VALUE MEASUREMENTS | DERIVATIVES AND FAIR VALUE MEASUREMENTS Derivative Instruments We utilize various derivative instruments to manage our exposure to interest rate risk and commodity price risk. Our risk management policies and procedures are designed to monitor interest rates, futures and swap positions and over-the-counter positions, as well as physical commodity volumes, grades, locations and delivery schedules, to help ensure that our hedging activities address our market risks. The results of operations for the fuels marketing segment depend largely on the margin between our cost and the sales prices of the products we market. Therefore, the results of operations for this segment are more sensitive to changes in commodity prices compared to the operations of the pipeline and storage segments. Since our fuels marketing operations expose us to commodity price risk, we enter into derivative instruments to mitigate the effect of commodity price fluctuations on our operations. Derivative financial instruments associated with commodity price risk with respect to our petroleum product inventories and related firm commitments to purchase and/or sell such inventories were not material for any period presented. Interest Rate Risk. We are a party to certain interest rate swap agreements that terminate in September 2020 to manage our exposure to changes in interest rates, which consist of forward-starting interest rate swap agreements related to a forecasted debt issuance in 2020. We entered into these swaps in order to hedge the risk of fluctuations in the required interest payments attributable to changes in the benchmark interest rate during the period from the effective date of the swap to the issuance of the forecasted debt. Under the terms of the swaps, we pay a fixed rate and receive a rate based on the three-month USD LIBOR. These swaps qualify as cash flow hedges, and we designate them as such. We record the effective portion of mark-to-market adjustments as a component of AOCI, and the amount in AOCI will be recognized in “Interest expense, net” as the forecasted interest payments occur or if the interest payments are probable not to occur. As of December 31, 2019 and 2018, the aggregate notional amount of forward-starting interest rate swaps totaled $250.0 million. In April 2018, in connection with the maturity of the 7.65% senior notes due April 15, 2018, we terminated forward-starting interest rate swaps with an aggregate notional amount of $350.0 million and received $8.0 million. The termination payments are included in cash flows from financing activities on the consolidated statements of cash flows. The remaining fair value amounts associated with unwound interest rate swap agreements are presented in the table below. These amounts are amortized ratably over the remaining life of the related debt instrument into “Interest expense, net” on the consolidated statements of (loss) income.
|  |  |  | December 31,
Unwound Interest Rate Swap Agreements |  | Balance Sheet Location |  | 2019 |  | 2018
|  |  |  | (Thousands of Dollars)
Fixed-to-floating |  | Current portion of long-term debt |  | $ | 2,755 |  |  | $ | — |
Fixed-to-floating |  | Long-term debt, less current portion |  | $ | 2,568 |  |  | $ | 10,475 |
Forward-starting |  | Accumulated other comprehensive income (loss) |  | $ | 3,045 |  |  | $ | (770 | )
The fair values of our interest rate swap agreements included in our consolidated balance sheets were as follows:
Balance Sheet Location |  | December 31,
| 2019 |  | 2018
|  | (Thousands of Dollars)
Other long-term assets, net |  | $ | — |  |  | $ | 627 |
Accrued liabilities |  | $ | (19,169 | ) |  | $ | — |
Other long-term liabilities |  | $ | — |  |  | $ | (751 | )
Our forward-starting interest rate swaps had the following impact on earnings:
|  | Year Ended December 31,
|  | 2019 |  | 2018 |  | 2017
|  | (Thousands of Dollars)
(Loss) gain recognized in other comprehensive income (loss) on derivative |  | $ | (19,045 | ) |  | $ | 17,912 |  |  | $ | (8,670 | )
Loss reclassified from AOCI into interest expense, net |  | $ | (3,814 | ) |  | $ | (5,499 | ) |  | $ | (6,624 | )
As of December 31, 2019, we expect to reclassify a loss of $2.4 million to “Interest expense, net” within the next twelve months associated with unwound forward-starting interest rate swap agreements. Fair Value Measurements We segregate the inputs used in measuring fair value into three levels: Level 1, defined as observable inputs such as quoted prices for identical assets or liabilities in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active; and Level 3, defined as unobservable inputs for which little or no market data exists. We consider counterparty credit risk and our own credit risk in the determination of all estimated fair values. Recurring Fair Value Measurements. Because we estimate the fair value of our forward-starting interest rate swaps using discounted cash flows, which use observable inputs such as time to maturity and market interest rates, we include interest rate swaps in Level 2 of the fair value hierarchy. Fair Value of Financial Instruments We recognize cash equivalents, receivables, payables and debt in our consolidated balance sheets at their carrying amounts. The fair values of these financial instruments, except for long-term debt other than finance leases, approximate their carrying amounts. The estimated fair values and carrying amounts of the long-term debt, including the current portion and excluding finance leases, were as follows:
| December 31, 2019 |  | December 31, 2018
| (Thousands of Dollars)
Fair value | $ | 3,442,001 |  |  | $ | 3,056,704 |
Carrying amount | $ | 3,331,839 |  |  | $ | 3,111,996 |
We have estimated the fair value of our publicly traded notes based upon quoted prices in active markets; therefore, we determined that the fair value of our publicly traded notes falls in Level 1 of the fair value hierarchy. With regard to our other debt, for which a quoted market price is not available, we have estimated the fair value using a discounted cash flow analysis using current incremental borrowing rates for similar types of borrowing arrangements and determined that the fair value falls in Level 2 of the fair value hierarchy.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivatives and fair value of assets and liabilities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 Reference 2: 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
Name: | us-gaap_DerivativesAndFairValueTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration