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FAIR VALUE OF FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2012
FAIR VALUE OF FINANCIAL INSTRUMENTS  
FAIR VALUE OF FINANCIAL INSTRUMENTS

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, long-term debt and commodity forward purchase contracts. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value because of the nature of such instruments. The fair value of our 9 percent notes is based on quoted market values. In January 2013, we initiated the Tender Offer to repurchase the $450.0 million outstanding principal amount of our 9 percent notes. The Tender Offer resulted in the redemption of 99.3 percent of the 9 percent notes for approximately $502.3 million, which includes a make-whole payment of $55.4 million. On February 1, 2013, we issued a redemption notice effective March 4, 2013 to redeem the 0.7 percent of the 9 percent notes that remain outstanding following the expiration of the Tender Offer. The fair value of our natural gas forward purchase contracts are determined with Level 2 inputs based on quoted market values for similar but not identical financial instruments.

The FASB ASC 820-10 establishes a fair value hierarchy that prioritizes observable and unobservable inputs to valuation techniques used to measure fair value. These levels, in order of highest to lowest priority are described below:

  Level 1—   Quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date.

 
Level 2—
 
Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

 
Level 3—
 
Prices that are unobservable for the asset or liability and are developed based on the best information available under the circumstances, which might include the Company's own data.

The fair value of Level 3 investments in our employee retirement plans was valued primarily based on trade information from multiple fund portfolios. Level 3 investments in our employee retirement plans were $31.4 million and $29.1 million as of December 31, 2012 and 2011, respectively. During the year ended December 31, 2012, the increase in the fair value of Level 3 investments primarily relates to net unrealized gains. The pooled equity fund's objective is to provide long-term return in excess of the Russell 1000 Value Index. The pooled equity fund is primarily comprised of publicly quoted securities. The fair market value of the pooled equity fund is determined by using the net asset value ("NAV") calculation performed by the custodian of the fund. The long-biased hedge fund's objective is to generate superior, long-term return with minimal risk. The investment is a series in this fund that is 100% redeemable. The fair market value for the series is determined by using the NAV calculation performed by the portfolio managers. Liquidation of the investment in this fund is 100% of the investment balance at the end of the year with a 100 day holding period. Quarterly liquidation restriction is 25% of the investment balance with a 100 day holding period.

Our restructuring impairment charges in the year ended December 31, 2011 were determined by Level 3 inputs, primarily consisting of third party appraisals and assuming the assets would be liquidated or subsequently terminated.

The following is a summary of the carrying amount and estimated fair values of our fixed-rate long-term debt and natural gas forward purchase contracts as of December 31, 2012 and 2011:

 
   December 31, 2012   December 31, 2011  
 
   Carrying
Amount		   Fair
Value		   Carrying
Amount		   Fair
Value		  

Level 1

                          

Long-term debt:

                          

9.0 percent notes

   $ 448,091   $ 501,750   $ 497,463   $ 525,315  

Level 2

                          

Derivative instruments:

                          

Natural gas forward purchase contracts liability (assets)

     (6 )   (6 )   721     721