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Fair Value Measurements
3 Months Ended
Mar. 31, 2014
Fair Value Measurements  
Fair Value Measurements

Note 13.              Fair Value Measurements

 

Certain of the Partnership’s assets and liabilities are measured at fair value.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

 

The FASB established a fair value hierarchy, which prioritizes the inputs used in measuring fair value into the following three levels:

 

Level 1

Observable inputs such as quoted prices in active markets for identical assets or liabilities.

 

 

 

Level 2

Inputs other than the quoted prices in active markets that are observable for assets or liabilities, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.

 

 

 

Level 3

Unobservable inputs based on the entity’s own assumptions.

 

The following table presents those financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013 (in thousands):

 

 

 

Fair Value as of March 31, 2014

 

 

Fair Value as of December 31, 2013

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedged inventories

 

$

248,918

 

$

 

$

248,918

 

$

 

 

$

452,302

 

$

 

$

452,302

 

$

 

Fair value of forward fixed price contracts

 

80,488

 

 

70,353

 

10,135

 

 

46,007

 

 

31,931

 

14,076

 

Swap agreements and options

 

58

 

10

 

48

 

 

 

116

 

74

 

42

 

 

Interest rate cap

 

7

 

 

7

 

 

 

25

 

 

25

 

 

Broker margin deposits

 

15,193

 

15,193

 

 

 

 

21,792

 

21,792

 

 

 

Pension plan

 

17,666

 

17,666

 

 

 

 

18,267

 

18,267

 

 

 

Total

 

$

362,330

 

$

32,869

 

$

319,326

 

$

10,135

 

 

$

538,509

 

$

40,133

 

$

484,300

 

$

14,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations on forward fixed price contracts

 

$

(89,930

)

$

 

$

(76,605

)

$

(13,325

)

 

$

(38,197

)

$

 

$

(33,014

)

$

(5,183

)

Mark to market loss related to RIN forward commitments

 

(122

)

 

(122

)

 

 

(6,166

)

 

(6,166

)

 

Swap agreements and option contracts

 

(10

)

(10

)

 

 

 

(108

)

(74

)

(34

)

 

Foreign currency derivatives

 

(74

)

 

(74

)

 

 

(16

)

 

(16

)

 

Interest rate swaps

 

(8,785

)

 

(8,785

)

 

 

(9,462

)

 

(9,462

)

 

Total liabilities

 

$

(98,921

)

$

(10

)

$

(85,586

)

$

(13,325

)

 

$

(53,949

)

$

(74

)

$

(48,692

)

$

(5,183

)

 

This table excludes cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value.  The carrying amounts of certain of the Partnership’s financial instruments, including cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short maturities.  The carrying value of the Partnership’s credit facilities approximate fair value due to the variable rate nature of these financial instruments.  The fair values of the derivatives used by the Partnership are disclosed in Note 5.

 

The majority of the Partnership’s derivatives outstanding are reported at fair value based market quotes that are deemed to be observable inputs in an active market for similar assets and liabilities and are considered Level 2 inputs for purposes of fair value disclosures.  Specifically, the fair values of the Partnership’s financial assets and financial liabilities provided above were derived from NYMEX and New York Harbor quotes for the Partnership’s hedged inventories, forward fixed price contracts, swap agreements and option contracts and from the LIBOR rates for the Partnership’s interest rate swaps and interest rate cap.  The fair value of the foreign currency derivatives and the mark to market loss related to RIN forward commitments are based on broker price quotations.  Except as discussed below, the Partnership has not changed its valuation techniques or Level 2 inputs during the three months ended March 31, 2014.

 

The fair value for the Partnership’s forward fixed price contracts related to crude oil are derived from a combination of quoted NYMEX market commodity prices as well as significant unobservable inputs (Level 3), including internally developed assumptions where there is little, if any, market activity.  The unobservable inputs used in the measurement of the Partnership’s forward fixed price contracts include estimates for location basis, transportation and throughput costs net of an estimated margin for current market participants.  Gains and losses recognized in earnings (or changes in net assets) are disclosed in Note 5.

 

The following table presents a summary of the changes in fair value of the Partnership’s Level 3 financial assets and liabilities at March 31, 2014:

 

Fair value at December 31, 2013

 

$

8,894

 

Change in fair value recorded in Cost of Sales

 

(12,084

)

Fair value at March 31, 2014

 

$

(3,190

)

 

The fair values of the Partnership’s pension plan assets at March 31, 2014 and December 31, 2013 were determined by Level 1 inputs which principally consist of quoted prices in active markets for identical assets.  The plan assets primarily consisted of fixed income securities, equity securities and cash and cash equivalents.

 

For assets and liabilities measured on a non-recurring basis during the period, accounting guidance requires quantitative disclosures about the fair value measurements separately for each major category.

 

Financial Instruments

 

The fair value of the Partnership’s financial instruments approximated the carrying value as of March 31, 2014 and December 31, 2013, in each case due to the short-term nature and the variable interest rate of the financial instruments.