Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

(5) Fair Value Measurements

The three-tier value hierarchy the Company utilizes, which prioritizes the inputs used in the valuation methodologies, is:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.

The fair value of cash, accounts receivable and accounts payable approximate their carrying values. The fair value of cash equivalents are determined using the fair value hierarchy described above. Cash equivalents consisting of money market funds are valued based on quoted prices in active markets and as a result are classified as Level 1. The Company’s pension plan asset portfolio as of September 30, 2012 and December 31, 2011 is primarily invested in fixed income securities, which generally fall within Level 2 of the fair value hierarchy.

Fair Value Measurements of Debt

The fair value of the Company’s fixed rate debt as of September 30, 2012 was estimated to be $346,692 compared to a carrying value of $254,796, net of unamortized discount. The fair value for the Senior Secured Notes is determined based on recent trades of the bonds and fall within level 2 of the fair value hierarchy.

The fair value of the Convertible Notes, which fall within level 3 of the fair value hierarchy, is determined based on similar debt instruments that do not contain a conversion feature. The main inputs and assumptions into the binomial lattice model are the Company’s stock price at the end of the period ($12.49), expected volatility (41.4%), credit spreads (12.02%) and the risk-free interest rate (0.66%).

As of September 30, 2012, the estimated fair value of the Company’s debt outstanding under its revolving credit facilities, which falls within level 3 of the fair value hierarchy, is $44,942 compared to its carrying value of $47,800, assuming the current amount of debt outstanding at the end of the year was outstanding until the maturity of the Company’s facility in December 2015. Although borrowings could be materially greater or less than the current amount of borrowings outstanding at the end of the year, it is not practical to estimate the amounts that may be outstanding during the future periods since there is no predetermined borrowing or repayment schedule.

Fair Value Measurements of Commodity Hedges

The Company has a commodity hedging program to mitigate risks associated with certain commodity price fluctuations. At September 30, 2012, the Company had executed forward contracts that extend through 2016. The sole counterparty to these contracts is not considered a credit risk by the Company. At September 30, 2012, the notional value associated with forward contracts was $17,590. The Company recorded a net realized and unrealized gain of $987 and loss of $24 for the three and nine months ended September 30, 2012, respectively, as a result of changes in the fair value of the contracts. The Company recorded a net realized and unrealized loss of $1,580 during the three and nine month periods ended September 30, 2011. Refer to Note 13 for letters of credit outstanding for collateral associated with commodity hedges.

The Company uses information which is representative of readily observable market data when valuing derivatives liabilities associated with commodity hedges. The derivative liabilities are classified as Level 2 in the table below.

The assets and liabilities measured at fair value on a recurring basis were as follows:

	Level 1		Level 2		Level 3		Total
As of September 30, 2012:
Derivative liability for commodity hedges	$	—	$	2,139	$	—	$	2,139
Derivative liability for conversion feature associated with convertible debt	$	—	$	—	$	—	$	—
As of December 31, 2011:
Derivative liability for commodity hedges	$	—	$	2,331	$	—	$	2,331
Derivative liability for conversion feature associated with convertible debt	$	—	$	—	$	26,440	$	26,440

The following reconciliation represents the change in fair value of Level 3 liabilities from January 1, 2012 to September 30, 2012:

	Derivative liability  for conversion feature associated with convertible debt
Fair value as of January 1	$	26,440
Mark-to-Market adjustment on conversion feature		15,597
Reclassification from long-term debt, less current portion to additional paid-in capital		(42,037	)
Fair value as of September 30	$	—