Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2013, December 31, 2012 and September 30, 2012:

(in thousands)	September 30, 2013
Assets (liabilities)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	90,093	$	—		$	—	$	90,093
Restricted cash	164		—			—		164
Commodity derivatives, net (c)	62,560		(55,035		)	—		7,525
Convertible preferred securities (b)	—		—			17,710		17,710
Other assets and liabilities (a)	9,539		(1,045		)	—		8,494
Total	$	162,356	$	(56,080	)	$	17,710	$	123,986

(in thousands)	December 31, 2012
Assets (liabilities)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	78,674	$	—		$	—	$	78,674
Restricted cash	398		—			—		398
Commodity derivatives, net (c)	46,966		23,634			—		70,600
Convertible preferred securities (b)	—		—			17,220		17,220
Other assets and liabilities (a)	7,813		(2,109		)	—		5,704
Total	$	133,851	$	21,525		$	17,220	$	172,596

(in thousands)	September 30, 2012
Assets (liabilities)	Level 1		Level 2			Level 3		Total
Cash equivalents	$	39,904	$	—		$	—	$	39,904
Restricted cash	160		—			—		160
Commodity derivatives, net (c)	15,619		113,513			—		129,132
Convertible preferred securities (b)	—		—			17,350		17,350
Other assets and liabilities (a)	7,515		(1,966		)	—		5,549
Total	$	63,198	$	111,547		$	17,350	$	192,095

(a) Included in other assets and liabilities are interest rate and foreign currency derivatives, swaptions and deferred compensation assets.

(b) Recorded in “Other noncurrent assets” on the Company’s Condensed Consolidated Balance Sheets.

(c) Includes associated cash posted/received as collateral

Level 1 commodity derivatives reflect the fair value of the exchanged-traded futures and options contracts that the Company holds, net of the cash collateral that the Company has in its margin account.

The majority of the Company’s assets and liabilities measured at fair value are based on the market approach valuation technique. With the market approach, fair value is derived using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices on the CME or the New York Mercantile Exchange for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Because “basis” for a particular commodity and location typically has multiple quoted prices from other agribusinesses in the same geographical vicinity and is used as a common pricing mechanism in the Agribusiness industry, we have concluded that “basis” is a “Level 2” fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives. Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a significant input to fair value for the majority of these commodity contracts.

The Company’s convertible preferred securities are measured at fair value using a combination of the income approach on a quarterly basis and the market approach on an annual basis. Specifically, the income approach incorporates the use of the Discounted Cash Flow method, whereas the Market Approach incorporates the use of the Guideline Public Company method. Application of the Discounted Cash Flow method requires estimating the annual cash flows that the business enterprise is expected to generate in the future. The assumptions input into this method are estimated annual cash flows for a specified estimation period, the discount rate, and the terminal value at the end of the estimation period. In the Guideline Public Company method, valuation multiples, including total invested capital, are calculated based on financial statements and stock price data from selected guideline publicly traded companies. On an annual basis, a comparative analysis is then performed for factors including, but not limited to size, profitability and growth to determine fair value.

A reconciliation of beginning and ending balances for the Company’s fair value measurements using Level 3 inputs is as follows:

	2013						2012
(in thousands)	Interest rate derivatives and swaptions		Convertible preferred securities		Commodity derivatives, net		Interest rate derivatives and swaptions			Convertible preferred securities			Commodity derivatives, net
Asset (liability) at December 31,	$	—	$	17,220	$	—	$	(2,178	)	$	20,360		$	2,467
Unrealized gains included in other comprehensive income	—		490		—		—			—			—
Transfers to level 2	—		—		—		2,178			—			(2,467		)
Asset at March 31,	$	—	$	17,710	$	—	$	—		$	20,360		$	—
Unrealized losses included in other comprehensive income	—		—		—		—			(3,010		)	—
Asset at June 30,	$	—	$	17,710	$	—	$	—		$	17,350		$	—
Unrealized gains (losses) included in other comprehensive income	—		—		—		—			—			—
Asset at September 30,	$	—	$	17,710	$	—	$	—		$	17,350		$	—

The following table summarizes information about the Company's Level 3 fair value measurements as of September 30, 2013:

Quantitative Information about Level 3 Fair Value Measurements
					Range
(in thousands)	Fair Value as of September 30, 2013		Valuation Method	Unobservable Input	Low		High		Weighted Average
Convertible Preferred Securities	$	17,710	Market Approach	EBITDA Multiples	5.50		7.00		6.60
			Income Approach	Discount Rate	17.0	%	17.0	%	17.0	%

Fair Value of Financial Instruments

The fair value of the Company’s long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. As such, the Company has concluded that the fair value of long-term debt is considered “Level 2” in the fair value hierarchy.

(in thousands)	September 30, 2013		December 31, 2012
Fair value of long-term debt	$	428,726	$	459,397
Fair value in excess of carrying value	3,476		17,009

The fair value of the Company’s cash equivalents, accounts receivable and accounts payable approximate their carrying value as they are close to maturity.