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Fair Value Measurements (Tables)
 12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements, Nonrecurring
The fair values of the assets acquired and liabilities assumed as a result of the Northwest Retail Acquisition were estimated as of March 23, 2018, the date of the acquisition, using valuation techniques described in notes (1) through (5) below.
 
 
 
Valuation
 
Fair Value
 
Technique
 
(in thousands)
 
 
Net working capital
$
3,822

 
(1)
Property, plant, and equipment
30,230

 
(2)
Goodwill
46,210

 
(3)
Long-term capital lease obligations
(5,244
)
 
(4)
Other non-current liabilities
(487
)
 
(5)
Total
$
74,531

 
 
(1)
Current assets acquired and liabilities assumed were recorded at their net realizable value.
(2)
The fair value of property, plant, and equipment was estimated using the cost approach. Under the cost approach, the total replacement cost of the property is determined based on industry sources with adjustments for regional factors. The total cost is then adjusted for depreciation based on the physical age of the assets and obsolescence. The fair value of the land was estimated using the sales comparison approach. Under this approach, the sales prices of similar properties are adjusted to account for differences in land characteristics. We consider this to be a Level 3 fair value measurement. The fair value of capital lease assets was estimated using the income approach. Under the income approach, the annual lease market rental rate cash flow stream is estimated and then discounted to present value over the remaining life of the lease using a pre-tax discount rate based on expected return for the specific asset type and location.
(3)
The excess of the purchase price paid over the fair value of the identifiable assets acquired and liabilities assumed is allocated to goodwill.
(4)
Long-term capital lease obligations were estimated based on the present value of lease payments over the term of the lease.
(5)
Other non-current liabilities are primarily related to asset retirement obligations. AROs are calculated based on the present value of the estimated removal and other closure costs using our credit-adjusted risk-free rate.
The fair values of the assets acquired and liabilities assumed as a result of the Washington Acquisition were estimated as of January 11, 2019, the date of the acquisition, using valuation techniques described in notes (1) through (6) below.
 
 
 
Valuation
 
Fair Value
 
Technique
 
(in thousands)
 
 
Net working capital excluding operating leases
$
(35,854
)
 
(1)
Property, plant, and equipment
412,766

 
(2)
Operating lease assets
62,337

 
(3)
Goodwill
42,522

 
(4)
Current operating lease liabilities
(21,571
)
 
(3)
Long-term operating lease liabilities
(40,766
)
 
(3)
Deferred tax liability
(92,103
)
 
(5)
Other non-current liabilities
(804
)
 
(6)
Total
$
326,527

 
 
(1)
Current assets acquired and liabilities assumed were recorded at their net realizable value.
(2)
The fair value of personal property was estimated using the cost approach. Key assumptions in the cost approach include determining the replacement cost by evaluating recent purchases of comparable assets or published data, and adjusting replacement cost for economic and functional obsolescence, location, normal useful lives, and capacity (if applicable). The fair value of real property was estimated using the market approach. Key assumptions in the market approach include determining the asset value by evaluating recent purchases of comparable assets under similar circumstances.
(3)
Operating lease assets and liabilities were recognized based on the present value of lease payments over the lease term using the incremental borrowing rate at acquisition of 9.6%.
(4)
The excess of the purchase price paid over the fair value of the identifiable assets acquired and liabilities assumed is allocated to goodwill.
(5)
The deferred tax liability was determined based on the differences between the tax bases of the assets acquired and the values of those assets recorded on our consolidated balance sheets as of the date of acquisition.
(6)
Other non-current liabilities are related to pension plan obligations. The underfunded status of the defined benefit plan represents the difference between the fair value of the plan’s assets and the projected benefit obligations.
Fair Value, Assets Measured on Recurring Basis
The following table provides information on the fair value amounts (in thousands) of these derivatives as of December 31, 2019 and 2018 and their placement within our consolidated balance sheets.
 
 
 
December 31,
 
Balance Sheet Location
 
2019
 
2018
 
 
 
Asset (Liability)
Commodity derivatives (1)
Prepaid and other current assets
 
$
2,075

 
$
4,973

Commodity derivatives
Other accrued liabilities
 
(5,534
)
 
(700
)
J. Aron repurchase obligation derivative
Obligations under inventory financing agreements
 
173

 
4,085

MLC terminal obligation derivative
Obligations under inventory financing agreements
 
(14,717
)
 
—

Interest rate derivatives
Prepaid and other current assets
 
—

 
191

Interest rate derivatives
Other accrued liabilities
 
(314
)
 
—

Interest rate derivatives
Other liabilities
 
(1,113
)
 
—

_________________________________________________________
(1)
Does not include cash collateral of $10.3 million and $2.7 million recorded in Prepaid and other current assets and $9.5 million and $8.3 million in Other long-term assets as of December 31, 2019 and 2018, respectively.
Fair value amounts by hierarchy level as of December 31, 2019 and 2018 are presented gross in the tables below (in thousands):
 
December 31, 2019
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-party Netting
 
Net Carrying Value on Balance Sheet (1)
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
4,595

 
$
2,075

 
$
—

 
$
6,670

 
$
(4,595
)
 
$
2,075

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$
—

 
$
—

 
$
(8,206
)
 
$
(8,206
)
 
$
—

 
$
(8,206
)
Commodity derivatives
(10,129
)
 
—

 
—

 
(10,129
)
 
4,595

 
(5,534
)
J. Aron repurchase obligation derivative
—

 
—

 
173

 
173

 
—

 
173

MLC terminal obligation derivative
—

 
—

 
(14,717
)
 
(14,717
)
 
—

 
(14,717
)
Interest rate derivatives
—

 
(1,427
)
 
—

 
(1,427
)
 
—

 
(1,427
)
Total
$
(10,129
)
 
$
(1,427
)
 
$
(22,750
)
 
$
(34,306
)
 
$
4,595

 
$
(29,711
)

 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Gross Fair Value
 
Effect of Counter-party Netting
 
Net Carrying Value on Balance Sheet (1)
Assets
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
170

 
$
5,234

 
$
—

 
$
5,404

 
$
(431
)
 
$
4,973

Interest rate derivatives
—

 
191

 
—

 
191

 
—

 
191

Total
$
170

 
$
5,425

 
$
—

 
$
5,595

 
$
(431
)
 
$
5,164

 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants
$
—

 
$
—

 
$
(5,007
)
 
$
(5,007
)
 
$
—

 
$
(5,007
)
Commodity derivatives
(870
)
 
(261
)
 
—

 
(1,131
)
 
431

 
(700
)
J.Aron repurchase obligation derivative
—

 
—

 
4,085

 
4,085

 
—

 
4,085

Total
$
(870
)
 
$
(261
)
 
$
(922
)
 
$
(2,053
)
 
$
431

 
$
(1,622
)
_________________________________________________________
(1)
Does not include cash collateral of $19.8 million and $10.9 million as of December 31, 2019 and 2018, respectively, included within Prepaid and other current assets and Other long-term assets on our consolidated balance sheets.
Reconcilliation of Level 3 Derivative Instruments, Fair Value
A roll forward of Level 3 derivative instruments measured at fair value on a recurring basis is as follows (in thousands):
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
Balance, beginning of period
 
$
(922
)
 
$
(26,372
)
 
$
(25,134
)
Settlements
 
13,263

 
—

 
—

Acquired
 
(8,654
)
 
—

 
—

Unrealized and realized income (loss) included in earnings
 
(26,437
)
 
25,450

 
(1,238
)
Balance, end of period
 
$
(22,750
)
 
$
(922
)
 
$
(26,372
)
Schedule of Carrying Value and Fair Value of Long Term Debt and Other Financial Instruments
The carrying value and fair value of long-term debt and other financial instruments as of December 31, 2019 and 2018 are as follows (in thousands):
 
December 31, 2019
 
Carrying Value
 
Fair Value
5.00% Convertible Senior Notes due 2021 (1) (3)
$
44,783

 
$
66,477

7.75% Senior Secured Notes due 2025 (1)
292,015

 
309,375

Mid Pac Term Loan (2)
1,433

 
1,433

Term Loan B Facility (1)
230,474

 
240,625

Retail Property Term Loan (2)
43,226

 
43,226

Common stock warrants (2)
8,206

 
8,206

 
December 31, 2018
 
Carrying Value
 
Fair Value
5.00% Convertible Senior Notes due 2021 (1) (3)
$
100,411

 
$
121,488

7.75% Senior Secured Notes due 2025 (1)
290,763

 
270,000

Mid Pac Term Loan (2)
1,466

 
1,466

Common stock warrants (2)
5,007

 
5,007

_________________________________________________________
(1)
The fair value measurements of the 5.00% Convertible Senior Notes, 7.75% Senior Secured Notes, and Term Loan B Facility are considered Level 2 measurements in the fair value hierarchy as discussed below.
(2)
The fair value measurements of the common stock warrants, Mid Pac Term Loan, and Retail Property Term Loan are considered Level 3 measurements in the fair value hierarchy.
(3)
The carrying value of the 5.00% Convertible Senior Notes excludes the fair value of the equity component, which was classified as equity upon issuance.