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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2020

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 right-of-use 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 right-of-use 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.

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.

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, 2020 and 2019 and their placement within our consolidated balance sheets.


		December 31,
	Balance Sheet Location	2020		2019
		Asset (Liability)
Commodity derivatives (1)	Prepaid and other current assets	$	1,346	$	2,075

Commodity derivatives	Other accrued liabilities	—		(5,534)

J. Aron repurchase obligation derivative	Obligations under inventory financing agreements	(20,797)		173
MLC terminal obligation derivative	Obligations under inventory financing agreements	(10,161)		(14,717)


Interest rate derivatives	Other accrued liabilities	(966)		(314)
Interest rate derivatives	Other liabilities	(2,027)		(1,113)

_________________________________________________________

(1)Does not include cash collateral of $1.5 million and $10.3 million recorded in Prepaid and other current assets and $9.5 million and $9.5 million in Other long-term assets as of December 31, 2020 and 2019, respectively.

Fair value amounts by hierarchy level as of December 31, 2020 and 2019 are presented gross in the tables below (in thousands):


	December 31, 2020
	Level 1		Level 2		Level 3		Gross Fair Value		Effect of Counter-party Netting		Net Carrying Value on Balance Sheet (1)
Assets
Commodity derivatives	$	616	$	1,573	$	—	$	2,189	$	(843)	$	1,346





Liabilities


Commodity derivatives	$	(3)	$	(840)	$	—	$	(843)	$	843	$	—
J. Aron repurchase obligation derivative	—		—		(20,797)		(20,797)		—		(20,797)
MLC terminal obligation derivative	—		—		(10,161)		(10,161)		—		(10,161)
Interest rate derivatives	—		(2,993)		—		(2,993)		—		(2,993)
Gross environmental credit obligations (2)	—		(150,482)		—		(150,482)		—		(150,482)
Total	$	(3)	$	(154,315)	$	(30,958)	$	(185,276)	$	843	$	(184,433)


	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)
Gross environmental credit obligations (2)	—		(22,776)		—		(22,776)		—		(22,776)
Total	$	(10,129)	$	(24,203)	$	(22,750)	$	(57,082)	$	4,595	$	(52,487)

_________________________________________________________

(1)Does not include cash collateral of $11.0 million and $19.8 million as of December 31, 2020 and 2019, respectively, included within Prepaid and other current assets and Other long-term assets on our consolidated balance sheets.

(2)Does not include RINs assets and other environmental credits of $26.7 million and $19.1 million presented as Inventories on our consolidated balance sheet and stated at the lower of cost and net realizable value as of December 31, 2020 and 2019, respectively.

Reconciliation 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,
	2020		2019		2018
Balance, beginning of period	$	(22,750)	$	(922)	$	(26,372)
Settlements	(31,328)		13,263		—
Acquired	—		(8,654)		—
Total gains (losses) included in earnings	23,120		(26,437)		25,450
Balance, end of period	$	(30,958)	$	(22,750)	$	(922)

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, 2020 and 2019 are as follows (in thousands):


	December 31, 2020
	Carrying Value		Fair Value

5.00% Convertible Senior Notes due 2021 (1) (3)	$	47,301	$	50,311
ABL Credit Facility due 2022	—		—
Retail Property Term Loan due 2024 (2)	41,891		41,891
7.75% Senior Secured Notes due 2025 (1)	293,289		289,521
Term Loan B Facility due 2026 (1)	219,708		215,578





12.875% Senior Secured Notes due 2026 (1)	99,213		112,901
Mid Pac Term Loan due 2028 (2)	1,399		1,399
PHL Term Loan due 2030 (2)	5,792		5,792


	December 31, 2019
	Carrying Value		Fair Value

5.00% Convertible Senior Notes due 2021 (1) (3)	$	44,783	$	66,477
ABL Credit Facility due 2022	—		—
Retail Property Term Loan due 2024 (2)	43,226		43,226
7.75% Senior Secured Notes due 2025 (1)	292,015		309,375
Term Loan B Facility due 2026 (1)	230,474		240,625




Mid Pac Term Loan due 2028 (2)	1,433		1,433
Common stock warrants (2)	8,206		8,206

_________________________________________________________

(1)The fair value measurements of the 5.00% Convertible Senior Notes, 7.75% Senior Secured Notes, Term Loan B Facility, and 12.875% Senior Secured Notes 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, Retail Property Term Loan, and PHL 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.