Annual report pursuant to Section 13 and 15(d)

Derivative Instruments

v3.7.0.1
Derivative Instruments
12 Months Ended
Dec. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
DERIVATIVE INSTRUMENTS
The Company has entered into heating oil and soybean oil futures, swaps and options (commodity derivative contracts) to reduce the risk of price volatility related to anticipated purchases of feedstock raw materials and to protect gross profit margins from potentially adverse effects of price volatility on biomass-based diesel sales where prices are set at a future date. All of the Company’s derivatives are recorded at fair value on the Consolidated Balance Sheets. Unrealized gains and losses on commodity futures, swaps and options contracts used to risk-manage feedstock purchases or biomass-based diesel inventory are recognized as a component of biomass-based diesel costs of goods sold reflected in current results of operations.
At December 31, 2016, the net notional volumes of heating oil and soybean oil covered under the open commodity derivative contracts were 45.4 million gallons and 41.0 million pounds, respectively.
The Company offsets the fair value amounts recognized for its commodity derivative contracts with cash collateral with the same counterparty under a master netting agreement. The net position is presented within Prepaid expenses and other assets in the Consolidated Balance Sheets, see "Note 10 – Other Assets". As of December 31, 2016, the Company posted $9,366 of collateral associated with its commodity-based derivatives with a net liability position of $2,239.
The following tables provide details regarding the Company’s derivative financial instruments:
   
December 31, 2016
 
December 31, 2015
   
Assets
 
Liabilities
 
Assets
 
Liabilities
Gross amounts of commodity derivative contracts recognized at fair value
$
1,272

 
$
3,511

 
$
4,644

 
$
185

Cash collateral
9,366

 

 
5,638

 

Total gross amount recognized
10,638

 
3,511

 
10,282

 
185

Gross amounts offset
(3,511
)
 
(3,511
)
 
(185
)
 
(185
)
Net amount reported in the Consolidated Balance Sheets
$
7,127

 
$

 
$
10,097

 
$


The following table sets forth the pre-tax gains (losses) included in the Consolidated Statements of Operations:
   
Location of Gain (Loss)
Recognized in income
 
2016
 
2015
 
2014
Commodity derivatives
Cost of goods sold – Biomass-based diesel
 
$
(35,386
)
 
$
35,983

 
$
61,631