Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements.

v3.22.0.1
Fair Value Measurements.
12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS.
15. FAIR VALUE MEASUREMENTS.

 

The fair value hierarchy prioritizes the inputs used in valuation techniques into three levels, as follows:

 

Level 1 – Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities;

 

Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data; and

 

Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable. For fair value measurements using significant unobservable inputs, a description of the inputs and the information used to develop the inputs is required along with a reconciliation of Level 3 values from the prior reporting period.

 

Pooled separate accounts – Pooled separate accounts invest primarily in domestic and international stocks, commercial paper or single mutual funds. The net asset value is used as a practical expedient to determine fair value for these accounts. Each pooled separate account provides for redemptions by the Retirement Plan at reported net asset values per share, with little to no advance notice requirement, therefore these funds are classified within Level 2 of the valuation hierarchy.

 

Long-Lived Assets Held-for-Sale – The Company recorded its long-lived assets associated with its property and equipment held-for-sale at fair value at December 31, 2021 and 2020 of $1,000,000 and $58,295,000, respectively. The fair values of these assets are based on observable values for the assets through corroboration with market data and are designated as Level 3 inputs.

 

Warrants issued to Senior Noteholders – The Company’s warrants issued December 22, 2019, were valued using the Black-Scholes Valuation Model and adjusted for quarterly. On August 5, 2020, these warrants were exercised in full and prior to exercise, the Company adjusted their fair value using the following assumptions (fair value dollars in thousands):

 

Original Issuance   Exercise
Price
    Volatility     Risk Free
Interest
Rate
    Term
(years)
    Fair Value  
12/22/19   $ 1.00       178.0 %     0.08 %     0.10     $ 8,474  

 

The assumptions used and related fair value for these warrants as of December 31, 2019 were as follows (fair value dollars in thousands):

 

Original Issuance   Exercise
Price
    Volatility     Risk Free
Interest
Rate
    Term
(years)
    Fair Value  
12/22/19   $ 1.00       76.0 %     1.66 %     3.00     $ 977  

 

Warrants issued in Equity Offering – The Company issued pre-funded warrants and other warrants with exercise prices of $0.001 and $9.757, respectively. The Company valued these warrants upon issuance using the Binomial valuation methodology. On November 16, 2020, the pre-funded warrants were exercised, and as a result, were revalued immediately prior to their exercise. Further, the other warrants were amended on November 24, 2020, resulting in equity accounting, and accordingly were revalued immediately prior to their amendment. The assumptions used were as follows (fair value dollars in thousands):

 

Warrant Type   Valuation
Date
  Exercise
Price
    Volatility     Risk Free
Interest
Rate
    Term
(years)
    Fair Value  
Pre-funded   10/28/2020   $ 0.01       97.0 %     0.34 %     5.00     $ 23,638  
Other   10/28/2020   $ 9.76       134.0 %     0.14 %     1.50     $ 27,048  
Pre-funded   11/16/2020   $ 0.01       97.0 %     0.40 %     4.95     $ 21,916  
Other   11/24/2020   $ 9.76       135.0 %     0.13 %     1.45     $ 31,231  

 

The fair values of the warrants are based on unobservable inputs and are designated as Level 3 inputs. The changes in the Company’s fair value of its Level 3 inputs with respect to its warrants were as follows (in thousands):

 

    Warrants to
Senior
Noteholders
    Pre-funded
Warrants
    Other
Warrants
 
Balance, December 31, 2019   $ 977     $
    $
 
Issuance of warrants in October 2020 offering    
      23,638       27,048  
Exercise of warrants/reclass to equity in 2020     (8,474 )     (21,917 )     (31,231 )
Adjustments to fair value for 2020     7,497       (1,721 )     4,183  
Balance, December 31, 2021   $
    $
    $
 

 

Other Derivative Instruments – The Company’s other derivative instruments consist of commodity positions. The fair values of the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1 inputs.

 

The following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2021 (in thousands):

 

                            Benefit Plan  
    Fair                       Percentage  
    Value     Level 1     Level 2     Level 3     Allocation  
Assets:                              
Derivative financial instruments   $ 15,839     $ 15,839     $
    $
         
Long-lived assets held-for-sale     1,000      
     
      1,000          
Defined benefit plan assets(1)                                        
(pooled separate accounts):                                        
Large U.S. Equity(2)     5,612      
      5,612      
      28 %
Small/Mid U.S. Equity(3)     3,684      
      3,684      
      18 %
International Equity(4)     2,909      
      2,909      
      15 %
Fixed Income(5)     7,782      
      7,782      
      39 %
    $ 36,826     $ 15,839     $ 19,987     $ 1,000          
                                         
Liabilities:                                        
Derivative financial instruments   $ 13,582     $ 13,582     $
    $
         

 

The following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2020 (in thousands):

 

                            Benefit Plan  
    Fair                       Percentage  
    Value     Level 1     Level 2     Level 3     Allocation  
Assets:                              
Derivative financial instruments   $ 17,149     $ 17,149     $
    $
         
Long-lived assets held-for-sale     58,295      
     
      58,295          
Defined benefit plan assets(1)                                        
(pooled separate accounts):                                        
Large U.S. Equity(2)     5,470      
      5,470      
      31 %
Small/Mid U.S. Equity(3)     2,605      
      2,605      
      15 %
International Equity(4)     2,921      
      2,921      
      17 %
Fixed Income(5)     6,592      
      6,592      
      37 %
    $ 93,032     $ 17,149     $ 17,588     $ 58,295          
                                         
Liabilities:                                        
    $
    $
    $
    $
         

 

(1) See Note 9 for accounting discussion.

 

(2) This category includes investments in funds comprised of equity securities of large U.S. companies. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund.

 

(3) This category includes investments in funds comprised of equity securities of small- and medium-sized U.S. companies. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund.

 

(4) This category includes investments in funds comprised of equity securities of foreign companies including emerging markets. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund.

 

(5) This category includes investments in funds comprised of U.S. and foreign investment-grade fixed income securities, high-yield fixed income securities that are rated below investment-grade, U.S. treasury securities, mortgage-backed securities, and other asset-backed securities. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund.