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Acquisition of the Predecessor | 9 Months Ended
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Sep. 30, 2017
Business Combinations [Abstract] |
Acquisition of the Predecessor | Acquisition of the Predecessor On November 5, 2015, the Walter Energy Debtors entered into the Asset Purchase Agreement with the Company, pursuant to which, among other things, the Company, on behalf of Walter Energy’s First Lien Lenders, agreed to acquire the Predecessor via a credit bid and release of the liens on the Walter Energy First Lien Obligations. On January 8, 2016, the Bankruptcy Court approved the Asset Acquisition, which closed on March 31, 2016. The cash consideration of $50.8 million included the funding of escrow accounts to be used to pay certain expenses on behalf of the Walter Energy Debtors, some of which required residual amounts contained in the escrow accounts to be refunded to the Company after a specified time period. The net cash paid for the Asset Acquisition was $24.1 million, which was $50.8 million of cash paid less cash and cash equivalents acquired of $26.7 million. The purchase consideration has been allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the Asset Acquisition. During the first quarter of 2017, the Company completed the valuation of the assets and liabilities with the assistance of an independent third party and recorded a measurement-period adjustment to the preliminary purchase price allocation. The measurement-period adjustment was due to updated estimates for the acquired mineral interests including estimates for future royalty income, production volumes and timing which resulted in a $3.5 million decrease in fair value allocated to mineral interests as compared to the December 31, 2016 preliminary fair value. This also resulted in a decrease to additional paid in capital. The measurement-period adjustment was recorded during the first quarter of 2017 and had no impact on reported earnings for the three and nine months ended September 30, 2017 (Successor). In determining the fair values of net assets acquired in the Asset Acquisition, the Company considered, among other factors, the analyses of the Predecessor’s historical financial performance and estimates of the future performance of the acquired business, as well as the highest and best use of the acquired assets. Working capital, excluding inventory, and non-current restricted cash were recorded at the Predecessor’s carrying value, which is representative of the fair value on the date of acquisition. Inventory was valued at its net realizable value. Mineral interest was recorded at fair value utilizing the income approach. The income approach utilized the Company’s operating projections as of the valuation date. Under the income approach, fair value was estimated based upon the present value of future cash flows. A number of significant assumptions and estimates were involved in forecasting the future cash flows including sales volumes and prices, costs to produce (including costs for labor, commodity supplies and contractors), transportation costs, capital spending, working capital changes and a risk adjusted, after-tax cost of capital (all of which generally constitute unobservable Level 3 inputs under the fair value hierarchy). Property, plant and equipment, and other assets were recorded at fair values based on the cost and market approaches. The cost approach utilized trending and direct costing techniques to develop replacement costs. The market approach is based on independent secondary market data (which generally constitute Level 2 inputs under the fair value hierarchy). Black lung obligations and asset retirement obligations were recorded at fair value using a combination of market data, operational data and discounted cash flows and were adjusted by a discount rate factor reflecting current market conditions at the time of acquisition. The following tables summarize the final purchase price allocation, including the applicable measurement-period adjustments made upon finalization during the first quarter of 2017 (in thousands):
Final purchase price: |
Cash paid | $ | 50,830 |
Fair value of First Lien Obligations relinquished in exchange for net assets of the Predecessor | 598,607 |
Total purchase price | $ | 649,437 |
Final fair values of assets acquired and liabilities assumed: |
Cash and cash equivalents | $ | 26,723 |
Trade and other receivables | 14,358 |
Inventories | 46,464 |
Prepaid expenses and other current assets | 30,722 |
Mineral interests | 144,224 |
Property, plant and equipment | 533,441 |
Other long-term assets | 28,865 |
Total assets | 824,797 |
Accounts payable | 10,470 |
Accrued expenses | 12,843 |
Other current liabilities | 24,044 |
Current debt | 2,879 |
Long-term debt | 5,758 |
Deferred income taxes | 1,400 |
Other long-term liabilities | 117,966 |
Total liabilities | 175,360 |
Total fair value of net assets acquired | $ | 649,437 |
Supplemental Unaudited Pro Forma Financial Information The following unaudited pro forma results of operations give effect to the Asset Acquisition as if it had occurred on January 1, 2015. This unaudited pro forma financial information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the Asset Acquisition had actually occurred on that date, nor the results of operations in the future. The 2016 supplemental unaudited pro forma financial information was adjusted to (i) reflect the impact of certain fair value adjustments, including an adjustment to depreciation and depletion expense as a result of a change in the basis of Property, Plant and Equipment and Mineral Interests, (ii) eliminate historical interest expense related to the notes, loans and other debt that was not assumed by the Company as part of the Asset Acquisition, (iii) eliminate a gain on reorganization items associated with the Chapter 11 Cases and (iv) eliminate the Predecessor's historical other postretirement benefit expense associated with the Predecessor's historical other postretirement benefit obligations for retiree medical and life insurance benefits, which were not assumed by the Company.
|  | Predecessor
|  | For the three months ended March 31, 2016
(in thousands) |  | As reported |  | Pro forma
Revenue |  | $ | 71,383 |  |  | $ | 71,383 |
Net loss |  | $ | (61,816 | ) |  | $ | (31,759 | )

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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