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Derivatives and Fair Value Measurements | 6 Months Ended
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Jun. 30, 2017
Fair Value Disclosures [Abstract] |
Derivatives and Fair Value Measurements | Derivatives and Fair Value Measurements Risk Management — Non-Coal Trading Activities The Company is exposed to several risks in the normal course of business, including (1) foreign currency exchange rate risk for non-U.S. dollar expenditures and balances, (2) price risk on coal produced by, and diesel fuel utilized in, the Company's mining operations and (3) interest rate risk that has been partially mitigated by fixed rates on long-term debt. The Company manages a portion of its price risk related to the sale of coal (excluding coal trading activities) using long-term coal supply agreements (those with terms longer than one year), rather than using derivative instruments. Derivative financial instruments have historically been used to manage the Company's risk exposure to foreign currency exchange rate risk, primarily on Australian dollar expenditures made in its Australian mining platform. This risk has historically been managed using forward contracts and options designated as cash flow hedges, with the objective of reducing the variability of cash flows associated with forecasted foreign currency expenditures. The Company has also used derivative instruments to manage its exposure to the variability of diesel fuel prices used in production in the U.S. and Australia with swaps and/or options, which it has also designated as cash flow hedges, with the objective of reducing the variability of cash flows associated with forecasted diesel fuel purchases. These risk management activities are collectively referred to as "Corporate Hedging" and are actively monitored for compliance with the Company's risk management policies. As of June 30, 2017, the Company had no diesel fuel derivatives in place. Subsequent to the Effective Date, the Company entered into a series of currency options and, as of June 30, 2017, had currency options outstanding with an aggregate notional amount of approximately $940.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures during the remainder of 2017. The instruments are average rate options whereby the Company is entitled to receive payment on the notional amount should the average Australian dollar-to-U.S. dollar exchange rate exceed approximately $0.77 over the respective measurement period. The currency options are not expected to receive cash flow hedge accounting treatment and changes in fair value will be reflected in current earnings. At June 30, 2017, the currency options' fair value of $9.3 million was included in "Other current assets" in the accompanying unaudited condensed consolidated balance sheet. The tables below show the classification and amounts of pre-tax gains and losses related to the Company’s Corporate Hedging derivatives during the Successor period April 2 through June 30, 2017 and the Predecessor periods January 1 through April 1, 2017, and the three and six months ended June 30, 2016:
|  |  |  | Successor
|  |  |  | April 2 through June 30, 2017
Financial Instrument |  | Income Statement Classification of (Losses) Gains |  | Total gain recognized in income |  | Loss realized in income on derivatives |  | Unrealized gain recognized in income on non- designated derivatives
|  |  | (Dollars in millions)
Foreign currency option contracts |  | Operating costs and expenses |  | $ | 2.9 |  |  | $ | (0.3 | ) |  | $ | 3.2 |
Total |  |  |  | $ | 2.9 |  |  | $ | (0.3 | ) |  | $ | 3.2 |
|  |  |  | Predecessor
|  |  |  | Three Months Ended June 30, 2016
Financial Instrument |  | Income Statement Classification of (Losses) Gains |  | Total loss recognized in income |  | Loss reclassified from other comprehensive income into income (1) |  | (Loss) gain realized in income on derivatives |  | Unrealized gain (loss)recognized in income on non- designated derivatives
|  |  | (Dollars in millions)
Commodity swap contracts |  | Operating costs and expenses |  | $ | (18.6 | ) |  | $ | (22.2 | ) |  | $ | (1.8 | ) |  | $ | 5.4 |
Commodity swap contracts |  | Reorganization items, net |  | (38.8 | ) |  | — |  |  | (38.8 | ) |  |  |
Foreign currency forward contracts |  | Operating costs and expenses |  | (45.7 | ) |  | (40.2 | ) |  | 24.9 |  |  | (30.4 | )
Foreign currency forward contracts |  | Reorganization items, net |  | (36.4 | ) |  | — |  |  | (36.4 | ) |  |  |
Total |  |  |  | $ | (139.5 | ) |  | $ | (62.4 | ) |  | $ | (52.1 | ) |  | $ | (25.0 | )
(1) | Includes the reclassification from "Accumulated other comprehensive income (loss)" into earnings of $13.6 million and $9.0 million of previously unrecognized losses on foreign currency and fuel contracts, respectively, monetized in the first quarter of 2016.
|  |  |  | Predecessor
|  |  |  | January 1 through April 1, 2017
Financial Instrument |  | Income Statement Classification of (Losses) Gains |  | Total loss recognized in income |  | Loss reclassified from other comprehensive loss into income |  | (Loss) gain realized in income on derivatives |  | Unrealized gain (loss)recognized in income on non- designated derivatives
|  |  | (Dollars in millions)
Commodity swap contracts |  | Operating costs and expenses |  | $ | (11.0 | ) |  | $ | (11.0 | ) |  | $ | — |  |  | $ | — |
Foreign currency forward contracts |  | Operating costs and expenses |  | (16.6 | ) |  | (16.6 | ) |  | — |  |  | — |
Total |  |  |  | $ | (27.6 | ) |  | $ | (27.6 | ) |  | $ | — |  |  | $ | — |
|  |  |  | Predecessor
|  |  |  | Six Months Ended June 30, 2016
Financial Instrument |  | Income Statement Classification of (Losses) Gains |  | Total loss recognized in income |  | Loss reclassified from other comprehensive income into income (1) |  | (Loss) gain realized in income on derivatives |  | Unrealized gain (loss)recognized in income on non- designated derivatives
|  |  | (Dollars in millions)
Commodity swap contracts |  | Operating costs and expenses |  | $ | (58.9 | ) |  | $ | (47.0 | ) |  | $ | (11.9 | ) |  | $ | — |
Commodity swap contracts |  | Reorganization items, net |  | (38.8 | ) |  | — |  |  | (38.8 | ) |  |  |
Foreign currency forward contracts |  | Operating costs and expenses |  | (91.4 | ) |  | (94.1 | ) |  | 2.7 |  |  | — |
Foreign currency forward contracts |  | Reorganization items, net |  | (36.4 | ) |  | — |  |  | (36.4 | ) |  |  |
Total |  |  |  | $ | (225.5 | ) |  | $ | (141.1 | ) |  | $ | (84.4 | ) |  | $ | — |
(1) | Includes the reclassification from "Accumulated other comprehensive income (loss)" into earnings of $13.6 million and $9.0 million of previously unrecognized losses on foreign currency and fuel contracts, respectively, monetized in the first quarter of 2016.
Cash Flow Presentation. The Company classifies the cash effects of its Corporate Hedging derivatives within the "Cash Flows From Operating Activities" section of the unaudited condensed consolidated statements of cash flows. Fair Value Measurements The Company uses a three-level fair value hierarchy that categorizes assets and liabilities measured at fair value based on the observability of the inputs utilized in the valuation. These levels include: Level 1 - inputs are quoted prices in active markets for the identical assets or liabilities; Level 2 - inputs are other than quoted prices included in Level 1 that are directly or indirectly observable through market-corroborated inputs; and Level 3 - inputs are unobservable, or observable but cannot be market-corroborated, requiring the Company to make assumptions about pricing by market participants. Financial Instruments Measured on a Recurring Basis. The following tables set forth the hierarchy of the Company’s net financial liability positions for which fair value is measured on a recurring basis:
| Successor
| June 30, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
Foreign currency contracts | $ | — |  |  | $ | 9.3 |  |  | $ | — |  |  | $ | 9.3 |
Total net financial liabilities | $ | — |  |  | $ | 9.3 |  |  | $ | — |  |  | $ | 9.3 |
As of December 31, 2016, the Company did not have any outstanding financial positions. For Level 1 and 2 financial assets and liabilities, the Company utilizes both direct and indirect observable price quotes, including interest rate yield curves, exchange indices, broker/dealer quotes, published indices, issuer spreads, benchmark securities and other market quotes. In the case of certain debt securities, fair value is provided by a third-party pricing service. Below is a summary of the Company’s valuation techniques for Level 1 and 2 financial assets and liabilities:
• | Investments in debt and equity securities: U.S. government securities and marketable equity securities are valued based on quoted prices in active markets (Level 1) and investment-grade corporate bonds and U.S. government agency securities are valued based on the various inputs listed above that may preclude the security from being measured using an identical asset in an active market (Level 2).
• | Commodity swap contracts — diesel fuel and explosives: valued based on a valuation that is corroborated by the use of market-based pricing (Level 2) except when credit and non-performance risk is considered to be a significant input, then the Company classifies such contracts as Level 3.
• | Foreign currency forward and option contracts: valued utilizing inputs obtained in quoted public markets (Level 2) except when credit and non-performance risk is considered to be a significant input, then the Company classifies such contracts as Level 3.
Other Financial Instruments. The Company used the following methods and assumptions in estimating fair values for other financial instruments as of June 30, 2017 and December 31, 2016:
• | Cash and cash equivalents, accounts receivable, including those within the Company’s accounts receivable securitization program, notes receivable and accounts payable have carrying values which approximate fair value due to the short maturity or the liquid nature of these instruments.
• | Long-term debt fair value estimates are based on observed prices for securities with an active trading market when available (Level 2), and otherwise on estimated borrowing rates to discount the cash flows to their present value (Level 3).
The estimated fair value of the Company’s current and long-term debt as of December 31, 2016 is unable to be determined given it was subject to compromise in connection with the Plan. The carrying amounts and estimated fair values of the Company’s long-term debt as of June 30, 2017 is summarized as follows:
| Successor
| June 30, 2017
| Carrying Amount |  | Estimated Fair Value
| (Dollars in millions)
Long-term debt | $ | 1,957.1 |  |  | $ | 2,009.9 |

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- Definition The entire disclosure for derivatives and fair value of assets and liabilities. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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