XML 29 R15.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Derivatives and Fair Value Measurements | 9 Months Ended
--- | ---
Sep. 30, 2018
Fair Value Disclosures [Abstract] |
Derivatives and Fair Value Measurements | Derivatives and Fair Value Measurements Risk Management — Corporate Hedging 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. Derivative financial instruments have historically been used to manage the Company’s exposure to foreign currency exchange rate risk, primarily on Australian dollar expenditures made in its Australian mining platform. This risk was historically 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 previously 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 or options, which it 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. The Company had no diesel fuel derivatives in place as of September 30, 2018 or December 31, 2017. As of September 30, 2018, the Company had currency options outstanding with an aggregate notional amount of $675.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures during the remainder of 2018 and over the first three months of 2019. The instruments are quarterly average rate options whereby the Company is entitled to receive payment on the notional amount should the quarterly average Australian dollar-to-U.S. dollar exchange rate exceed amounts ranging from $0.79 to $0.82 over the remainder of 2018 and the first three months of 2019. The Company does not seek cash flow hedge accounting treatment for the currency options and thus changes in fair value are reflected in current earnings. The currency options’ fair value of $0.2 million and $4.2 million was included in “Other current assets” in the accompanying condensed consolidated balance sheets as of September 30, 2018 and December 31, 2017, respectively. Subsequent to September 30, 2018, the Company purchased additional quarterly average rate options with an aggregate notional amount of $275.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures during the first half of 2019 should the quarterly average Australian dollar-to-U.S. dollar exchange rate exceed approximately $0.76 over that period. The Company incurred premium costs of approximately $0.8 million for these options. The tables below show the classification and amounts of pre-tax gains and losses related to the Company’s Corporate Hedging derivatives:
|  |  |  | Successor
|  |  |  | Three Months Ended September 30, 2018
Financial Instrument |  | Income Statement Classification |  | Total loss 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 |  | $ | (1.5 | ) |  | $ | (1.8 | ) |  | $ | 0.3 |
Total |  |  |  | $ | (1.5 | ) |  | $ | (1.8 | ) |  | $ | 0.3 |
|  |  |  | Successor
|  |  |  | Three Months Ended September 30, 2017
Financial Instrument |  | Income Statement Classification |  | Total gain recognized in income |  | Gain realized in income on derivatives |  | Unrealized loss recognized in income on non-designated derivatives
|  |  | (Dollars in millions)
Foreign currency option contracts |  | Operating costs and expenses |  | $ | 5.6 |  |  | $ | 7.3 |  |  | $ | (1.7 | )
Total |  |  |  | $ | 5.6 |  |  | $ | 7.3 |  |  | $ | (1.7 | )
|  |  |  | Successor
|  |  |  | Nine Months Ended September 30, 2018
Financial Instrument |  | Income Statement Classification |  | Total loss recognized in income |  | Loss realized in income on derivatives |  | Unrealized loss recognized in income on non-designated derivatives
|  |  | (Dollars in millions)
Foreign currency option contracts |  | Operating costs and expenses |  | $ | (7.9 | ) |  | $ | (6.5 | ) |  | $ | (1.4 | )
Total |  |  |  | $ | (7.9 | ) |  | $ | (6.5 | ) |  | $ | (1.4 | )
|  |  |  | Successor
|  |  |  | April 2 through September 30, 2017
Financial Instrument |  | Income Statement Classification |  | Total gain recognized in income |  | Gain 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 |  | $ | 8.5 |  |  | $ | 7.0 |  |  | $ | 1.5 |
Total |  |  |  | $ | 8.5 |  |  | $ | 7.0 |  |  | $ | 1.5 |
|  |  |  | Predecessor
|  |  |  | January 1 through April 1, 2017
Financial Instrument |  | Income Statement Classification |  | Total loss recognized in income |  | Loss reclassified from other comprehensive loss into income
|  |  | (Dollars in millions)
Commodity swap contracts |  | Operating costs and expenses |  | $ | (11.0 | ) |  | $ | (11.0 | )
Foreign currency option contracts |  | Operating costs and expenses |  | (16.6 | ) |  | (16.6 | )
Total |  |  |  | $ | (27.6 | ) |  | $ | (27.6 | )
Cash Flow Presentation. The Company classifies the cash effects of its Corporate Hedging derivatives within the “Cash Flows From Operating Activities” section of the accompanying 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 asset positions for which fair value is measured on a recurring basis:
| September 30, 2018
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
Equity securities | $ | — |  |  | $ | — |  |  | $ | 10.0 |  |  | $ | 10.0 |
Foreign currency contracts | — |  |  | 0.2 |  |  | — |  |  | 0.2 |
Total net financial assets | $ | — |  |  | $ | 0.2 |  |  | $ | 10.0 |  |  | $ | 10.2 |
| December 31, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
Foreign currency contracts | $ | — |  |  | $ | 4.2 |  |  | $ | — |  |  | $ | 4.2 |
Total net financial assets | $ | — |  |  | $ | 4.2 |  |  | $ | — |  |  | $ | 4.2 |
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:
• | 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 September 30, 2018 and December 31, 2017:
• | Cash and cash equivalents, restricted cash, 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.
• | Investments in equity securities are based on observed prices in an inactive market (Level 3).
• | 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 carrying amounts and estimated fair values of the Company’s current and long-term debt as of September 30, 2018 and December 31, 2017 are summarized as follows:
| September 30, 2018 |  | December 31, 2017
| Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
| (Dollars in millions)
Current and Long-term debt | $ | 1,376.2 |  |  | $ | 1,451.0 |  |  | $ | 1,460.8 |  |  | $ | 1,547.4 |
The Company had no transfers between fair value hierarchy levels for either financial instruments measured on a recurring basis or other financial instruments during the three and nine months ended September 30, 2018, the three months ended September 30, 2017, the period April 2 through September 30, 2017 or the period January 1 through April 1, 2017. The Company’s policy is to value all transfers between levels using the beginning of period valuation.

X
- 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
Name: | us-gaap_DerivativesAndFairValueTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration