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Derivatives and Fair Value Measurements | 12 Months Ended
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Dec. 31, 2018
Fair Value Disclosures [Abstract] |
Derivatives and Fair Value [Text Block] | Derivatives and Fair Value Measurements Derivatives Corporate Risk Management Activities From time to time, the Company may utilize various types of derivative instruments to manage its exposure to risks in the normal course of business, including (1) foreign currency exchange rate risk and the variability of cash flows associated with forecasted Australian dollar expenditures made in its Australian mining platform, (2) price risk of fluctuating coal prices related to forecasted sales or purchases of coal, or changes in the fair value of a fixed price physical sales contract, (3) price risk and the variability of cash flows related to forecasted diesel fuel purchased for use in its operations, and (4) interest rate risk on long-term debt. These risk management activities are actively monitored for compliance with the Company’s risk management policies. As of December 31, 2018, the Company had currency options outstanding with an aggregate notional amount of $875.0 million Australian dollars to hedge currency risk associated with anticipated Australian dollar expenditures during the first nine 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 $0.77 to $0.78 the over the first nine months of 2019. As of December 31, 2018, the Company held coal-related financial contracts in relation to a portion of the forecasted sales of its mines’ coal production for an aggregate notional volume of 1.7 million tons. Such financial contracts include futures, forwards and options. Of the aggregate notional volume, 0.8 million tons will settle in 2019 and the remainder will settle in 2020. The Company had no diesel fuel or interest rate derivatives in place as of December 31, 2018. Coal Trading Activities On a limited basis, the Company engages in the direct and brokered trading of coal and freight-related contracts (coal trading). Except those contracts for which the Company has elected to apply a normal purchases and normal sales exception, all derivative coal trading contracts are accounted for at fair value. Coal brokering is conducted both as principal and agent in support of various coal production-related activities that may involve coal produced from the Company’s mines, coal sourcing arrangements with third-party mining companies or offtake agreements with other coal producers. The Company also provides transportation-related services, which involve both financial derivative contracts and physical contracts. Collectively, coal and freight-related hedging activities include both economic hedging and, from time to time, cash flow hedging in support of the Company’s coal trading strategy. Revenues from such transactions include realized and unrealized gains and losses on derivative instruments, including those that arise from coal deliveries related to contracts accounted for on an accrual basis under the normal purchases and normal sales exception. Offsetting and Balance Sheet Presentation The Company has master netting agreements with certain of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the consolidated balance sheets. The Company’s coal trading assets and liabilities include financial instruments cleared through various exchanges, which involve the daily net settlement of open positions. The Company must post cash collateral in the form of initial margin, in addition to variation margin, on exchange-cleared positions that are in a net liability position and receives variation margin when in a net asset position. The Company also transacts in coal trading financial swaps and options through over-the-counter (OTC) markets with financial institutions and other non-financial trading entities under International Swaps and Derivatives Association (ISDA) Master Agreements, which contain symmetrical default provisions. Certain of the Company’s coal trading agreements with OTC counterparties also contain credit support provisions that may periodically require the Company to post, or entitle the Company to receive, variation margin. Physical coal and freight-related purchase and sale contracts included in the Company’s coal trading assets and liabilities are executed pursuant to master purchase and sale agreements that also contain symmetrical default provisions and allow for the netting and setoff of receivables and payables that arise during the same time period. The Company offsets its coal trading asset and liability derivative positions, and variation margin related to those positions, on a counterparty-by-counterparty basis in the consolidated balance sheets. The fair value of derivatives reflected in the accompanying balance sheets are set forth in the table below.
| December 31, 2018 |  | December 31, 2017
| Asset Derivative |  | Liability Derivative |  | Asset Derivative |  | Liability Derivative
| (Dollars in millions)
Foreign currency option contracts | $ | 1.2 |  |  | $ | — |  |  | $ | 4.2 |  |  | $ | — |
Coal contracts related to forecasted sales | 6.6 |  |  | (23.1 | ) |  | 8.4 |  |  | (46.1 | )
Coal trading contracts | 59.7 |  |  | (64.4 | ) |  | 119.4 |  |  | (126.7 | )
Total derivatives | 67.5 |  |  | (87.5 | ) |  | 132.0 |  |  | (172.8 | )
Effect of counterparty netting | (64.5 | ) |  | 64.5 |  |  | (125.2 | ) |  | 125.2 |
Variation margin posted | — |  |  | 21.8 |  |  | — |  |  | 35.8 |
Net derivatives and margin as classified in the balance sheets | $ | 3.0 |  |  | $ | (1.2 | ) |  | $ | 6.8 |  |  | $ | (11.8 | )
The net amounts of asset derivatives are included in “Other current assets” and the net amount of liability derivatives, net of margin, are included in “Accounts payable and accrued expenses” in the accompanying balance sheets. Effects of Derivatives on Measures of Financial Performance Currently, the Company does not seek cash flow hedge accounting treatment for its currency- or coal-related derivative financial instruments and thus changes in fair value are reflected in current earnings. Prior to the Bankruptcy Petitions, as of December 31, 2015, the Company concluded that as a result of deterioration in its credit profile, it could no longer consider its then existing cash flow hedging relationships to be “highly effective” at offsetting the changes in the anticipated exposure of hedged items. Therefore, the Company discontinued the application of cash flow hedge accounting subsequent to December 31, 2015 and changes in the fair value of derivative instruments have been reflected in current earnings after that date. Previous fair value adjustments recorded in “Accumulated other comprehensive income” were frozen until the underlying transactions impacted the Company’s earnings. The Bankruptcy Petitions constituted an event of default under the Company’s derivative financial instrument contracts and the counterparties terminated the agreements shortly thereafter in accordance with contractual terms. The Company adjusted the corresponding liabilities to be equivalent to the termination value of each contract. The adjustment was recorded in reorganization items, net, in the accompanying consolidated statements of operations during the year ended December 31, 2016. The tables below show the amounts of pre-tax gains and losses related to the Company’s derivatives.
|  | Successor
|  | Year Ended December 31, 2018
|  | Total (loss) gain recognized in income |  | (Loss) gain realized in income on derivatives |  | Unrealized (loss) gain recognized in income on derivatives
Financial Instrument |  |  |
|  | (Dollars in millions)
Foreign currency option contracts |  | $ | (9.1 | ) |  | $ | (8.4 | ) |  | $ | (0.7 | )
Coal contracts related to forecasted sales |  | 115.7 |  |  | 97.4 |  |  | 18.3 |
Coal trading contracts |  | (2.9 | ) |  | (5.3 | ) |  | 2.4 |
Total |  | $ | 103.7 |  |  | $ | 83.7 |  |  | $ | 20.0 |
|  | Successor
|  | April 2 through December 31, 2017
|  | Total gain (loss) recognized in income |  | Gain (loss) realized in income on derivatives |  | Unrealized (loss) gain recognized in income on derivatives
Financial Instrument |  |  |
|  | (Dollars in millions)
Foreign currency option contracts |  | $ | 1.8 |  |  | $ | 3.3 |  |  | $ | (1.5 | )
Coal contracts related to forecasted sales |  | 12.1 |  |  | 35.1 |  |  | (23.0 | )
Coal trading contracts |  | (1.6 | ) |  | (8.3 | ) |  | 6.7 |
Total |  | $ | 12.3 |  |  | $ | 30.1 |  |  | $ | (17.8 | )
|  | Predecessor
|  | January 1 through April 1, 2017
|  | Total (loss) gain recognized in income |  | Gain (loss) realized in income on derivatives |  | Unrealized gain recognized in income on derivatives |  | Loss reclassified from other comprehensive loss into income
Financial Instrument |  |
|  | (Dollars in millions)
Commodity swap contracts |  | $ | (11.0 | ) |  | $ | — |  |  | $ | — |  |  | $ | (11.0 | )
Foreign currency forward contracts |  | (16.6 | ) |  | — |  |  | — |  |  | (16.6 | )
Financial coal contracts - Company production |  | 29.2 |  |  | 12.7 |  |  | 16.5 |  |  | — |
Coal trading contracts |  | 2.2 |  |  | (11.3 | ) |  | 13.5 |  |  | — |
Total |  | $ | 3.8 |  |  | $ | 1.4 |  |  | $ | 30.0 |  |  | $ | (27.6 | )
|  | Predecessor
|  | Year Ended December 31, 2016
Financial Instrument |  | Total realized (loss) gain recognized in income |  | Gain realized in income on derivatives |  | Unrealized loss recognized in income on derivatives |  | Loss reclassified from other comprehensive income into income (effective portion) |  | Loss reclassified from other comprehensive income into income (ineffective portion)
|  | (Dollars in millions)
Commodity swap contracts |  | $ | (136.8 | ) |  | $ | — |  |  | $ | — |  |  | $ | (86.1 | ) |  | $ | (50.7 | )
Foreign currency forward contracts |  | (179.3 | ) |  | — |  |  | — |  |  | (145.6 | ) |  | (33.7 | )
Coal contracts related to forecasted sales |  | 5.6 |  |  | 45.4 |  |  | (39.8 | ) |  | — |  |  | — |
Coal trading contracts |  | (16.5 | ) |  | 22.1 |  |  | (38.6 | ) |  | — |  |  | — |
Total |  | $ | (327.0 | ) |  | $ | 67.5 |  |  | $ | (78.4 | ) |  | $ | (231.7 | ) |  | $ | (84.4 | )
During the year ended December 31, 2018, the period April 2 through December 31, 2017, and the period January 1 through April 1, 2017, gains and losses on foreign currency option contracts and commodity swap contracts were included in “Operating costs and expenses,” and gains and losses on coal contracts related to forecasted sales and those related to coal trading contracts were included in “Revenues” in the accompanying consolidated statements of operations. During the year ended December 31, 2016, all classifications in the accompanying consolidated statements of operations were similar, except for realized losses of $75.2 million related to commodity swap contracts and foreign currency forward contracts which are included in “Reorganization items, net.” Such losses were incurred as a result of the Company’s filing of the Bankruptcy Petitions, an event of default which led the derivative contract counterparties to terminate the agreements in accordance with their contractual terms and demand payment at the termination values of each contract. The Company classifies the cash effects of its derivatives within the “Cash Flows From Operating Activities” section of the 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. The following tables set forth the hierarchy of the Company’s net financial asset (liability) positions for which fair value is measured on a recurring basis:
| December 31, 2018
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
Foreign currency option contracts | $ | — |  |  | $ | 1.2 |  |  | $ | — |  |  | $ | 1.2 |
Coal contracts related to forecasted sales | — |  |  | (21.2 | ) |  | — |  |  | (21.2 | )
Coal trading contracts | — |  |  | 21.8 |  |  | — |  |  | 21.8 |
Equity securities | — |  |  | — |  |  | 10.0 |  |  | 10.0 |
Total net financial assets | $ | — |  |  | $ | 1.8 |  |  | $ | 10.0 |  |  | $ | 11.8 |
| December 31, 2017
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (Dollars in millions)
Foreign currency option contracts | $ | — |  |  | $ | 4.2 |  |  | $ | — |  |  | $ | 4.2 |
Coal contracts related to forecasted sales | — |  |  | (40.2 | ) |  | — |  |  | (40.2 | )
Coal trading contracts | (3.0 | ) |  | 34.0 |  |  | — |  |  | 31.0 |
Total net financial liabilities | $ | (3.0 | ) |  | $ | (2.0 | ) |  | $ | — |  |  | $ | (5.0 | )
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 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.
• | Coal contracts related to forecasted sales and coal trading contracts: generally valued based on unadjusted quoted prices in active markets (Level 1) or 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 (greater than 10% of fair value), then the Company classifies as Level 3.
• | Investments in equity securities are based on observed prices in an inactive market (Level 3).
Other Financial Instruments. The following methods and assumptions were used by the Company in estimating fair values for other financial instruments as of December 31, 2018 and 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.
• | 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 amount and estimated fair values of the Company’s current and long-term debt as of December 31, 2018 and 2017 are summarized as follows:
| December 31, 2018 |  | December 31, 2017
| Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
| (Dollars in millions)
Current and Long-term debt | $ | 1,367.0 |  |  | $ | 1,366.2 |  |  | $ | 1,460.8 |  |  | $ | 1,547.4 |
The Company’s risk management function, which is independent of the Company’s coal trading function, is responsible for valuation policies and procedures, with oversight from executive management. Generally, the Company’s Level 3 instruments or contracts are valued using bid/ask price quotations and other market assessments obtained from multiple, independent third-party brokers or other transactional data incorporated into internally-generated discounted cash flow models. Decreases in the number of third-party brokers or market liquidity could erode the quality of market information and therefore the valuation of the Company’s market positions. The Company’s valuation techniques include basis adjustments to the foregoing price inputs for quality, such as sulfur and ash content, location differentials, expressed as port and freight costs, and credit risk. The Company’s risk management function independently validates the Company’s valuation inputs, including unobservable inputs, with third-party information and settlement prices from other sources where available. A daily process is performed to analyze market price changes and changes to the portfolio. Further periodic validation occurs at the time contracts are settled with the counterparty. These valuation techniques have been consistently applied in all periods presented, and the Company believes it has obtained the most accurate information available for the types of derivative contracts held. Significant increases or decreases in the inputs in isolation could result in a significantly higher or lower fair value measurement. The unobservable inputs do not have a direct interrelationship; therefore, a change in one unobservable input would not necessarily correspond with a change in another unobservable input. The following table summarizes the changes in the Company’s recurring Level 3 net financial assets (liabilities):
| Successor | Predecessor
| Year Ended December 31, 2018 |  | April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016
| (Dollars in millions)
Beginning of period | $ | — |  |  | $ | (0.7 | ) | $ | (1.1 | ) |  | $ | (15.6 | )
Transfers into Level 3 | — |  |  | — |  | — |  |  | 5.3 |
Transfers out of Level 3 | — |  |  | 0.7 |  | 0.2 |  |  | (0.4 | )
Total gains realized/unrealized: |  |  |  |  |  |
Included in earnings | (1.7 | ) |  | — |  | 0.2 |  |  | (2.4 | )
Purchases | 10.0 |  |  | — |  | — |  |  | — |
Sales | — |  |  | — |  | — |  |  | — |
Settlements | 1.7 |  |  | — |  | — |  |  | 12.0 |
End of period | $ | 10.0 |  |  | $ | — |  | $ | (0.7 | ) |  | $ | (1.1 | )
The Company had no transfers between Levels 1 and 2 during any of the periods presented in the table above. Transfers of liabilities into/out of Level 3 from/to Level 2 during the periods presented were due to the relative value of unobservable inputs to the total fair value measurement of certain derivative contracts falling below, or in the case of transfers in, rising above, the 10% threshold. The Company’s policy is to value all transfers between levels using the beginning of period valuation. The following table summarizes the changes in net unrealized gains relating to Level 3 net financial liabilities held both as of the beginning and the end of the period:
| Successor | Predecessor
| Year Ended December 31, 2018 |  | April 2 through December 31, 2017 | January 1 through April 1, 2017 |  | Year Ended December 31, 2016
| (Dollars in millions)
Changes in unrealized gains (1) | $ | — |  |  | $ | — |  | $ | 0.3 |  |  | $ | — |
(1) | Within the consolidated statements of operations and consolidated statements of comprehensive income for the periods presented, unrealized gains from Level 3 items are combined with unrealized gains and losses on positions classified in Level 1 or 2, as well as other positions that have been realized during the applicable periods.
Credit and Nonperformance Risk. The fair value of the Company’s coal derivative assets and liabilities reflects adjustments for credit risk. The Company’s exposure is substantially with electric utilities, energy marketers, steel producers and nonfinancial trading houses. The Company’s policy is to independently evaluate each customer’s creditworthiness prior to entering into transactions and to regularly monitor the credit extended. If the Company engages in a transaction with a counterparty that does not meet its credit standards, the Company seeks to protect its position by requiring the counterparty to provide an appropriate credit enhancement. Also, when appropriate (as determined by its credit management function), the Company has taken steps to reduce its exposure to customers or counterparties whose credit has deteriorated and who may pose a higher risk of failure to perform under their contractual obligations. These steps include obtaining letters of credit or cash collateral (margin), requiring prepayments for shipments or the creation of customer trust accounts held for the Company’s benefit to serve as collateral in the event of a failure to pay or perform. To reduce its credit exposure related to trading and brokerage activities, the Company seeks to enter into netting agreements with counterparties that permit the Company to offset asset and liability positions with such counterparties and, to the extent required, the Company will post or receive margin amounts associated with exchange-cleared and certain OTC positions. The Company also continually monitors counterparty and contract non-performance risk, if present, on a case-by-case basis. As of December 31, 2018, 27% of the Company’s credit exposure related to coal trading activities was with investment grade counterparties and 73% was with counterparties that are not rated. Performance Assurances and Collateral The Company is required to post variation margin on positions that are in a net liability position and is entitled to receive and hold variation margin on positions that are in a net asset position with an exchange and certain of its OTC derivative contract counterparties. The Company had posted $21.8 million and $35.8 million of net variation margin at December 31, 2018 and 2017, respectively. In addition to the requirements surrounding variation margin, the Company is required by the exchanges upon which it transacts to post certain additional collateral, known as initial margin, which represents an estimate of potential future adverse price movements across the Company’s portfolio under normal market conditions. The Company posted initial margin of $16.7 million and $18.8 million as of December 31, 2018 and 2017, respectively, which is reflected in “Other current assets” in the consolidated balance sheets. As of December 31, 2018 and 2017, respectively, the Company was in receipt of $2.2 million and $1.8 million, respectively, of the required variation and initial margin. Certain of the Company’s derivative trading instruments require the parties to provide additional performance assurances whenever a material adverse event jeopardizes one party’s ability to perform under the instrument. If the Company was to sustain a material adverse event (using commercially reasonable standards), its counterparties could request collateralization on derivative trading instruments in net liability positions which, based on an aggregate fair value at December 31, 2018 and 2017, would have amounted to collateral postings to counterparties of approximately $1.3 million and $7.0 million, respectively. As of December 31, 2018, the Company was not required to post collateral to counterparties for such positions. Approximately $0.4 million in collateral was required to be posted to counterparties as of December 31, 2017.

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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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