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Derivatives
 12 Months Ended
Dec. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Derivatives
 
Diesel fuel price risk management
 
The Company is exposed to price risk with respect to diesel fuel purchased for use in its operations. The Company anticipates purchasing approximately 57 to 67 million gallons of diesel fuel for use in its operations during 2013. To protect the Company’s cash flows from increases in the price of diesel fuel for its operations, the Company uses forward physical diesel purchase contracts and purchased heating oil call options, and in the past, heating oil swaps. At December 31, 2012, the Company had protected the price of substantially all of its 2013 purchases. At December 31, 2012, the Company had purchased heating oil call options for approximately 60 million gallons for the purpose of managing the price risk associated with future diesel purchases.
 
 
The Company also purchased heating oil call options to hedge the fuel surcharges on its barge and rail shipments that cover increases in diesel fuel prices. These positions reduce the Company’s risk of cash flow fluctuations related to these surcharges but the positions are not accounted for as hedges. At December 31, 2012, the Company held purchased call options for approximately 15 million gallons for the purpose of managing the fluctuations in cash flows associated with fuel surcharges on future shipments.
 
Coal risk management positions
 
The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market in order to manage its exposure to coal prices. The Company has exposure to the risk of fluctuating coal prices related to forecasted sales or purchases of coal or to the risk of changes in the fair value of a fixed price physical sales contract. Certain derivative contracts may be designated as hedges of these risks.
 
At December 31, 2012, the Company held derivatives for risk management purposes that are expected to settle in the following years:
 
(Tons in thousands)
 
2013
 
2014
 
2015
 
Total
Coal sales
 
6,704

 
4,260

 
780

 
11,744

Coal purchases
 
1,410

 
1,260

 
—

 
2,670


 
Coal trading positions
 
The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market for trading purposes. The Company is exposed to the risk of changes in coal prices on the value of its coal trading portfolio. The estimated future realization of the value of the trading portfolio is $1.1 million of losses in 2013 and $1.5 million of gains in 2014.
 
Tabular derivatives disclosures
 
The Company’s contracts with certain of its counterparties 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 amounts shown in the table below represent the fair value position of individual contracts, and not the net position presented in the accompanying consolidated balance sheets. The fair value and location of derivatives reflected in the accompanying consolidated balance sheets are as follows:
 
 
 
December 31, 2012
 
 
 
December 31, 2011
 
 
Fair Value of Derivatives
 
Asset
 
Liability
 
 
 
Asset
 
Liability
 
 
(In thousands)
 
Derivative
 
Derivative
 
 
 
Derivative
 
Derivative
 
 
Derivatives Designated as Hedging Instruments
 
 

 
 

 
 

 
 

 
 

 
 

Heating oil--diesel purchases
 
$
—

 
$
—

 
 

 
$
8,997

 
$
—

 
 

Coal
 
3,277

 
(10
)
 
 

 
1,109

 
—

 
 

Total
 
3,277

 
(10
)
 
 

 
10,106

 
—

 
 

Derivatives Not Designated as Hedging Instruments
 
 

 
 

 
 

 
 

 
 

 
 

Heating oil -- diesel purchases
 
7,379

 
—

 
 

 
—

 
—

 
 

Heating oil -- fuel surcharges
 
1,961

 
—

 
 

 
1,797

 
—

 
 

Coal -- held for trading purposes
 
17,403

 
(16,933
)
 
 

 
15,505

 
(19,927
)
 
 

Coal -- risk management
 
24,843

 
(7,342
)
 
 

 
14,855

 
(6,035
)
 
 

Total
 
51,586

 
(24,275
)
 
 

 
32,157

 
(25,962
)
 
 

Total derivatives
 
54,863

 
(24,285
)
 
 

 
42,263

 
(25,962
)
 
 

Effect of counterparty netting
 
(22,548
)
 
22,548

 
 

 
(18,134
)
 
18,134

 
 

Net derivatives as classified in the balance sheets
 
$
32,315

 
$
(1,737
)
 
$
30,578

 
$
24,129

 
$
(7,828
)
 
$
16,301

 
 
 
 
 
December 31, 2012
 
December 31, 2011
Net derivatives as reflected on the balance sheets
 
 
 
 

 
 

Heating oil
 
Other current assets
 
$
9,340

 
$
10,794

Coal
 
Coal derivative assets
 
22,975

 
13,335

 
 
Coal derivative liabilities
 
(1,737
)
 
(7,828
)
 
 
 
 
$
30,578

 
$
16,301



 The Company had a current asset for the right to reclaim cash collateral of $16.2 million and $12.4 million at December 31, 2012 and December 31, 2011, respectively. These amounts are not included with the derivatives presented in the table above and are included in “other current assets” in the accompanying consolidated balance sheets.

During the first quarter of 2012, the Company determined the effectiveness of the heating oil options could not be established as of December 31, 2011 and on an ongoing basis.  As a result, the amount remaining in accumulated other comprehensive income of $8.2 million was recorded in the “other operating income, net” line on the consolidated statement of operations, or $5.2 million net of income taxes.


The effects of derivatives on measures of financial performance are as follows:
 
Derivatives used in Cash Flow Hedging Relationships (in thousands)
For the year ended December 31,  
 
 
Gain (Loss) Recognized in Other Comprehensive Income(Effective Portion)
 
Gains (Losses) Reclassified from Other Comprehensive Income into Income
(Effective Portion)
 
 
 
(2) 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
 
Heating oil — diesel purchases
(1) 
$
—

 
$
1,294

 
$
(149
)
 
$
—

 
$
14,866

 
$
437

 
 
Coal sales
(2) 
7,690

 
4,923

 
(4,714
)
 
2,675

 
1,572

 
(1,602
)
 
 
Coal purchases
 
(2,440
)
 
(2,009
)
 
5,145

 
—

 
—

 
(1,202
)
 
 
Totals
 
$
5,250

 
$
4,208

 
$
282

 
$
2,675

 
$
16,438

 
$
(2,367
)
 
 
 
No ineffectiveness or amounts excluded from effectiveness testing relating to the Company’s cash flow hedging relationships were recognized in the results of operations in the twelve month periods ended December 31, 2012 and 2011.  
 
Derivatives Not Designated as Hedging Instruments (in thousands)
For the year ended December 31
 
 
Gain (Loss) Recognized
 
 
 
2012
 
2011
 
2010
 
Coal — unrealized
(3) 
$
8,272

 
$
6,438

 
$
(10,991
)
 
Coal — realized
(4) 
$
43,990

 
$
(7
)
 
$
4,542

 
Heating oil — diesel purchases
(4) 
$
(22,281
)
 
$
(2,906
)
 
$
—

 
Heating oil — fuel surcharges
(4) 
$
(2,209
)
 
$
—

 
$
—

 

____________________________________________________________
Location in statement of operations:
(1) — Revenues
(2) — Cost of sales
(3) — Change in fair value of coal derivatives and coal trading activities, net
(4) — Other operating income, net
 
The Company recognized net unrealized and realized gains of $8.3 million, losses of $3.5 million, and gains of $2.1 million during the year ended December 31, 2012, 2011, and 2010, respectively, related to its trading portfolio, which are included in the caption “Change in fair value of coal derivatives and coal trading activities, net” in the accompanying consolidated statements of operations, and are not included in the previous tables reflecting the effects of derivatives on measures of financial performance.
 
Based on fair values at December 31, 2012, gains on derivative contracts designated as hedge instruments in cash flow hedges of approximately $2.2 million are expected to be reclassified from other comprehensive income into earnings during the next twelve months.