Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The hierarchy of fair value measurements assigns a level to fair value measurements based on the inputs used in the respective valuation techniques. The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

·Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale equity securities, U.S. Treasury securities, and coal futures that are submitted for clearing on the New York Mercantile Exchange.

·Level 2 is defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s level 2 assets and liabilities include U.S. government agency securities and commodity contracts (coal and heating oil) with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

·Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. These include the Company’s commodity option contracts (coal and heating oil) valued using modeling techniques, such as Black-Scholes, that require the use of inputs, particularly volatility, that are rarely observable. Changes in the unobservable inputs would not have a significant impact on the reported Level 3 fair values at June 30, 2013.

The table below sets forth, by level, the Company’s financial assets and liabilities that are recorded at fair value in the accompanying condensed consolidated balance sheet: 

	Fair Value at June 30, 2013
	Total		Level 1		Level 2		Level 3
	(In thousands)
Assets:
Investments in marketable securities	$	260,936	$	94,036	$	166,900	$	—
Derivatives	34,853		30,959		—		3,894
Total assets	$	295,789	$	124,995	$	166,900	$	3,894
Liabilities:
Derivatives	$	542	$	—	$	86	$	456

The Company’s contracts with 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. For classification purposes, the Company records the net fair value of all the positions with these counterparties as a net asset or liability. Each level in the table above displays the underlying contracts according to their classification in the accompanying condensed consolidated balance sheet, based on this counterparty netting.

The following table summarizes the change in the fair values of financial instruments categorized as level 3.

	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
	(In thousands)
Balance, beginning of period	$	5,642		$	8,174
Realized and unrealized losses recognized in earnings, net	(4,840		)	(9,312		)
Realized and unrealized losses recognized in other comprehensive income, net	—			—
Purchases	2,636			5,853
Issuances	—			(25		)
Settlements	—			(1,252		)
Ending balance	$	3,438		$	3,438

Net unrealized losses during the three and six month periods ended June 30, 2013 related to level 3 financial instruments held on June 30, 2013 were $4.1 million and $6.9 million, respectively.

Fair Value of Long-Term Debt

At June 30, 2013 and December 31, 2012, the fair value of the Company’s debt, including amounts classified as current, was $4.7 billion and $5.0 billion, respectively. Fair values are based upon observed prices in an active market, when available, or from valuation models using market information, which fall into Level 2 in the fair value hierarchy.