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Derivatives
 12 Months Ended
Dec. 31, 2016
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 45 to 50 million gallons of diesel fuel for use in its operations during 2017. To protect the Company’s cash flows from increases in the price of diesel fuel for its operations, the Company may use forward physical diesel purchase contracts and purchase out-of-the-money heating oil call options to protect against substantial increases in pricing. At December 31, 2016, the Company had heating oil call options for approximately 30.7 million gallons at an average strike price of $1.72.

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, 2016, the Company held derivatives for risk management purposes that are expected to settle in the following years:
 
(Tons in thousands)
 
2017
 
2018
 
Total
Coal sales
 
540

 
—

 
540

Coal purchases
 
480

 
—

 
480



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 unrecognized gains of $0.2 million in the trading portfolio are expected to be realized in 2017.

Tabular derivatives disclosures
 
The Company has master netting agreements with all 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 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:
 
 
Successor
 
 
 
Predecessor
 
 
 
 
December 31, 2016
 
 
 
December 31, 2015
 
 
Fair Value of Derivatives
 
Asset
 
Liability
 
 
 
Asset
 
Liability
 
 
(In thousands)
 
Derivative
 
Derivative
 
 
 
Derivative
 
Derivative
 
 
Derivatives Designated as Hedging Instruments
 
 

 
 

 
 

 
 

 
 

 
 

Coal
 
$
—

 
$
(15
)
 
 

 
$
4

 
$
(20
)
 
 

 
 


 


 
 
 


 


 
 

Derivatives Not Designated as Hedging Instruments
 
 

 
 

 
 

 
 

 
 

 
 

Heating oil -- diesel purchases
 
4,646

 
—

 
 

 
1,017

 
—

 
 

Coal held for trading purposes, exchange traded swaps and futures
 
68,948

 
(68,740
)
 
 

 
110,653

 
(104,814
)
 
 

Coal -- risk management
 
475

 
(580
)
 
 

 
3,912

 
(1,947
)
 
 

Natural gas
 
86

 
(13
)
 
 
 
494

 
(247
)
 
 
Total
 
74,155

 
(69,333
)
 
 

 
116,076

 
(107,008
)
 
 

Total derivatives
 
74,155

 
(69,348
)
 
 

 
116,080

 
(107,028
)
 
 

Effect of counterparty netting
 
(69,247
)
 
69,247

 
 

 
(107,028
)
 
107,028

 
 

Net derivatives as classified in the balance sheets
 
$
4,908

 
$
(101
)
 
$
4,807

 
$
9,052

 
$
—

 
$
9,052

 
 
 
 
 
Successor
Predecessor
 
 
 
 
December 31, 2016
December 31, 2015
Net derivatives as reflected on the balance sheets
 
 
 
 

 

Heating oil
 
Other current assets
 
$
4,646

$
1,017

Coal
 
Coal derivative assets
 
262

8,035

 
 
Accrued expenses and other current liabilities
 
(101
)
—

 
 
 
 
$
4,807

$
9,052


 
The Company had a current asset for the right to reclaim cash collateral of $2.8 million and $1.7 million at December 31, 2016 and 2015, 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.

The effects of derivatives on measures of financial performance are as follows: 

Derivatives used in Cash Flow Hedging Relationships (in thousands)
For the noted periods,
 
 
Gain (Loss) Recognized in Other Comprehensive Income (Effective Portion)
 
 
Successor
Predecessor
 
 
October 2 through December 31, 2016
January 1 through October 1, 2016
 
Year Ended December 31, 2015
 
Year Ended December 31, 2014
Coal sales
(1) 
$
—

$
(672
)
 
$
12,816

 
10,842

Coal purchases
(2) 
—

536

 
(6,718
)
 
(5,097
)
 
 
$
—

$
(136
)
 
$
6,098

 
$
5,745

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) Reclassified from Other Comprehensive Income into Income
(Effective Portion)
 
 
Successor
Predecessor
 
 
October 2 through December 31, 2016
January 1 through October 1, 2016
 
Year Ended December 31, 2015
 
Year Ended December 31, 2014
Coal sales
 
$
—

$
1,634

 
$
18,635

 
$
5,336

Coal purchases
 
—

(1,237
)
 
(9,060
)
 
(2,693
)
 
 
$
—

$
397

 
$
9,575

 
$
2,643

 
 
 
 
 
 
 
 
 
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 Successor period from October 2 through December 31, 2016, the Predecessor period from January 1 through October 1, 2016, and for the Predecessor years ended December 31, 2015, and 2014.  
 


Derivatives Not Designated as Hedging Instruments (in thousands)
For the noted periods,
 
 
Gain (Loss) Recognized
 
 
Successor
Predecessor
 
 
October 2 through December 31, 2016
January 1 through October 1, 2016
 
Year Ended December 31, 2015
 
Year Ended December 31, 2014
Coal — unrealized
(3) 
$
(408
)
$
(1,662
)
 
$
(3,883
)
 
$
430

Coal — realized
(4) 
$
116

$
(476
)
 
$
3,236

 
$
5,956

Heating oil — diesel purchases
(4) 
$
827

$
826

 
$
(8,294
)
 
$
(7,848
)
Heating oil — fuel surcharges
(4) 
$
—

$
—

 
$
—

 
$
(405
)
Natural gas
 
$
(91
)
$
(463
)
 
$
878

 
$
—

Foreign currency
 
$
(9
)
$
(451
)
 
$
(887
)
 
$
—



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 losses of an immaterial amount for the period October 2 through December 31, 2016 and $0.9 million for the period January 1 through October 1, 2016; and net unrealized and realized gains of $5.7 million, and $3.2 million during the years ended December 31, 2015 and 2014, 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, 2016, amounts on derivative contracts designated as hedge instruments in cash flow hedges expected to be reclassified from other comprehensive income into earnings during the next twelve months are immaterial.