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Derivatives
 12 Months Ended
Dec. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives
Derivatives
 
Interest rate risk management

The Company has entered into some interest rate swaps to reduce the variability of cash outflows associated with interest payments on its variable rate term loan. These swaps have been designated as cash flow hedges. For additional information on these arrangements, see Note 14, “Debt and Financing Arrangements” in the Consolidated Financial Statements.

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 42 to 46 million gallons of diesel fuel for use in its operations during 2018. 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. At December 31, 2017, the Company had heating oil call options for approximately 26.2 million gallons at an average strike price of $1.84.

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, 2017, the Company held derivatives for risk management purposes that are expected to settle in the following years:
 
(Tons in thousands)
 
2018
 
2019
 
Total
Coal sales
 
1,706

 
159

 
1,865

Coal purchases
 
747

 
—

 
747



The Company may also enter into natural gas options to protect the Company from decreases in natural gas prices, which could impact thermal coal demand. These options are not designated as hedges. Additionally, the Company may enter into nominal quantities of foreign currency options protecting for decreases in the Australian to United States dollar exchange rate, which could impact metallurgical coal demand. These options are not designated as hedges.
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 losses of $1.2 million in the trading portfolio are expected to be realized in 2018.

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:
 
 
December 31, 2017
 
 
 
December 31, 2016
 
 
Fair Value of Derivatives
 
Asset
 
Liability
 
 
 
Asset
 
Liability
 
 
(In thousands)
 
Derivative
 
Derivative
 
 
 
Derivative
 
Derivative
 
 
Derivatives Designated as Hedging Instruments
 
 

 
 

 
 

 
 

 
 

 
 

Coal
 
$
942

 
$
(2,146
)
 
 

 
$
—

 
$
(15
)
 
 

 
 


 


 
 
 


 


 
 

Derivatives Not Designated as Hedging Instruments
 
 

 
 

 
 

 
 

 
 

 
 

Heating oil -- diesel purchases
 
5,354

 
—

 
 

 
4,646

 
—

 
 

Coal held for trading purposes, exchange traded swaps and futures
 
44,088

 
(45,221
)
 
 

 
68,948

 
(68,740
)
 
 

Coal -- risk management
 
5,139

 
(9,892
)
 
 

 
475

 
(580
)
 
 

Natural gas
 
27

 
—

 
 
 
86

 
(13
)
 
 
Total
 
54,608

 
(55,113
)
 
 

 
74,155

 
(69,333
)
 
 

Total derivatives
 
55,550

 
(57,259
)
 
 

 
74,155

 
(69,348
)
 
 

Effect of counterparty netting
 
(50,042
)
 
50,042

 
 

 
(69,247
)
 
69,247

 
 

Net derivatives as classified in the balance sheets
 
$
5,508

 
$
(7,217
)
 
$
(1,709
)
 
$
4,908

 
$
(101
)
 
$
4,807

 
 
 
 
 
December 31, 2017
 
December 31, 2016
Net derivatives as reflected on the balance sheets
 
 
 
 

 
 

Heating oil
 
Other current assets
 
$
5,354

 
$
4,646

Coal
 
Other current assets
 
154

 
262

 
 
Accrued expenses and other current liabilities
 
(7,217
)
 
(101
)
 
 
 
 
$
(1,709
)
 
$
4,807


 
The Company had a current asset for the right to reclaim cash collateral of $16.2 million and $2.8 million at December 31, 2017 and 2016, 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
 
 
Year Ended December 31, 2017
 
October 2 through December 31, 2016
January 1 through October 1, 2016
 
Year Ended December 31, 2015
Coal sales
(1) 
$
(2,127
)
 
$
—

$
(672
)
 
12,816

Coal purchases
(2) 
942

 
—

536

 
(6,718
)
 
 
$
(1,185
)
 
$
—

$
(136
)
 
$
6,098

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) Reclassified from Other Comprehensive Income into Income
(Effective Portion)
 
 
Successor
Predecessor
 
 
Year Ended December 31, 2017
 
October 2 through December 31, 2016
January 1 through October 1, 2016
 
Year Ended December 31, 2015
Coal sales
 
$
—

 
$
—

$
1,634

 
$
18,635

Coal purchases
 
—

 
—

(1,237
)
 
(9,060
)
 
 
$
—

 
$
—

$
397

 
$
9,575

 
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 respective periods. 


Derivatives Not Designated as Hedging Instruments (in thousands)
For the noted periods,
 
 
Gain (Loss) Recognized
 
 
Successor
Predecessor
 
 
Year Ended December 31, 2017
October 2 through December 31, 2016
January 1 through October 1, 2016
 
Year Ended December 31, 2015
Coal — unrealized
(3) 
$
(4,648
)
$
(408
)
$
(1,662
)
 
$
(3,883
)
Coal — realized
(4) 
$
—

$
116

$
(476
)
 
$
3,236

Heating oil — diesel purchases
(4) 
$
(1,057
)
$
827

$
826

 
$
(8,294
)
Natural gas
 
$
(774
)
$
(91
)
$
(463
)
 
$
878

Foreign currency
 
$
—

$
(9
)
$
(451
)
 
$
(867
)


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 $2.0 million for the year ended December 31, 2017; an immaterial amount for the period October 2 through December 31, 2016; net unrealized and realized losses of $0.9 million for the period January 1 through October 1, 2016; and net unrealized and realized gains of $5.7 million during the year ended December 31, 2015, 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, 2017, 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 losses of $1.2 million.