Derivatives and Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Fair value measured on recurring basis of financial assets and liabilities

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.

Financial Instruments Measured on a Recurring Basis. 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, 2012
	Level 1		Level 2		Level 3		Total
			(Dollars in millions)
Investment in available-for-sale debt and equity securities	$	75.4	$	13.0	$	—	$	88.4
Commodity swaps and options	—		4.0		—		4.0
Foreign currency cash flow hedge contracts	—		286.9		—		286.9
Total net financial assets	$	75.4	$	303.9	$	—	$	379.3



	December 31, 2011
	Level 1 ⁽¹⁾		Level 2 ⁽¹⁾		Level 3		Total
			(Dollars in millions)
Investment in available-for-sale debt and equity securities	$	78.0	$	5.5	$	—	$	83.5
Commodity swaps and options	—		33.0		—		33.0
Foreign currency cash flow hedge contracts	—		490.6		—		490.6
Total net financial assets	$	78.0	$	529.1	$	—	$	607.1


⁽¹⁾	Certain amounts have been revised from a Level 1 to a Level 2 fair value hierarchy classification to conform to the current year presentation, which had no effect on previously reported consolidated results and was not material to the footnotes to the consolidated financial statements.

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 quotes, published indices and other market quotes. Below is a summary of the Company’s valuation techniques for Level 1 and 2 financial assets and liabilities:


•	Investments in debt and equity securities: corporate bonds and U.S. government treasury instruments are valued based on quoted prices in active markets (Level 1) and U.S. government agency securities are valued based on derived prices in active markets (Level 2).


•	Commodity swap contracts — diesel fuel and explosives: valued based on a valuation that is corroborated by the use of market-based pricing (Level 2).


•	Foreign currency forward and option contracts: valued utilizing inputs obtained in quoted public markets (Level 2).

Carrying amounts and estimated fair values of the Company's debt

The carrying amounts and estimated fair values of the Company’s debt are summarized as follows:



	December 31, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
			(Dollars in millions)
Long-term debt	$	6,252.9	$	6,583.9	$	6,657.5	$	6,922.7

Non Coal Trading [Member]

Derivative [Line Items]

Company's foreign currency and commodity positions

Notional Amounts and Fair Value. The following summarizes the Company’s foreign currency and commodity positions at December 31, 2012:



	Notional Amount by Year of Maturity
	Total		2013		2014		2015		2016		2017 and thereafter
Foreign Currency
A$:US$ hedge contracts (A$ millions)	$	4,448.2	$	2,173.6	$	1,513.5	$	761.1	$	—	$	—
Commodity Contracts
Diesel fuel hedge contracts (million gallons)	188.3		102.0		63.6		22.7		—		—
U.S. explosives hedge contracts (million MMBtu)	3.8		2.6		1.2		—		—		—



	Account Classification by
	Cash Flow Hedge		Fair Value Hedge		Economic Hedge		Fair Value Asset (Liability)
							(Dollars in millions)
Foreign Currency
A$:US$ hedge contracts (A$ millions)	$	4,448.2	$	—	$	—	$	286.9
Commodity Contracts
Diesel fuel hedge contracts (million gallons)	188.3		—		—		$	9.6
U.S. explosives hedge contracts (million MMBtu)	3.8		—		—		$	(5.6	)

Classification and amounts of pre-tax gains and losses related to the Company's non-trading hedges

The tables below show the classification and amounts of pre-tax gains and losses related to the Company’s non-trading hedges during the years ended December 31, 2012, 2011 and 2010:



		Year Ended December 31, 2012
	Statement of Operations Classification Gains (Losses) - Realized	Gain recognized in income on non- designated derivatives		Gain recognized in other comprehensive income on derivative (effective portion)		Gain reclassified from other comprehensive income into income (effective portion)		Loss reclassified from other comprehensive income into income (ineffective portion)
Financial Instrument		Gain recognized in income on non- designated derivatives
		(Dollars in millions)
Commodity swaps and options	Operating costs and expenses	$	—	$	14.5	$	48.3	$	(4.7	)
Foreign currency cash flow hedge contracts	Operating costs and expenses	—		148.0		351.7		—
Total		$	—	$	162.5	$	400.0	$	(4.7	)



		Year Ended December 31, 2011
	Statement of Operations Classification Gains (Losses) - Realized	Loss recognized in income on non- designated derivatives⁽¹⁾			Gain (loss) recognized in other comprehensive income on derivative (effective portion)			Gain reclassified from other comprehensive income into income (effective portion)		Gain reclassified from other comprehensive income into income (ineffective portion)
Financial Instrument		Loss recognized in income on non- designated derivatives⁽¹⁾
		(Dollars in millions)

Commodity swaps and options	Operating costs and expenses	$	—		$	30.7		$	42.7	$	4.8
Foreign currency cash flow hedge contracts
- Operating costs	Operating costs and expenses	—			193.4			342.2		—
- Capital expenditures	Depreciation, depletion and amortization	—			(0.5		)	—		—
Foreign currency economic hedge contracts	Acquisition costs related to PEA-PCI	(32.8		)	—			—		—
Total		$	(32.8	)	$	223.6		$	384.9	$	4.8


⁽¹⁾	Relates to foreign currency contracts associated with the acquisition of PEA-PCI shares under the takeover process.



		Year Ended December 31, 2010
	Statement of Operations Classification Gains (Losses) - Realized	Loss recognized in income on non- designated derivatives⁽²⁾			Gain recognized in other comprehensive income on derivative (effective portion)		Gain (loss) reclassified from other comprehensive income into income (effective portion)			Loss reclassified from other comprehensive income into income (ineffective portion)
Financial Instrument		Loss recognized in income on non- designated derivatives⁽²⁾
		(Dollars in millions)

Interest rate swaps cash flow hedge contracts	Interest expense	$	(8.5	)	$	0.8	$	(0.5	)	$	—
Commodity swaps and options	Operating costs and expenses	—			29.9		(36.2		)	(1.1		)
Foreign currency cash flow hedge contracts	Operating costs and expenses	—			622.2		188.2			—
Total		$	(8.5	)	$	652.9	$	151.5		$	(1.1	)


⁽²⁾	Amounts relate to swaps that were de-designated and terminated in conjunction with the refinancing of the Company's previous credit facility.

Classification and amount of derivatives, gross

The classification and amount of derivatives presented before netting by counterparty on a gross basis as of December 31, 2012 and 2011 are as follows:



	Fair Value as of December 31, 2012
	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
Financial Instrument	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
	(Dollars in millions)
Commodity swaps and options	$	18.3	$	2.5	$	8.5	$	8.3
Foreign currency cash flow hedge contracts	260.1		27.6		—		0.8
Total	$	278.4	$	30.1	$	8.5	$	9.1



	Fair Value as of December 31, 2011
	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
Financial Instrument	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
	(Dollars in millions)
Commodity swaps and options	43.4		11.7		7.1		15.0
Foreign currency cash flow hedge contracts	270.4		229.0		4.3		4.5
Total	$	313.8	$	240.7	$	11.4	$	19.5

- Definition

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

+ References+ Details

- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

+ References+ Details