Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2014 |
Fair Value Disclosures [Abstract] | ' |
Fair Value of Financial Instruments | ' |
17. Fair Value of Financial Instruments |
The table below sets forth, by level, the Partnership’s net financial assets and liabilities for which fair value is measured on a recurring basis: |
|
| Fair Value at September 30, 2014 | |
| Total | | | Level 1 | | | Level 2 | | | Level 3 | |
| (In Thousands) | |
Coal derivative contracts | $ | 37,170 | | | $ | — | | | $ | 37,170 | | | $ | — | |
Total | $ | 37,170 | | | $ | — | | | $ | 37,170 | | | $ | — | |
|
| Fair Value at December 31, 2013 | |
| Total | | | Level 1 | | | Level 2 | | | Level 3 | |
| (In Thousands) | |
Coal derivative contracts | $ | 2,020 | | | $ | — | | | $ | 2,020 | | | $ | — | |
Liability Award | | (11,700 | ) | | | — | | | | — | | | | (11,700 | ) |
Total | $ | (9,680 | ) | | $ | — | | | $ | 2,020 | | | $ | (11,700 | ) |
|
The Partnership’s coal derivative contracts are valued based on direct broker quotes and corroborated with API 2 market pricing data. The liability award represents a phantom equity award (“Liability Award”) to a retired executive for which the value was determined based on the fair value, as defined in the agreement, of Foresight Reserves as of the employee’s retirement date and was adjusted for distributions made to Foresight Reserves’ members. This Liability Award fully vested in 2010 and was granted principally for services performed to develop the Partnership’s longwall mines. Prior to March 31, 2014, the Liability Award was Level 3 in the fair value hierarchy given Foresight Reserves was a private company; therefore, there was no liquid market to determine the fair value of Foresight Reserves’ equity. The fair value of the Liability Award was determined using a discounted cash flow model and corroborated with recent equity transactions at Foresight Reserves. Effective March 31, 2014, the Liability Award amount was negotiated between the Partnership and the employee to be $12.4 million; therefore, the value of this liability was contracted and therefore no longer a Level 3 liability. As of September 30, 2014, $0.4 million of the unpaid balance is recorded in accrued expenses and other current liabilities for required payments over the next year, and the remaining $3.9 million is recorded in other long-term liabilities, which will be paid out ratably over the next ten years. The note payable to the retired executive currently bears interest at 3.45%. |
The classification and amount of the Partnership’s financial instruments measured at fair value on a recurring basis, which are presented on a gross basis in the condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013, are as follows: |
|
| Fair Value at September 30, 2014 | |
| Current – Coal Derivative Assets | | | Long-Term – Coal Derivative Assets | | | Accrued Expenses | | | Other Long-Term Liabilities | |
| (In Thousands) | |
Coal derivative contracts | $ | 19,942 | | | $ | 17,228 | | | $ | — | | | $ | — | |
Total | $ | 19,942 | | | $ | 17,228 | | | $ | — | | | $ | — | |
|
| Fair Value at December 31, 2013 | |
| Current – Coal Derivative Assets | | | Long-Term – Coal Derivative Assets | | | Accrued Expenses | | | Other Long-Term Liabilities | |
| (In Thousands) | |
Coal derivative contracts | $ | 1,976 | | | $ | 912 | | | $ | (531 | ) | | $ | (337 | ) |
Liability Award | | — | | | | — | | | | (11,700 | ) | | | — | |
Total | $ | 1,976 | | | $ | 912 | | | $ | (12,231 | ) | | $ | (337 | ) |
|
The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2014 and 2013: |
|
| Liability Award | | | | | | | | | | | | | |
| (In Thousands) | | | | | | | | | | | | | |
Balance at January 1, 2014 | $ | 11,700 | | | | | | | | | | | | | |
Recorded fair value losses (gains): | | | | | | | | | | | | | | | |
Included in earnings | | 690 | | | | | | | | | | | | | |
Purchases, issuances and settlements | | (12,390 | ) | | | | | | | | | | | | |
Balance at September 30, 2014 | $ | — | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Balance at January 1, 2013 | $ | — | | | | | | | | | | | | | |
Recorded fair value losses (gains): | | | | | | | | | | | | | | | |
Included in earnings | | 716 | | | | | | | | | | | | | |
Capitalized into development costs | | (217 | ) | | | | | | | | | | | | |
Purchases, issuances and settlements | | 11,240 | | | | | | | | | | | | | |
Balance at September 30, 2013 | $ | 11,739 | | | | | | | | | | | | | |
|
|
During the nine months ended September 30, 2014 and 2013, there were no assets or liabilities that were transferred between Level 1 and Level 2. |
Long-Term Debt |
The fair value of long-term debt as of September 30, 2014 and December 31, 2013 was $1,240.9 million and $1,509.2 million, respectively. The fair value of long-term debt was calculated based on the amount of future cash flows associated with each debt instrument discounted at the Partnership’s current estimated credit-adjusted borrowing rate for similar debt instruments with comparable terms. This is considered a Level 3 fair value measurement. |