Arch Coal (ACI)

 

The Company generally utilizes derivative instruments to manage exposures to commodity prices. Additionally, the Company may hold certain coal derivative instruments for trading purposes. Derivative financial instruments are recognized in the balance sheet at fair value. Certain coal contracts may meet the definition of a derivative instrument, but because they provide for the physical purchase or sale of coal in quantities expected to be used or sold by the Company over a reasonable period in the normal course of business, they are not recognized on the balance sheet.

 

Certain derivative instruments are designated as the hedge instrument in a hedging relationship. In a fair value hedge, we hedge the risk of changes in the fair value of a firm commitment, typically a fixed-price coal sales contract. Changes in both the hedged firm commitment and the fair value of a derivative used as a hedge instrument in a fair value hedge are recorded in earnings. In a cash flow hedge, we hedge the risk of changes in future cash flows related to a forecasted purchase or sale. Changes in the fair value of the derivative instrument used as a hedge instrument in a cash flow hedge are recorded in other comprehensive income. Amounts in other comprehensive income are reclassified to earnings when the hedged transaction affects earnings and are classified in a manner consistent with the transaction being hedged.

 

Any ineffective portion of a hedge is recognized immediately in earnings. Ineffectiveness was insignificant for the years ended December 31, 2009 and 2008.

 

We formally document all relationships between hedging instruments and hedged items, as well as our risk management objectives for undertaking various hedge transactions. We evaluate the effectiveness of our hedging relationships both at the hedge inception and on an ongoing basis.

 

 

We use derivative financial instruments to manage exposures to commodity prices and interest rates. We also enter into over-the-counter coal positions for trading purposes. All derivative financial instruments are recognized in the balance sheet at fair value. The fair values of the majority of our derivative instruments are obtained from either quoted prices in active markets, quoted prices in over-the-counter markets or direct broker quotes. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or other comprehensive income if they qualify for cash flow hedge accounting. Amounts in other comprehensive income are reclassified to earnings when the hedged transaction affects earnings. Any ineffective portion of a cash flow hedge’s change in fair value is recognized immediately in earnings. The amount of ineffectiveness recognized in other operating income, net relating to our heating oil derivatives was a gain of $1.4 million for the year ended December 31, 2007. Ineffectiveness was insignificant for the years ended December 31, 2008 and 2006.

 

We formally document all relationships between hedging instruments and hedged items, as well as our risk management objectives for undertaking various hedge transactions. We evaluate the effectiveness of our hedging relationships both at the hedge inception and on an ongoing basis.

 

 

We use derivative financial instruments to manage exposures to
commodity prices and interest rates. We also enter into
over-the-counter
coal positions for trading purposes. All derivative financial
instruments are recognized in the balance sheet at fair value.
The fair values of the majority of our derivative instruments
are obtained from either quoted prices in active markets, quoted
prices in
over-the-counter
markets or direct broker quotes. Changes in fair value are
recognized in earnings if they are not eligible for hedge
accounting or other comprehensive income if they qualify for
cash flow hedge accounting. Amounts in other comprehensive
income are reclassified to earnings when the hedged transaction
affects earnings. Any ineffective portion of a cash flow
hedge’s change in fair value is recognized immediately in
earnings. The amount of ineffectiveness recognized in other
operating income, net relating to our heating oil derivatives
was a gain of $1.4 million for the year ended
December 31, 2007. Ineffectiveness was insignificant for
the years ended December 31, 2008 and 2006.

 

We formally document all relationships between hedging
instruments and hedged items, as well as our risk management
objectives for undertaking various hedge transactions. We
evaluate the effectiveness of our hedging relationships both at
the hedge inception and on an ongoing basis.

 

 

The Company generally utilizes derivative financial instruments to manage exposures to commodity prices. Additionally, the Company may hold certain coal derivative financial instruments for trading purposes.

 

All derivative financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if the derivatives are not eligible for hedge accounting or in other comprehensive income if they qualify for cash flow hedge accounting. Amounts in other comprehensive income are reclassified to earnings when the hedged transaction affects earnings and classified in a manner consistent with the transaction being hedged. The Company formally documents the relationships between hedging instruments and the respective hedged items, as well as its risk management objectives for hedge transactions.

 

The Company evaluates the effectiveness of its hedging relationships both at the hedge’s inception and on an ongoing basis. Any ineffective portion of a cash flow hedge’s change in fair value, based on the extent to which exact offset is not achieved between the change in fair value of the hedge instrument and the cumulative change in expected future cash flows on the hedged transaction from inception of the hedge, is recognized immediately in earnings. The amount of ineffectiveness recognized in other operating income, net in the accompanying consolidated statements of income resulting from heating oil derivatives was a gain of $1.4 million for the year ended December 31, 2007. Ineffectiveness was insignificant for the years ended December 31, 2008 and 2006.

 

 

The Company generally utilizes derivative financial instruments
to manage exposures to commodity prices. Additionally, the
Company may hold certain coal derivative financial instruments
for trading purposes.

 

All derivative financial instruments are recognized in the
balance sheet at fair value. Changes in fair value are
recognized in earnings if the derivatives are not eligible for
hedge accounting or in other comprehensive income if they
qualify for cash flow hedge accounting. Amounts in other
comprehensive income are reclassified to earnings when the
hedged transaction affects earnings and classified in a manner
consistent with the transaction being hedged. The Company
formally documents the relationships between hedging instruments
and the respective hedged items, as well as its risk management
objectives for hedge transactions.

 

The Company evaluates the effectiveness of its hedging
relationships both at the hedge’s inception and on an
ongoing basis. Any ineffective portion of a cash flow
hedge’s change in fair value, based on the extent to which
exact offset is not achieved between the change in fair value of
the hedge instrument and the cumulative change in expected
future cash flows on the hedged transaction from inception of
the hedge, is recognized immediately in earnings. The amount of
ineffectiveness recognized in other operating income, net in the
accompanying consolidated statements of income resulting from
heating oil derivatives was a gain of $1.4 million for the
year ended December 31, 2007. Ineffectiveness was
insignificant for the years ended December 31, 2008 and
2006.

 

 

The Company generally has used derivative financial instruments to manage exposures to commodity prices and interest rates. Additionally, the Company may hold certain coal derivative financial instruments for trading purposes.

 

All derivative financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if the derivatives are not eligible for hedge accounting or in other comprehensive income if they qualify for cash flow hedge accounting. Amounts in other comprehensive income are reclassified to earnings when the hedged transaction affects earnings. The Company formally documents the relationships between hedging instruments and the respective hedged items, as well as its risk management objectives for undertaking various hedge transactions. The Company evaluates the effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis.

 

Any ineffective portion of a cash flow hedge’s change in fair value is recognized immediately in earnings. The amount of ineffectiveness recognized in other operating (income) expense, net in the accompanying