|ARCH COAL INC filed this Form 10-Q on 10/31/2017|
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our results for the third quarter of 2017 benefited from relative strength in both the thermal and metallurgical markets. Seasonal cooling demand and stable natural gas pricing supported the domestic thermal coal market. The summer cooling season was uneven but effectively normal during the current period. Natural gas pricing remained stable and storage levels trended toward the five year average as export demand for natural gas continued to increase and natural gas production began to increase late in the current period. Powder River Basin coal remained economically competitive for electrical generation in many regions throughout the country during the period, and generator stockpiles of Powder River Basin coal declined to the point of approaching the bottom of the five year range by the end of the period. Additionally, pricing in international thermal markets continued to strengthen, increasing the opportunity for certain of our operations to be able to economically ship coal to these markets in the period.
Metallurgical coal markets remained strong in the third quarter of 2017, as continued economic growth, certain supply constraints, and Chinese supply control positively impacted international coking coal prices. However, during the period pricing differentials between the Atlantic and Pacific seaborne markets expanded with the Atlantic market discount growing. We believe anticipated increases in North American coking coal supply coupled with slow economic growth in Europe, contrasted with some supply constraints in Australia, more robust Chinese economic growth, and supportive Chinese policy has led to the increasing Atlantic market discount.
Filing Under Chapter 11 of the United States Bankruptcy Code
On January 11, 2016 (the “Petition Date”), Arch Coal and substantially all of its wholly owned domestic subsidiaries (the “Filing Subsidiaries” and, together with Arch Coal, the “Debtors”; the Debtors, solely following the effective date of the Plan, the “Reorganized Debtors”) filed voluntary petitions for reorganization (collectively, the “Bankruptcy Petitions”) under Chapter 11 of Title 11 of the U.S. Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Eastern District of Missouri (the “Court”). The Debtors’ Chapter 11 Cases (collectively, the “Chapter 11 Cases”) were jointly administered under the caption In re Arch Coal, Inc., et al. Case No. 16-40120 (lead case). During the Chapter 11 Cases, each Debtor operated its business as a “debtor in possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Court.
Upon emergence from bankruptcy on October 5, 2016, Arch Coal applied the provisions of fresh start accounting effective October 1, 2016 which resulted in Arch becoming a new entity for financial reporting purposes. Accordingly, the consolidated financial statements and accompanying footnotes on or after October 1, 2016 are not comparable to the consolidated financial statements prior to that date. References to “Successor” in the consolidated financial statements and footnotes are in reference to reporting dates on or after October 2, 2016; references to “Predecessor” in the consolidated financial statements and footnotes are in reference to reporting dates through October 1, 2016 which includes the impact of the Plan provisions and the application of fresh start accounting.
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