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SEC Filings

8-K
ARCH COAL INC filed this Form 8-K on 02/13/2018
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Capital Allocation Update and Financial Position

 

During the quarter, Arch continued to execute upon its share repurchase program, purchasing 1.1 million shares of common stock, representing 4.2 percent of shares outstanding, at a total cost of $84 million and an average price of $79.73 per share. The fourth quarter purchases include the previously announced stock purchase transaction with Monarch Alternative Capital in early December.

 

In total, over the course of 2017, Arch purchased approximately 4 million shares of common stock, representing nearly 16 percent of shares outstanding, at a total cost of $302 million. At year-end, the company had up to $198 million remaining for share repurchases under the existing authorization.

 

In addition, the company paid $7.6 million in cash dividends to shareholders during the fourth quarter of 2017, and $24.4 million during the course of 2017.

 

“Arch had a strong finish to 2017, completing a number of initiatives to enhance its financial position and increase shareholder value,” said John T. Drexler, Arch’s chief financial officer. “In addition to returning excess capital to our shareholders, we successfully refinanced and repriced our term loan during the year, trimmed our annual interest expense, and reduced both our collateral requirements and restricted cash balance.”

 

Today, Arch’s board of directors announced that it has approved an increase in the company’s quarterly dividend to $0.40 per share from $0.35 per share. The board believes this to be a sustainable level through all stages of the dynamic market cycle. The next quarterly cash dividend payment of $0.40 per common share is scheduled to be paid on March 15, 2018 to stockholders of record at the close of business on March 5, 2018.

 

In the short time period since the capital allocation program was introduced, Arch has provided more than $326 million to shareholders through share buybacks and dividends.

 

“Arch’s ongoing repurchase activity and the announced increase in our quarterly dividend is in alignment with our goal of consistently providing strong shareholder returns while maintaining sufficient liquidity,” said Drexler.

 

Future dividend declarations and share repurchases will be subject to ongoing board review and authorization and will be based on a number of factors, including business and market conditions, Arch’s future financial performance and other capital priorities.

 

The passage of the Tax Cuts and Jobs Act was a significant positive for Arch. The elimination of the corporate AMT will allow Arch to realize all of its remaining AMT credits, resulting in a tax benefit of $35 million in the fourth quarter. Arch filed carryback claims for a portion of those AMT credits in the fourth quarter and a $24.3 million refund was received in January. The remaining $10.7 million of credits will be refunded between 2018 and 2022.  Going forward, Arch believes that the reduction in the corporate tax rate, elimination of the AMT, and the company’s large net operating loss position should result in a cash tax rate of effectively zero for the foreseeable future.

 

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