News Release

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Arch Coal, Inc. Reports Second Quarter 2010 Results
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Quarterly revenues increase nearly 40% versus prior-year quarter
Adjusted EBITDA more than doubles in second quarter of 2010
Operating margins expand across all regions versus year-ago quarter
Operating cash flow grows more than 60% in first half of 2010
                               Earnings Highlights
                               -------------------

                                      Quarter Ended       Six Months Ended
    In $ millions, except per
     share data               6/30/10      6/30/09   6/30/10        6/30/09
    ------------------------- -------      -------   -------        -------

    Revenues                   $764.3       $554.6  $1,476.2       $1,235.7
    Income from Operations      106.5          7.3     138.7           45.9
    Net Income (Loss) (1)        66.2        (15.1)     64.4           15.5
    Fully Diluted EPS            0.41        (0.11)     0.40           0.11
    -----------------              --        -----        --             --
    Adjusted EBITDA (2)        $199.4        $78.8    $330.8         $193.8



    (1)/-Net income attributable to ACI.
    (2)/- Adjusted EBITDA is defined and reconciled under
    "Reconciliation of Non-GAAP Measures" in this release.


ST. LOUIS, July 30, 2010 -- Arch Coal, Inc. (NYSE: ACI) today reported net income of $66.2 million, or $0.41 per diluted share, in the second quarter of 2010, compared with a net loss of $15.1 million, or $0.11 per diluted share, in the prior-year quarter. Second quarter 2010 results included the amortization of coal supply agreements acquired in the Jacobs Ranch transaction, which was completed on Oct. 1, 2009. Excluding this non-cash charge, second quarter 2010 adjusted net income was $69.5 million, or $0.43 per diluted share.

Quarterly revenues increased nearly 40 percent versus the second quarter of 2009, driven by stronger global and domestic coal market fundamentals and higher volumes than in the year-ago quarter. Adjusted earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") more than doubled over the same time period to reach $199.4 million. Second quarter 2010 results included an after-tax gain of $26.4 million on the exchange of Arch-owned coal reserves with Knight Hawk Holdings LLC ("Knight Hawk") for an increased ownership position in the company.

"Arch delivered a strong operating performance in the second quarter of 2010 - with substantial increases in revenues, EPS and EBITDA - compared with the year-ago quarter," said Steven F. Leer, Arch's chairman and chief executive officer. "Higher pricing in Central Appalachia and continued effective cost control in all operating segments helped expand our consolidated per-ton operating margin in the quarter just ended. We also generated positive free cash flow for the first six months of 2010."

In the first half of the year, Arch generated adjusted EBITDA of $330.8 million compared with $193.8 million in adjusted EBITDA for the first six months of 2009. Revenues totaled $1.5 billion for the first six months of 2010, an increase of nearly 20 percent versus the prior-year period. Cash flow from operations increased 62 percent over the same time period to reach $259.3 million, while capital expenditures equaled $172.0 million for the first six months of 2010, a decline of 30 percent from the prior-year level.

"Coal markets have improved considerably since this time last year, but remain well below the levels of the bull market of 2008," said Leer. "Global metallurgical markets remain relatively tight, and domestic steam coal conditions have strengthened meaningfully on the decline in stockpiles of U.S. generators, particularly those served by Powder River Basin coal."

"Looking ahead, we expect to continue managing through any ongoing operational challenges and deliver even stronger results in the year's second half," added Leer. "We also will remain disciplined in controlling our costs and capital spending levels to generate meaningful free cash flow for our stakeholders."

Illinois Basin Expansion

Arch increased its equity interest in Knight Hawk, a private Illinois Basin coal producer, from 33 percent to 42 percent during the second quarter of 2010. In exchange for the increased percentage ownership, Arch's resource management group contributed 68 million tons of company-owned reserves to Knight Hawk and recognized an after-tax gain of $26.4 million on the transaction.

"The Knight Hawk transaction reflects our long-term strategy of expanding Arch's presence in the Illinois Basin and our confidence in building a partnership with an existing top 10 producer in the region," said Leer. "With continued supply declines in Appalachia, we expect the Illinois Basin to follow the Powder River Basin in playing a growing role in U.S. and global energy markets."

"This investment in Knight Hawk coupled with the eventual development of Arch's own Illinois reserves will allow us to capitalize on the expected future growth of the region," added Leer. "Specifically, the addition of Illinois Basin coals to our strong portfolio of Powder River Basin, Western Bituminous and Central Appalachian assets augments Arch's product capabilities to further expand our customer reach, both domestically and internationally."

Knight Hawk shipped nearly 4 million tons of coal from its mining operations in 2009. In addition to its interest in Knight Hawk, Arch still controls approximately 306 million tons of coal reserves in Illinois, three-fourths of which are low in chlorine content.

Operational Results

"We achieved higher realized prices and solid cost control in each of our operating regions during the second quarter of 2010 when compared with the first quarter," said John W. Eaves, Arch's president and chief operating officer. "These strong results helped to expand our consolidated operating margin per ton by nearly 40 percent in the quarter just ended."

                                      Arch Coal, Inc.

                                   2Q10          1Q10          2Q09
                                   ----          ----          ----

    Tons sold (in millions)          38.1          37.5          27.4
    Average sales price per
     ton                           $18.86        $17.74        $19.43
    Cash cost per ton              $13.87        $13.45        $16.26
    Cash margin per ton             $4.99         $4.29         $3.17
    Total operating cost per
     ton                           $16.17        $15.80        $18.74
    Operating margin per ton        $2.69         $1.94         $0.69



    Consolidated results may not tie to regional breakout due to
    rounding.
    Above figures exclude transportation costs billed to customers.
    Operating cost per ton includes depreciation, depletion and
    amortization per ton.
    Amortization of acquired coal supply agreements not included in
    results.
    Amounts reflected in this table exclude certain coal sales and
    purchases which have no effect
    on company results.  For further description of the excluded
    transactions, please refer to
    the supplemental regional schedule that can be found at
    http://investor.archcoal.com.


Second quarter 2010 consolidated operating margin expanded $0.75 per ton versus the first quarter. Average sales price per ton rose 6 percent over this same time period, benefiting from a larger percentage of Central Appalachian coal in the company's overall volume mix coupled with higher average price realizations across all operating segments. Operating costs per ton increased 2 percent in the second quarter of 2010 compared with the prior-quarter period, mainly driven by the increase in Central Appalachian coal in the company's overall volume mix. On a regional basis, costs were lower in the Powder River Basin but slightly higher in Central Appalachia and the Western Bituminous Region.

                                              Powder River Basin

                                      2Q10          1Q10          2Q09
                                      ----          ----          ----

    Tons sold (in millions)             31.0          30.6          21.3
    Average sales price per ton       $11.88        $11.64        $12.56
    Cash cost per ton                  $9.23         $9.33        $10.54
    Cash margin per ton                $2.65         $2.31         $2.02
    Total operating cost per ton      $10.67        $10.79        $11.84
    Operating margin per ton           $1.21         $0.85         $0.72



    Above figures exclude transportation costs billed to customers.
    Operating cost per ton includes depreciation, depletion and
    amortization per ton.
    Amortization of acquired coal supply agreements not included in
    results.


In the Powder River Basin, second quarter 2010 operating margin earned was $1.21 per ton, an increase of 42 percent versus the first quarter. Average sales price rose by $0.24 per ton in the second quarter of 2010 compared with the prior-quarter period, primarily reflecting higher pricing on market-based tons. Second quarter 2010 operating costs, excluding amortization of acquired coal supply agreements, declined $0.12 per ton versus the first quarter and $1.17 per ton or 10 percent versus the second quarter of 2009, benefiting from the integration of the former Jacobs Ranch mine into Arch's Black Thunder operation and lower diesel costs.

                                            Western Bituminous Region

                                  2Q10   1Q10    2Q09
                                  ----   ----    ----

    Tons sold (in millions)         4.0    4.1     3.5
    Average sales price per ton  $30.09 $28.97  $29.93
    Cash cost per ton            $22.39 $21.45  $26.06
    Cash margin per ton           $7.70  $7.52   $3.87
    Total operating cost per ton $26.99 $26.38  $31.49
    Operating margin per ton      $3.10  $2.59 ($1.56)



    Above figures exclude transportation costs billed to customers.
    Operating cost per ton includes depreciation, depletion and
    amortization per ton.


In the Western Bituminous region, second quarter 2010 volumes decreased 3 percent compared with the first quarter, due to two outages at the Dugout Canyon mine in Utah, which in total spanned 36 days in the quarter just ended. Despite Dugout Canyon's temporary idling during this time period, the region recorded an operating margin of $3.10 per ton, a 20 percent increase versus the first quarter. Average sales price rose by $1.12 per ton in the second quarter of 2010 compared with the prior-quarter period, reflecting new customer sales and a more favorable mix of customer shipments. Operating costs increased $0.61 per ton over the same time period, driven by the impact of lower volumes as well as the costs associated with the outages at Dugout Canyon, which totaled nearly $6.5 million in the quarter just ended.

                                               Central Appalachia

                                       2Q10          1Q10          2Q09
                                       ----          ----          ----

    Tons sold (in millions)              3.1           2.8           2.7
    Average sales price per ton       $73.96        $68.43        $60.66
    Cash cost per ton                 $49.19        $47.20        $49.26
    Cash margin per ton               $24.77        $21.23        $11.40
    Total operating cost per ton      $57.10        $55.57        $57.30
    Operating margin per ton          $16.86        $12.86         $3.36



    Above figures exclude transportation costs billed to customers.
    Operating cost per ton includes depreciation, depletion and
    amortization per ton.
    Arch acts as an intermediary on certain pass-through transactions
    that have no effect
    on company results.  In addition, Arch services some legacy sales
    contracts by
    purchasing and supplying third-party coal and records offsetting
    revenue and expenses
    against a reserve established to account for these transactions.
    These transactions are
    not reflected in this table.


In Central Appalachia, Arch earned $16.86 per ton in operating margin during the second quarter of 2010, representing a 31 percent increase versus the first quarter. Average sales price increased $5.53 per ton over this time period, reflecting a larger percentage of metallurgical coal shipments and higher pricing on metallurgical coal sales. Operating costs increased $1.53 per ton in the second quarter of 2010 compared with the prior-quarter period, due to efforts to increase metallurgical coal production and higher sales-sensitive costs.

Coal Market Trends

Coal market fundamentals continue to strengthen, as evidenced by the following:

  • Electricity generation grew 4 percent year-to-date through July 24, according to the Edison Electric Institute. Power demand accelerated during the second quarter, and has reached near record levels in July, according to internal estimates. For the first half of 2010, Arch forecasts that coal consumption for electric generation grew by roughly 25 million tons compared with the first half of 2009.
  • Domestic coal production in the first half of 2010 declined by 15.5 million tons, according to recently released MSHA data. Coal production decreased in both the eastern and western United States, with Central Appalachia declining by more than 12 million tons and the southern Powder River Basin declining by more than 2 million tons through the six months ended June 30, 2010.
  • Consequently, U.S. generator coal stockpile levels have declined considerably since the peak in Nov. 2009, and totaled approximately 178 million tons at the end of June 2010. While stockpiles in some U.S. regions remain above the five-year average, estimated stockpiles at Powder River Basin customers were 20 percent below year-ago levels and in line with the five-year average at the end of June, according to third-party estimates. Additionally, based on continued favorable weather trends in July, Arch now expects U.S. coal stockpiles to decline by an additional 20 million to 25 million tons by the end of the summer season.
  • The company estimates that U.S. coal exports in the first half of 2010 reached approximately 39 million tons, an increase of 45 percent versus the first six months of 2009. The strong 2010 export pace is on par with the robust 2008 level. For the full year, Arch expects domestic coal exports to total 75 million to 80 million tons, representing an increase of 15 million to 20 million tons versus 2009.
  • Arch continues to forecast robust growth in seaborne coal demand, primarily driven by the Asia-Pacific market. Global seaborne supply also is projected to grow but will not keep pace with demand, resulting in a shortfall of supply in global coal trade, according to company estimates.

"Favorable weather patterns, an improving U.S. economy, growth in global coal demand, and declining domestic coal production are all positively impacting coal markets," said Leer. "Arch has the ability to capitalize on these positive trends through our unpriced sales leverage and strong operating platform."

Sales Contract Portfolio

Arch continues to follow a patient approach to sales contracting in the current market. "We are selectively participating in new sales contract opportunities, with the goal of expanding our future profitability," said Eaves. "At the same time, we have maintained a significant unpriced sales portfolio for future years as we expect coal markets to strengthen further."

Since the last update, Arch selectively placed roughly 10 million tons of steam coal for annual delivery in 2011 and 2012, at prices that met or exceeded the regional average forward market price curve that prevailed at the time. (Roughly 5 million tons placed in the second quarter of 2010 resulted from a contract price re-opener.) Arch also committed roughly 1 million tons of metallurgical coal for 2010 delivery, at average netback mine prices above $130 per ton.

Based on current expected production levels, Arch has uncommitted volumes of 55 million to 65 million tons in 2011, and uncommitted volumes of 90 million to 100 million tons in 2012. In addition, Arch has approximately 5 million tons committed but not yet priced in 2010, and roughly 20 million tons committed but not yet priced in both 2011 and 2012.

2010 Guidance

Arch has adjusted its 2010 earnings guidance as follows:

  • Sales volume from company-controlled operations is expected to be in the 147 million to 155 million ton range, excluding purchased coal from third parties. Sales of metallurgical coal (coking and pulverized coal injection/PCI) - included within the company's full year volume guidance range - are expected to be in the 6 million to 7 million ton range.
  • Earnings per diluted share on a GAAP basis is projected to be between $0.98 and $1.26, including non-cash amortization of acquired coal supply agreements. Excluding this non-cash charge, adjusted earnings per diluted share would be in the range of $1.10 to $1.40.
  • Adjusted EBITDA is forecasted to be in the $718 million to $790 million range.
  • Capital spending is expected to remain in the $315 million to $335 million range.
  • Depreciation, depletion and amortization expense (excluding non-cash amortization of acquired coal supply agreements) is projected to be between $372 million and $376 million.

"The next energy market up-cycle is at hand and we believe that a sustained period of growth is underway," said Leer. "Increased power demand from rising GDP, growth in demand from new coal plant start-ups, a vibrant coal export market and continued rationalization of high-cost supply should lead to a stronger U.S. coal industry. We have positioned the company well to benefit from the changing landscape of domestic and global coal markets," said Leer.

A conference call regarding Arch Coal's second quarter 2010 financial results will be webcast live today at 11 a.m. E.D.T. The conference call can be accessed via the "investor" section of the Arch Coal Web site (<http://investor.archcoal.com/>).

St. Louis-based Arch Coal is the second largest U.S. coal producer, with revenues of $2.6 billion in 2009. Through its national network of mines, Arch supplies cleaner-burning, low-sulfur coal to U.S. power producers to fuel roughly 8 percent of the nation's electricity. The company also ships coal to domestic and international steel manufacturers as well as international power producers.

Forward-Looking Statements: This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from changes in the demand for our coal by the domestic electric generation industry; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from operational, geological, permit, labor and weather-related factors; from fluctuations in the amount of cash we generate from operations; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a description of some of the risks and uncertainties that may affect our future results, you should see the risk factors described from time to time in the reports we file with the Securities and Exchange Commission.

                        Arch Coal, Inc. and Subsidiaries
                  Condensed Consolidated Statements of Income
                     (In thousands, except per share data)


                                          Three Months Ended
                                               June 30,
                                               --------
                                           2010           2009
                                           ----           ----
                                              (Unaudited)
    Revenues
      Coal sales                       $764,295       $554,612

    Costs, expenses and other
      Cost of coal sales                570,861        467,521
      Depreciation, depletion and
       amortization                      87,759         68,419
      Amortization of acquired
       sales contracts, net               5,214             58
      Selling, general and
       administrative expenses           35,344         21,627
      Change in fair value of coal
       derivatives and coal trading
       activities, net                    4,587         (6,458)
      Gain on Knight Hawk
       transaction                     (41,577)              -
      Costs related to acquisition
       of Jacobs Ranch                        -          3,025
      Other operating income, net        (4,392)        (6,889)
                                         ------         ------
                                        657,796        547,303


          Income from operations        106,499          7,309

    Interest expense, net:
      Interest expense                 (35,125)        (20,657)
      Interest income                       623            417
                                            ---            ---
                                       (34,502)        (20,240)
                                        -------        -------


          Income (loss) before income
           taxes                         71,997        (12,931)
    Provision for (benefit from)
     income taxes                         5,723          2,230
                                          -----          -----
          Net income (loss)              66,274        (15,161)
          Less: Net (income) loss
           attributable to
           noncontrolling interest         (118)            35
          Net income (loss)
           attributable to Arch Coal,
           Inc.                         $66,156       $(15,126)
                                        =======       ========

    Earnings (loss) per common
     share
    Basic earnings (loss) per
     common share                         $0.41         $(0.11)
                                          =====         ======
    Diluted earnings (loss) per
     common share                         $0.41         $(0.11)
                                          =====         ======

    Weighted average shares
     outstanding
      Basic                             162,388        142,815
                                        =======        =======
      Diluted                           163,130        142,815
                                        =======        =======

    Dividends declared per common
     share                                $0.10          $0.09
                                          =====          =====

    Adjusted EBITDA (A)
     (unaudited)                       $199,354        $78,846
                                       ========        =======



                                            Six Months Ended
                                                June 30,
                                                --------
                                             2010            2009
                                             ----            ----
                                               (Unaudited)
    Revenues
      Coal sales                       $1,476,169      $1,235,652

    Costs, expenses and other
      Cost of coal sales                1,121,611       1,014,647
      Depreciation, depletion and
       amortization                       176,278         141,688
      Amortization of acquired
       sales contracts, net                15,967            (170)
      Selling, general and
       administrative expenses             62,510          46,741
      Change in fair value of coal
       derivatives and coal trading
       activities, net                     10,464          (6,986)
      Gain on Knight Hawk
       transaction                        (41,577)              -
      Costs related to acquisition
       of Jacobs Ranch                          -           6,375
      Other operating income, net          (7,783)        (12,524)
                                           ------         -------
                                        1,337,470       1,189,771


          Income from operations          138,699          45,881

    Interest expense, net:
      Interest expense                    (70,208)        (40,675)
      Interest income                         961           6,885
                                              ---           -----
                                          (69,247)        (33,790)
                                          -------         -------


          Income (loss) before income
           taxes                           69,452          12,091
    Provision for (benefit from)
     income taxes                           4,948          (3,320)
                                            -----          ------
          Net income (loss)                64,504          15,411
          Less: Net (income) loss
           attributable to
           noncontrolling interest           (144)             42
                                                              ---
          Net income (loss)
           attributable to Arch Coal,
           Inc.                           $64,360         $15,453
                                          =======         =======

    Earnings (loss) per common
     share
    Basic earnings (loss) per
     common share                           $0.40           $0.11
                                            =====           =====
    Diluted earnings (loss) per
     common share                           $0.40           $0.11
                                            =====           =====

    Weighted average shares
     outstanding
      Basic                               162,380         142,802
                                          =======         =======
      Diluted                             163,105         142,924
                                          =======         =======

    Dividends declared per common
     share                                  $0.19           $0.18
                                            =====           =====

    Adjusted EBITDA (A)
     (unaudited)                         $330,800        $193,816
                                         ========        ========



    (A) Adjusted EBITDA is defined and reconciled under "Reconciliation
    of Non-GAAP Measures" later in this release.

                        Arch Coal, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                                 (In thousands)


                                                              December
                                                 June 30,        31,
                                                       2010        2009
                                                       ----        ----
                                                (Unaudited)
    Assets
      Current assets
        Cash and cash
         equivalents                                $56,966     $61,138
        Trade accounts
         receivable                                 243,567     190,738
        Other receivables                            33,221      40,632
        Inventories                                 238,317     240,776
        Prepaid royalties                            49,441      21,085
        Deferred income
         taxes                                       20,937           -
        Coal derivative
         assets                                      14,598      18,807
        Other                                        88,094     113,606
                                                     ------     -------
                            Total current
                             assets                 745,141     686,782
                                                    -------     -------

      Property, plant and
       equipment, net                             3,346,294   3,366,186
                                                  ---------   ---------

      Other assets
        Prepaid royalties                            65,683      86,622
        Goodwill                                    113,701     113,701
        Deferred income
         taxes                                      335,412     354,869
        Equity investments                          150,136      87,268
        Other                                       134,173     145,168
                                                    -------     -------
                            Total other assets      799,105     787,628
                                                    -------     -------
                            Total assets         $4,890,540  $4,840,596
                                                 ==========  ==========

    Liabilities and
     Stockholders'
     Equity
      Current liabilities
        Accounts payable                           $157,965    $128,402
        Coal derivative
         liabilities                                  7,570       2,244
        Deferred income
         taxes                                            -       5,901
        Accrued expenses
         and other current
         liabilities                                226,365     227,716
        Current maturities
         of debt and short-
         term borrowings                            243,660     267,464
                                                    -------     -------
                            Total current
                             liabilities            635,560     631,727
      Long-term debt                              1,540,363   1,540,223
      Asset retirement
       obligations                                  317,257     305,094
      Accrued pension
       benefits                                      67,252      68,266
      Accrued
       postretirement
       benefits other
       than pension                                  45,441      43,865
      Accrued workers'
       compensation                                  27,676      29,110
      Other noncurrent
       liabilities                                   95,559      98,243
                                                     ------      ------
                            Total liabilities     2,729,108   2,716,528
                                                  ---------   ---------

      Redeemable
       noncontrolling
       interest                                       9,993       8,962

     Stockholders'
      Equity
        Common stock                                  1,643       1,643
        Paid-in capital                           1,728,806   1,721,230
        Treasury stock, at
         cost                                       (53,848)    (53,848)
        Retained earnings                           499,423     465,934
        Accumulated other
         comprehensive loss                         (24,585)    (19,853)
                                                    -------     -------
                            Total stockholders'
                             equity               2,151,439   2,115,106
                                                  ---------   ---------
                            Total liabilities
                             and stockholders'
                             equity              $4,890,540  $4,840,596
                                                 ==========  ==========


                     Arch Coal, Inc. and Subsidiaries
             Condensed Consolidated Statements of Cash Flows
                              (In thousands)


                                                   Six Months Ended
                                                       June 30,
                                                       --------
                                                     2010            2009
                                                     ----            ----
                                                      (Unaudited)
    Operating activities
    Net income                                    $64,504         $15,411
    Adjustments to reconcile to cash
     provided by operating activities:
      Depreciation, depletion and
       amortization                               176,278         141,688
      Amortization of acquired sales
       contracts, net                              15,967            (170)
      Prepaid royalties expensed                   16,048          17,173
      Gain on Knight Hawk transaction             (41,577)              -
      Gain on dispositions of property, plant
       and equipment                                 (111)           (286)
      Employee stock-based compensation
       expense                                      7,439           6,901
      Changes in:
          Receivables                             (44,057)         60,982
          Inventories                               2,458         (49,260)
          Coal derivative assets and liabilities   11,631          16,830
          Accounts payable, accrued expenses and
           other current liabilities               32,060         (51,760)
          Deferred income taxes                    (4,719)         (5,751)
          Other                                    23,434           8,433
                                                   ------           -----

        Cash provided by operating activities     259,355         160,191
                                                  -------         -------

    Investing activities
    Capital expenditures                         (171,958)       (246,562)
    Proceeds from dispositions of property,
     plant and equipment                              229             715
    Purchases of investments and advances
     to affiliates                                (14,249)         (9,463)
    Additions to prepaid royalties                (23,466)        (22,524)
    Reimbursement of deposits on equipment              -           3,209
                                                      ---           -----

        Cash used in investing activities        (209,444)       (274,625)
                                                 --------        --------

    Financing activities
    Net increase (decrease) in borrowings
     under lines of credit and commercial
     paper program                                (15,555)        134,349
    Net payments on other debt                     (8,249)         (9,763)
    Debt financing costs                             (437)         (4,574)
    Dividends paid                                (30,870)        (25,725)
    Issuance of common stock under
     incentive plans                                  137              58
    Contribution from non-controlling
     interest                                         891               -
                                                      ---             ---

        Cash provided by (used in) financing
         activities                               (54,083)         94,345
                                                  -------          ------

    Decrease in cash and cash equivalents          (4,172)        (20,089)
    Cash and cash equivalents, beginning of
     period                                        61,138          70,649
                                                   ------          ------

    Cash and cash equivalents, end of
     period                                       $56,966         $50,560
                                                  =======         =======


                                    Arch Coal, Inc. and Subsidiaries
                                  Reconciliation of Non-GAAP Measures
                                             (In thousands)

    Included in the accompanying release, we have disclosed certain
     non-GAAP measures as defined by Regulation G.
    The following reconciles these items to net income and cash flows as reported under GAAP.


    Adjusted EBITDA

    Adjusted EBITDA is defined as net income attributable to the Company before the effect of net interest 
    expense, income taxes, depreciation, depletion   and amortization and the amortization of acquired 
    sales contracts, net.  Adjusted EBITDA may also be adjusted for items that may not reflect the trend 
    of future results.

        Adjusted EBITDA is not a measure of financial performance in accordance with generally 
        accepted accounting principles, and items excluded to calculate Adjusted EBITDA are 
        significant in understanding and assessing our financial condition. Therefore, Adjusted 
        EBITDA should not be considered in isolation nor as an alternative to net income, income 
        from operations, cash flows from operations or as a measure of our profitability, liquidity or 
        performance under generally accepted accounting principles. We believe that Adjusted EBITDA 
        presents a useful measure of our ability to service and incur debt based on ongoing operations. 
        Furthermore, analogous measures are used by industry analysts to evaluate operating performance. 
        In addition, acquisition-related expenses are excluded to make results more comparable between
        periods.  Investors should be aware that our presentation of Adjusted EBITDA may not be 
        comparable to similarly titled measures used by other companies. The table below shows 
        how we calculate Adjusted EBITDA.



                              Three Months Ended          Six Months Ended
                                   June 30,                   June 30,
                                   --------                   --------
                                2010           2009      2010          2009
                                ----           ----      ----          ----
                                  (Unaudited)                (Unaudited)
    Net income (loss)        $66,274       $(15,161)  $64,504       $15,411
         Income tax expense
          (benefit)            5,723          2,230     4,948        (3,320)
         Interest expense,
          net                 34,502         20,240    69,247        33,790
         Depreciation,
          depletion and
          amortization        87,759         68,419   176,278       141,688
         Amortization of
          acquired sales
          contracts, net       5,214             58    15,967          (170)
         Costs related to
          acquisition of
          Jacobs Ranch             -          3,025         -         6,375
         Net (income) loss
          attributable to
          noncontrolling
          interest              (118)            35      (144)           42
                                ----            ---      ----           ---

         Adjusted EBITDA    $199,354        $78,846  $330,800      $193,816
                            ========        =======  ========      ========






    Adjusted net income and adjusted diluted
     earnings per common share

        Adjusted net income and adjusted diluted earnings per common
         share are adjusted for the after-tax impact of acquisition-
        related expenses and are not measures of financial performance in
         accordance with generally accepted accounting principles.
        Adjustments made to arrive at these amounts are significant in
         understanding and assessing our financial condition.
        Therefore, adjusted net income and adjusted diluted earnings per
         share should not be considered in isolation nor as an
        alternative to net income or diluted earnings per common share
         under generally accepted accounting principles.
        We believe that adjusted net income and adjusted diluted earnings
         per common share better reflect the trend of future
        results.





                            Three Months Ended
                                June 30,
                            ------------------
                                   2010
                                   ----
                               (Unaudited)
    Net income (loss)
     attributable to Arch
     Coal                       $66,156

         Amortization of
          acquired sales
          contracts, net          5,214
         Costs related to
          acquisition of Jacobs
          Ranch                       -
         Tax impact of
          adjustments            (1,903)
                                 ------

    Adjusted net income
     (loss) attributable to
     Arch Coal                  $69,467
                                =======
    Diluted weighted
     average shares
     outstanding                163,130
                                =======

    Adjusted diluted
     earnings per share           $0.43
                                  =====






    Reconciliation of 2010 Targets
    Adjusted EBITDA
                                                          Targeted Results
                                                             Year Ended
                                                          December 31, 2010
                                                          -----------------
                                                         Low           High
                                                         ---           ----
                                                             (Unaudited)
    Net income attributable to Arch Coal, Inc.         $160,000      $206,500
         Income tax expense (benefit)                    16,000        37,500
         Interest expense, net                          139,000       135,000
         Depreciation, depletion and amortization       372,000       376,000
         Amortization of acquired sales contracts, net   31,000        35,000
                                                         ------        ------

         Adjusted EBITDA                               $718,000      $790,000
                                                       ========      ========





    Adjusted net income and adjusted diluted earnings per share





                                                          Targeted Results
                                                             Year Ended
                                                          December 31, 2010
                                                          -----------------
                                                         Low           High
                                                         ---           ----
                                                             (Unaudited)
    Net income attributable to Arch Coal               $160,000      $206,000

         Amortization of acquired sales contracts, net   31,000        35,000
         Tax impact of adjustments                      (11,315)     (12,775)
                                                        -------       -------

    Adjusted net income attributable to Arch Coal      $179,685      $228,225
                                                       ========      ========
    Diluted weighted average shares outstanding         163,000       163,000
                                                        =======       =======

    Adjusted diluted earnings per share                   $1.10         $1.40
                                                          =====         =====

                       Arch Coal, Inc. and Subsidiaries
                        Schedule of Consolidated Debt
                                (In thousands)


                                                             December
                                                 June 30,       31,
                                                       2010       2009
                                                       ----       ----
                                                (Unaudited)

    Commercial paper                                $61,998    $49,453
    Revolving credit agreement                       65,000    120,000
    Accounts receivable securitization program      110,900     84,000
    6.75% senior notes ($950.0 million face
     value)                                         954,098    954,782
    8.75% senior notes ($600.0 million face
     value)                                         586,265    585,441
    Other                                             5,762     14,011
                                                      -----     ------
                                                  1,784,023  1,807,687
    Less: current maturities of debt and short-
     term borrowings                                243,660    267,464
    Long-term debt                               $1,540,363 $1,540,223
                                                 ========== ==========