UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 21, 2006 (July 21, 2006)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 1-13105 | 43-0921172 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
CityPlace One
One CityPlace Drive, Suite 300
St. Louis, Missouri 63141
(Address, including zip code, of principal executive offices)
One CityPlace Drive, Suite 300
St. Louis, Missouri 63141
(Address, including zip code, of principal executive offices)
Registrant’s telephone number, including area code: (314) 994-2700
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On July 21, 2006, Arch Coal, Inc. issued a press release containing its second quarter 2006
financial results. A copy of the press release is attached hereto as exhibit 99.1.
In accordance with General Instruction B.2 of Form 8-K, the information contained in Item 2.02
and the exhibits attached to this Current Report shall not be deemed “filed” for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise
subject to the liabilities of that section, nor shall they be deemed incorporated by reference in
any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be
expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibit is attached hereto and filed herewith.
| Exhibit | ||
| No. | Description | |
99.1
|
Press release dated July 21, 2006. |
1
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: July 21, 2006 | Arch Coal, Inc. |
|||
| By: | /s/ Robert G. Jones | |||
| Robert G. Jones | ||||
| Vice President -- Law, General Counsel and Secretary | ||||
2
Exhibit Index
| Exhibit | ||
| No. | Description | |
99.1
|
Press release dated July 21, 2006. |
EXHIBIT 99.1
News from Arch Coal, Inc. |
 |
|
| FOR FURTHER INFORMATION: | ||
Deck S. Slone
Vice President, Investor
Relations and Public Affairs
314/994-2717
Vice President, Investor
Relations and Public Affairs
314/994-2717
FOR IMMEDIATE RELEASE
July 21, 2006
July 21, 2006
Arch Coal, Inc. Reports Second Quarter Results
EPS increases to $0.48 compared to $0.01 in prior-year period
EPS increases to $0.48 compared to $0.01 in prior-year period
Earnings Highlights
| Quarter Ended | Six Months Ended | ||||||||||||||||
| In $ millions, except per share data | 6/30/2006 | 6/30/2005 | 6/30/2006 | 6/30/2005 | |||||||||||||
Revenue |
$ | 637.5 | $ | 633.8 | $ | 1,272.0 | $ | 1,234.3 | |||||||||
Income from Operations |
99.8 | 21.5 | 194.0 | 47.4 | |||||||||||||
Net Income |
69.7 | 3.5 | 130.4 | 10.0 | |||||||||||||
Fully Diluted EPS1 |
0.48 | 0.01 | 0.90 | 0.05 | |||||||||||||
Adjusted EBITDA2 |
$ | 151.6 | $ | 73.6 | $ | 291.5 | $ | 150.5 | |||||||||
1/- Reflects a two-for-one stock split on May 15, 2006.
2/- Adjusted EBITDA is defined and reconciled under “Reconciliation of Non-GAAP Measures” in this release.
St. Louis — Arch Coal, Inc. (NYSE: ACI) today reported second quarter 2006 consolidated
net income of $69.7 million, or $0.48 per fully diluted share, compared with $3.5 million, or $0.01
per fully diluted share, in the prior-year period. All earnings per share figures reflect the
impact of the company’s two-for-one stock split on May 15, 2006. During the quarter, Arch also
raised its dividend by 50 percent to $0.06 per share on a post-split basis.
Arch achieved a more than fourfold increase in income from operations during the second
quarter of 2006, reaching $99.8 million compared with $21.5 million from the prior-year period.
Adjusted EBITDA more than doubled, rising to $151.6 million over the year-ago period, while
revenues increased modestly despite the disposition of select Central Appalachian operations at the
end of 2005.
During the first half of 2006, Arch reported consolidated net income of $130.4 million, or
$0.90 per fully diluted share, compared with $10.0 million, or $0.05 per fully diluted share,
during the first half of 2005. Income from operations more than quadrupled to $194.0 million and
adjusted EBITDA nearly doubled to $291.5 million over the prior-year period.
1
“Arch Coal achieved a strong operating performance in the second quarter of 2006, with
substantial increases in EPS, operating income and EBITDA,” said Steven F. Leer, Arch’s chairman
and chief executive officer. “Arch continued to deliver solid financial results despite rail
bottlenecks and weaker near-term market conditions. At the same time, we began production at our
Coal Creek surface mine in Wyoming and our Skyline longwall mine in Utah, managed costs very
effectively and made good progress on our ongoing process improvement initiatives.”
Arch Executes A Strong Operating Performance
“We are pleased with the company’s operational performance during the second quarter and first
half of 2006,” said John W. Eaves, Arch’s president and chief operating officer. “We look to build
upon this strong performance in the second half of the year.”
| Arch Coal, Inc. | ||||||||||||||||||
| 2Q05 | FY05 | 1Q06 | 2Q06 | |||||||||||||||
Tons Sold (in millions) |
34.6 | 138.8 | 29.6 | 32.0 | ||||||||||||||
Average sales price per ton |
$ | 17.52 | $ | 17.25 | $ | 17.53 | $ | 16.78 | ||||||||||
Cash cost per ton |
$ | 14.83 | $ | 14.81 | $ | 12.35 | $ | 11.51 | ||||||||||
Cash margin per ton |
$ | 2.69 | $ | 2.44 | $ | 5.18 | $ | 5.27 | ||||||||||
Total operating cost per ton |
$ | 16.33 | $ | 16.33 | $ | 13.88 | $ | 13.11 | ||||||||||
Operating margin per ton |
$ | 1.19 | $ | 0.92 | $ | 3.65 | $ | 3.67 | ||||||||||
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.
Arch acts as an intermediary on certain pass-through transactions that have no effect
on company results. These transactions are not reflected in this table.
A supplemental regional schedule for all quarters beginning with FY04 can be found
in the investor section of www.archcoal.com.
While consolidated volumes and price realization mix were impacted by the disposition of
select Central Appalachian operations at the end of 2005, operating margin per ton increased
substantially due to the roll-off of lower-priced sales contracts and the restructuring of Arch’s
Central Appalachian assets.
| Powder River Basin | ||||||||||||||||||
| 2Q05 | FY05 | 1Q06 | 2Q06 | |||||||||||||||
Tons Sold (in millions) |
22.0 | 90.0 | 22.2 | 24.1 | ||||||||||||||
Average sales price per ton |
$ | 8.11 | $ | 8.26 | $ | 11.34 | $ | 11.44 | ||||||||||
Cash cost per ton |
$ | 6.22 | $ | 6.11 | $ | 7.46 | $ | 7.48 | ||||||||||
Cash margin per ton |
$ | 1.89 | $ | 2.15 | $ | 3.88 | $ | 3.96 | ||||||||||
Total operating cost per ton |
$ | 7.40 | $ | 7.30 | $ | 8.64 | $ | 8.64 | ||||||||||
Operating margin per ton |
$ | 0.71 | $ | 0.96 | $ | 2.70 | $ | 2.80 | ||||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
In 2005, Arch acted as an intermediary on certain pass-through transactions that
had no effect on company results. These transactions are not reflected in this table.
2
In the Powder River Basin, sales volume increased 2.1 million tons in the second quarter of
2006 compared with the second quarter of 2005, driven by improved rail service compared to the
significant disruptions experienced last year. The restart of Coal Creek also contributed to the
higher sales volume from the year-ago period. Average price realization rose by $3.33 per ton over
the same time period resulting from the roll-off of lower-priced sales contracts. Operating margin
per ton nearly quadrupled compared with the prior-year period.
When compared with the first quarter of 2006, sales volume rose by 1.9 million tons and
average price realization increased modestly. Of the 24.1 million tons shipped in the second
quarter, approximately 600,000 tons related to Coal Creek. Average price realization and operating
margin rose modestly over the same time period as gradually improving rail performance offset
higher unit start-up costs at Coal Creek.
In the second half of 2006, Arch expects its shipments to accelerate in the PRB with the
anticipated completion of additional rail infrastructure and the further ramp up of Coal Creek.
Additionally, Arch expects the increasing volumes at Coal Creek to result in a modestly lower
average price realization as well as a lower average unit cost during the year’s second half.
| Western Bituminous | ||||||||||||||||
| 2Q05 | FY05 | 1Q06 | 2Q06 | |||||||||||||
Tons Sold (in millions) |
4.7 | 18.2 | 4.1 | 4.5 | ||||||||||||
Average sales price per ton |
$ | 19.36 | $ | 19.01 | $ | 23.31 | $ | 22.08 | ||||||||
Cash cost per ton |
$ | 11.72 | $ | 13.90 | $ | 14.82 | $ | 10.74 | ||||||||
Cash margin per ton |
$ | 7.64 | $ | 5.11 | $ | 8.49 | $ | 11.34 | ||||||||
Total operating cost per ton |
$ | 13.58 | $ | 15.73 | $ | 17.03 | $ | 13.23 | ||||||||
Operating margin per ton |
$ | 5.78 | $ | 3.28 | $ | 6.28 | $ | 8.85 | ||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
In the Western Bituminous Region, sales volume declined 200,000 tons in the second quarter of
2006 compared with the second quarter of 2005 as shipment timing and a longwall move impacted the
current quarter. Average price realization rose by $2.72 per ton over the same time period
resulting from the roll-off of lower-priced sales contracts. Operating margin per ton increased
over 50% due to higher price realization as well as an insurance recovery of $10 million associated
with the outage of the West Elk longwall mine in late 2005 and early 2006.
When compared with the first quarter of 2006, sales volume rose by more than 400,000 tons due
to the resumption of operations at West Elk and the start up of Skyline. Of the 4.5 million tons
shipped in the second quarter, approximately 200,000 tons related to Skyline. Average price
realization declined over the same time period due principally to a less favorable contract mix.
Operating margin expanded $2.57 per ton from the prior-quarter period due principally to improved
productivity at the mines resulting from the restart of West Elk in March 2006. (Both the first
and second quarter of 2006 benefited from separate insurance recoveries of $10 million related to
West Elk.)
3
| Central Appalachia | |||||||||||||||||||||
| 2Q05 | FY05 | 1Q06 | 2Q06 | ||||||||||||||||||
Tons Sold (in millions) |
8.0 | 30.5 | 3.4 | 3.3 | |||||||||||||||||
Average sales price per ton |
$ | 42.44 | $ | 42.73 | $ | 51.34 | $ | 48.55 | |||||||||||||
Cash cost per ton |
$ | 40.47 | $ | 41.01 | $ | 41.56 | $ | 41.95 | |||||||||||||
Cash margin per ton |
$ | 1.97 | $ | 1.72 | $ | 9.78 | $ | 6.60 | |||||||||||||
Total operating cost per ton |
$ | 42.63 | $ | 43.32 | $ | 44.59 | $ | 45.55 | |||||||||||||
Operating margin per ton |
($0.19 | ) | ($0.59 | ) | $ | 6.75 | $ | 3.00 | |||||||||||||
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. These transactions are not reflected in this table. In addition,
Arch services some legacy Magnum contracts by purchasing and supplying third-
party coal and records offsetting revenue and expenses against a reserve established
to account for these transactions.
In Central Appalachia, volume comparisons between the second quarter of 2006 and the second
quarter of 2005 were impacted by the divestiture of select operations in December 2005. Average
price realization rose by $6.11 per ton over the prior-year period resulting from the roll-off of
lower-priced sales contracts. Operating margin per ton improved dramatically over the same time
period, from a negative $0.19 to $3.00 in the second quarter in 2006 resulting from the
restructuring of Central Appalachian operations.
When compared with the first quarter of 2006, average price realization in Central Appalachia
declined due to lower and delayed metallurgical coal sales as well as lower realizations on spot
sales. Some of the delayed metallurgical coal sales are expected to occur in the second half of
2006. Operating cost per ton increased modestly during the same time period as a result of lower
sales volume in the quarter.
Western Rail Performance Improves Modestly
While Arch has seen a modest increase in the number of daily trains servicing Black Thunder,
additional throughput by the railroads will be needed to reach the mine’s planned production rate.
One such project to increase throughput is the construction of the triple track section of the
joint line adjacent to Black Thunder. The additional track and supporting infrastructure is
expected to be completed late in the third quarter.
“The completion of a third track south of Reno Junction — where Black Thunder’s rail spur
joins the main line — is expected to increase the overall fluidity of the rail system and should
benefit Black Thunder in particular,” said Eaves.
Arch Maintains Significant Unpriced Position
Given the weaker near-term pricing environment, most of Arch’s sales contracting activity
during the second quarter consisted of short-term deals associated with its uncommitted 2006
production volumes. Arch’s 2007 and 2008 unpriced positions remain virtually unchanged from the
first quarter of 2006.
4
Based on current expected production over the next three years, Arch has unpriced volumes of 7
million to 11 million tons in 2006; 55 million to 65 million tons in 2007; and 85 million to 95
million tons in 2008.
The company still has a significant percentage of its coal under sales contracts signed in
earlier periods, when market conditions were weaker than the current environment. Within the next
three years, the vast majority of these commitments will expire, and volumes are expected to be
re-priced based on market conditions at the time.
“We continue to expect strong domestic and global demand growth for coal, coupled with supply
pressures in the Appalachian basins, to exert a positive influence on coal pricing in coming
years,” said Leer. “The mild winter and spring have weakened near-term market conditions in 2006,
but the energy needs of the U.S. and the rest of the world are growing dramatically. Arch believes
that maintaining a significant unpriced position at this time is strategically advantageous.”
Long-Term Fundamentals in Coal Markets Remain Strong Despite Near-Term Weakness
Arch believes that long-term fundamentals of the U.S. coal industry remain intact, despite
weaker near-term conditions.
| • | A healthy U.S. economy will lead to increased electric generation demand, the majority of which will be supplied by coal. The U.S. economy is growing, with annualized gross domestic product up a strong 5.6% for the first quarter of 2006. Furthermore, the industrial production index, a measure of domestic manufacturing activity, reported annualized growth of 4.5% through June 2006. | ||
| • | The cost of competing fuels continues to rise, creating a compelling economic incentive for utilities to maximize coal-fired utilization at existing power plants. The price of natural gas in the futures market for delivery this winter remains above $9 per million Btus, a far more expensive option for generating electricity than coal. | ||
| • | Planned new coal-fueled capacity announcements in the U.S. have reached 93 gigawatts, equating to approximately 325 million tons of incremental coal demand and increasing coal’s installed base by 30%, according to government and industry sources. At least 19 gigawatts — representing 67 million tons of new annual coal demand — are expected to come online by 2010. | ||
| • | Worldwide coal markets are robust, fueled by increasing coal consumption in fast-growing economies such as China and India. In addition, tight supply conditions, driven by insufficient investment in the development of reserves, inadequate transportation infrastructure and labor challenges, continue to positively impact seaborne coal prices. | ||
| • | Crude oil is currently trading above $70 per barrel. Furthermore, the geopolitical risk associated with the location of major world oil (and natural gas) reserves has continued to bring the public policy debate of domestic energy security to the forefront. As a result, the outlook for the advancement of Btu-conversion technologies, such as coal-to-gas and coal-to-liquids, remains favorable for the coal industry. |
5
Furthermore, Arch believes that certain factors affecting some Central Appalachian coal
producers may benefit the U.S. coal industry, and Arch in particular, in coming years. Beset by
higher costs, permitting issues and a softer pricing environment, weaker Appalachian coal producers
may struggle to keep up the current pace of production.
Arch’s Capital Spending Program, Focused on Organic Growth, Is On Target for 2006
In 2006, Arch continues to target capital spending of $420 million, excluding reserve
additions. Incremental production resulting from the completion of these projects is expected to
total around 23 million tons per year by 2008.
| Projected Capital Spending | ||||
| In $ millions | 2006 | |||
Major Expansion Projects |
$ | 185 | ||
Productivity Enhancements |
70 | |||
Replacement / Maintenance |
165 | |||
Capital Spending (excl. reserves) |
$ | 420 | ||
Reserve Additions |
$ | 130 | ||
Total |
$ | 550 | ||
“Arch is executing on its organic growth initiatives with the start-up of the Coal Creek mine
in the Powder River Basin and Skyline’s North Lease mine in the Western Bituminous Region, as well
as the development of the Mountain Laurel complex in Central Appalachia,” said Eaves. “Possessing
superior geology, low capital costs, strategic location, or a combination of all three, these
projects are expected to deliver an attractive return on our investment.”
Arch Affirms Guidance For 2006
Arch affirmed its guidance for full year 2006, with earnings per share projected to be within
the range of $1.87 to $2.12, on a post-split, fully diluted share basis, while adjusted EBITDA is
expected to be in the $570 million to $610 million range. Total sales volume is expected to be
between 135 million to 140 million tons, excluding pass-through tons of approximately 8 million
associated with legacy Magnum contracts that Arch is currently servicing.
“We expect a strong second half performance,” said Leer. “Furthermore, Arch remains sharply
focused on delivering shareholder value via anticipated increases in price realizations, margins,
earnings and cash flow in coming years, benefiting from contract roll-offs and strong operational
execution.”
Arch currently anticipates three longwall moves in the third quarter of 2006 as a result of
shifting two moves from June to July. Additionally, ongoing railroad maintenance and construction
activity, coupled with the timing of miners’ vacations and associated mine maintenance, should
impact operations in the upcoming quarter. “Consequently, we expect the third quarter to be our
weakest operating period of the year while the fourth quarter is expected to be our strongest,”
said Leer.
6
“We believe that the long-term fundamentals of U.S. coal markets remain strong,” said Leer.
“Coal’s economic advantage over natural gas in electric generation markets has led to a significant
level of new coal-fueled capacity announcements, which is expected to translate into meaningful
incremental coal demand by the end of the decade. Additionally, public interest in domestic energy
independence and the price of oil is swinging momentum in favor of real investment in
Btu-conversion technologies.”
“Going forward, we expect our size, distinct asset portfolio and low-cost operations to enable
us to deliver strong financial results, while positioning Arch to capitalize on the very promising
long-term outlook for the U.S. coal industry,” said Leer.
A conference call regarding Arch Coal’s second quarter financial results will be webcast live
today at 11 a.m. EDT. The conference call can be accessed via the “investor” section of the Arch
Coal Web site (http://investor.archcoal.com).
Arch Coal is the nation’s second largest coal producer, with subsidiary operations in Wyoming,
Colorado, Utah, West Virginia, Kentucky and Virginia. Through these operations, Arch provides the
fuel for approximately 6% of the electricity generated in the United States.
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.
# # #
7
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)
Condensed Consolidated Statements of Income
(In thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Revenues |
||||||||||||||||
Coal sales |
$ | 637,476 | $ | 633,797 | $ | 1,272,029 | $ | 1,234,262 | ||||||||
Costs, expenses and other |
||||||||||||||||
Cost of coal sales |
471,896 | 542,073 | 954,846 | 1,061,714 | ||||||||||||
Depreciation, depletion and amortization |
51,713 | 52,142 | 97,534 | 103,045 | ||||||||||||
Selling, general and administrative expenses |
20,642 | 17,979 | 38,523 | 40,255 | ||||||||||||
Other operating (income) expense, net |
(6,623 | ) | 110 | (12,859 | ) | (18,198 | ) | |||||||||
| 537,628 | 612,304 | 1,078,044 | 1,186,816 | |||||||||||||
Income from operations |
99,848 | 21,493 | 193,985 | 47,446 | ||||||||||||
Interest expense, net: |
||||||||||||||||
Interest expense |
(15,923 | ) | (19,389 | ) | (31,995 | ) | (37,460 | ) | ||||||||
Interest income |
600 | 1,681 | 2,515 | 3,526 | ||||||||||||
| (15,323 | ) | (17,708 | ) | (29,480 | ) | (33,934 | ) | |||||||||
Other non-operating expense |
||||||||||||||||
Expenses resulting from early debt extinguishment and termination
of hedge accounting for interest rate swaps |
(1,406 | ) | (2,066 | ) | (3,064 | ) | (4,133 | ) | ||||||||
Other non-operating income (expense) |
(402 | ) | 455 | (137 | ) | 70 | ||||||||||
| (1,808 | ) | (1,611 | ) | (3,201 | ) | (4,063 | ) | |||||||||
Income before income taxes |
82,717 | 2,174 | 161,304 | 9,449 | ||||||||||||
Provision for (benefit from) income taxes |
13,000 | (1,300 | ) | 30,900 | (600 | ) | ||||||||||
Net income |
69,717 | 3,474 | 130,404 | 10,049 | ||||||||||||
Preferred stock dividends |
(124 | ) | (1,797 | ) | (187 | ) | (3,594 | ) | ||||||||
Net income available to common shareholders |
$ | 69,593 | $ | 1,677 | $ | 130,217 | $ | 6,455 | ||||||||
Earnings per common share (A) |
||||||||||||||||
Basic earnings per common share |
$ | 0.49 | $ | 0.01 | $ | 0.91 | $ | 0.05 | ||||||||
Diluted earnings per common share |
$ | 0.48 | $ | 0.01 | $ | 0.90 | $ | 0.05 | ||||||||
Weighted average shares outstanding |
||||||||||||||||
Basic |
143,043 | 126,988 | 142,852 | 126,280 | ||||||||||||
Diluted |
145,164 | 129,040 | 145,018 | 128,316 | ||||||||||||
Dividends declared per common share |
$ | 0.06 | $ | 0.04 | $ | 0.10 | $ | 0.08 | ||||||||
Adjusted EBITDA (B) |
$ | 151,561 | $ | 73,635 | $ | 291,519 | $ | 150,491 | ||||||||
| (A) | All share and per share information reflects the Company’s two for one stock split on May 15, 2006 | |
| (B) | 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)
Condensed Consolidated Balance Sheets
(In thousands)
| June 30, | December 31, | |||||||
| 2006 | 2005 | |||||||
| (unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 13,190 | $ | 260,501 | ||||
Trade receivables |
246,141 | 179,220 | ||||||
Other receivables |
43,396 | 40,384 | ||||||
Inventories |
120,484 | 130,720 | ||||||
Prepaid royalties |
10,602 | 2,000 | ||||||
Deferred income taxes |
91,419 | 88,461 | ||||||
Other |
44,121 | 28,278 | ||||||
Total current assets |
569,353 | 729,564 | ||||||
Property, plant and equipment, net |
2,115,584 | 1,829,626 | ||||||
Other assets |
||||||||
Prepaid royalties |
113,370 | 106,393 | ||||||
Goodwill |
40,032 | 40,032 | ||||||
Deferred income taxes |
195,322 | 223,856 | ||||||
Other |
122,994 | 121,969 | ||||||
| 471,718 | 492,250 | |||||||
Total assets |
$ | 3,156,655 | $ | 3,051,440 | ||||
Liabilities and stockholders’ equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 198,129 | $ | 256,883 | ||||
Accrued expenses |
214,646 | 245,656 | ||||||
Short-term borrowings and current portion of long-term debt |
64,387 | 10,649 | ||||||
Total current liabilities |
477,162 | 513,188 | ||||||
Long-term debt |
1,007,296 | 971,755 | ||||||
Asset retirement obligations |
172,792 | 166,728 | ||||||
Accrued postretirement benefits other than pension |
42,189 | 41,326 | ||||||
Accrued workers’ compensation |
52,926 | 53,803 | ||||||
Other noncurrent liabilities |
86,370 | 120,399 | ||||||
Total liabilities |
1,838,735 | 1,867,199 | ||||||
Stockholders’ equity |
||||||||
Preferred stock |
1 | 2 | ||||||
Common stock |
1,439 | 719 | ||||||
Paid-in capital |
1,385,340 | 1,367,470 | ||||||
Retained deficit |
(75,056 | ) | (164,181 | ) | ||||
Unearned compensation |
— | (9,947 | ) | |||||
Treasury stock, at cost |
— | (1,190 | ) | |||||
Accumulated other comprehensive income (loss) |
6,196 | (8,632 | ) | |||||
Total stockholders’ equity |
1,317,920 | 1,184,241 | ||||||
Total liabilities and stockholders’ equity |
$ | 3,156,655 | $ | 3,051,440 | ||||
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Condensed Consolidated Statements of Cash Flows
(In thousands)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2006 | 2005 | |||||||
| (Unaudited) | ||||||||
Operating activities |
||||||||
Net income |
$ | 130,404 | $ | 10,049 | ||||
Adjustments to reconcile to cash
provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
97,534 | 103,045 | ||||||
Prepaid royalties expensed |
3,774 | 10,687 | ||||||
Net gain on disposition of assets |
(150 | ) | (20,103 | ) | ||||
Employee stock-based compensation expense |
5,540 | 8,395 | ||||||
Other non-operating expense |
3,201 | 4,063 | ||||||
Changes in: |
||||||||
Receivables |
(69,933 | ) | (47,371 | ) | ||||
Inventories |
(30,441 | ) | (15,889 | ) | ||||
Accounts payable and accrued expenses |
(86,809 | ) | 21,521 | |||||
Income taxes |
34,062 | 2,515 | ||||||
Other |
(1,717 | ) | 25,744 | |||||
Cash provided by operating activities |
85,465 | 102,656 | ||||||
Investing activities |
||||||||
Capital expenditures |
(391,124 | ) | (139,355 | ) | ||||
Purchases of investments/advances to affiliates |
(2,955 | ) | — | |||||
Proceeds from dispositions of property, plant and equipment |
417 | 20,395 | ||||||
Additions to prepaid royalties |
(19,353 | ) | (22,961 | ) | ||||
Cash used in investing activities |
(413,015 | ) | (141,921 | ) | ||||
Financing activities |
||||||||
Net proceeds from (payments on) revolver and lines of credit |
95,900 | (25,000 | ) | |||||
Payments on long-term debt |
(5,939 | ) | (6,411 | ) | ||||
Debt financing costs |
(2,095 | ) | (2,298 | ) | ||||
Dividends paid |
(14,502 | ) | (13,741 | ) | ||||
Issuance of common stock under incentive plans |
6,875 | 22,930 | ||||||
Cash provided by (used in) financing activities |
80,239 | (24,520 | ) | |||||
Decrease in cash and cash equivalents |
(247,311 | ) | (63,785 | ) | ||||
Cash and cash equivalents, beginning of period |
260,501 | 323,167 | ||||||
Cash and cash equivalents, end of period |
$ | 13,190 | $ | 259,382 | ||||
Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
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 as reported under GAAP.
The following reconciles these items to net income as reported under GAAP.
Adjusted EBITDA and Adjusted EBITDA Excluding Special Items:
Adjusted EBITDA is defined as net income before the effect of net interest expense; income taxes; our depreciation,
depletion and amortization; expenses resulting from early extinguishment of debt; and other non-operating expenses.
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. 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, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Net income |
$ | 69,717 | $ | 3,474 | $ | 130,404 | $ | 10,049 | ||||||||
Income tax expense (benefit) |
13,000 | (1,300 | ) | 30,900 | (600 | ) | ||||||||||
Interest expense, net |
15,323 | 17,708 | 29,480 | 33,934 | ||||||||||||
Depreciation, depletion and amortization |
51,713 | 52,142 | 97,534 | 103,045 | ||||||||||||
Expenses from early debt extinguishment and other non-operating |
1,808 | 1,611 | 3,201 | 4,063 | ||||||||||||
Adjusted EBITDA |
$ | 151,561 | $ | 73,635 | $ | 291,519 | $ | 150,491 | ||||||||
Adjusted EBITDA Excluding Special Items |
||||||||||||||||
Adjusted EBITDA |
$ | 151,561 | $ | 73,635 | $ | 291,519 | $ | 150,491 | ||||||||
Long-term incentive compensation plan expense |
— | — | — | 9,937 | ||||||||||||
Adjusted EBITDA excluding special items |
$ | 151,561 | $ | 73,635 | $ | 291,519 | $ | 160,428 | ||||||||
Operating Income Excluding Special Items: |
||||||||||||||||
Operating income |
$ | 99,848 | $ | 21,493 | $ | 193,985 | $ | 47,446 | ||||||||
Long-term incentive compensation plan expense |
— | — | — | 9,937 | ||||||||||||
Operating income excluding special items |
$ | 99,848 | $ | 21,493 | $ | 193,985 | $ | 57,383 | ||||||||
Net Income Available to Common Shareholders and Earnings Per Common Share Excluding Special Items:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Net income |
$ | 69,717 | $ | 3,474 | $ | 130,404 | $ | 10,049 | ||||||||
Other non-operating expense |
1,808 | 1,611 | 3,201 | 4,063 | ||||||||||||
Long-term incentive compensation plan expense |
— | — | — | 9,937 | ||||||||||||
Tax impact of the excluded items |
(409 | ) | (161 | ) | (726 | ) | (1,400 | ) | ||||||||
Total impact of items affecting net income |
1,399 | 1,450 | 2,475 | 12,600 | ||||||||||||
Net income excluding special items |
$ | 71,116 | $ | 4,924 | $ | 132,879 | $ | 22,649 | ||||||||
Preferred stock dividends applicable to the dilution calculation |
(124 | ) | (1,797 | ) | (187 | ) | (3,594 | ) | ||||||||
Net income available to common shareholders excluding special items |
$ | 70,992 | $ | 3,127 | $ | 132,692 | $ | 19,055 | ||||||||
Fully diluted shares outstanding |
145,164 | 129,040 | 145,018 | 128,316 | ||||||||||||
Earnings per fully diluted common share excluding special items |
$ | 0.49 | $ | 0.02 | $ | 0.91 | $ | 0.15 | ||||||||