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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): April 4, 2007 (April 4, 2007)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
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| Delaware
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1-13105
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43-0921172 |
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(Commission File Number)
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(I.R.S. Employer Identification No.) |
| incorporation) |
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CityPlace One
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))
TABLE OF CONTENTS
Item 7.01 Regulation FD Disclosure.
On April 4, 2007, Steven F. Leer, Chairman and Chief Executive Officer of Arch Coal, Inc.,
will deliver a presentation at the Howard Weil 35th Annual Energy Conference that will
include written communication comprised of slides. The slides from the presentation are attached
hereto as Exhibit 99.1 and are hereby incorporated by reference.
A copy of the slides will be available at www.shareholder.com/archcoal/events.cfm for 30 days.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are attached hereto and furnished herewith.
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| Exhibit |
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Description |
99.1
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Slides from the presentation at the Howard Weil 35th Annual Energy Conference. |
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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.
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| Dated: April 4, 2007 |
Arch Coal, Inc.
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By: |
/s/ Robert G. Jones
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Robert G. Jones |
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Vice President – Law, General Counsel and
Secretary |
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2
Exhibit Index
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| Exhibit |
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Description |
99.1
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Slides from the presentation at the Howard Weil 35th Annual Energy Conference. |
exv99w1
Exhibit 99.1
| Howard Weil 35th Annual Energy Conference |
| Steven F. Leer Chairman and
CEO |
| April 4, 2007 New Orleans,
LA |
| Forward-looking information |
| This presentation 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. |
| This presentation includes certain non-GAAP financial measures, including Adjusted EBITDA. These
non-GAAP financial measures are not measures of financial performance in accordance with generally
accepted accounting principles and may exclude items that are significant in understanding and
assessing our financial results. Therefore, these measures should not be considered in isolation or
as an alternative to net income from operations, cash flows from operations, earnings per
fully-diluted share or other measures of profitability, liquidity or performance under generally
accepted accounting principles. You should be aware that |
| our presentation of these measures may not be comparable to similarly-titled measures used by other
companies. A reconciliation of these financial measures to the most comparable measures presented
in accordance with generally accepted accounting principles has been included at the end of this
presentation. |
| U.S. coal markets weakened in 2006, but may be on the rebound |
| Factors
causing demand decline |
| 2006 (in millions of tons) ` Mild winter; mild summer (East) |
| ` Near-record nuclear availability Supply +26 ` Strong
hydro year |
| Low gas prices allowed coal -10 Demand stockpile
conservation efforts |
| ` Led to
generator
stockpile
increase of an
estimated
35 million
tons |
| ` Stronger gas prices ` Seaborne coal markets strengthening |
| ` Return of normal weather ` Met market – tugging at steam |
` Electric generation up 5% YTD ` Long-term supply pressures in East
` Coal production flat YTD ` New plants on horizon |
| ` Renewed CAPP permitting issues
Slide 3 Source: ACI and NMA |
| EIA projects U.S. coal use and market share to increase over next 25 years |
| Market Share by Fuel Type U.S. Fuel Prices |
| (in billion kWh) ($/mm BTU, at 3/30/07) |
| Nuclear $12.04 19% $9.89 17% Natural Gas 20% 5% Hydro 7% 4%
$0.52 Renewable 3% PRB 8800 Nat. Gas Crude Oil 2% |
| Crude Oil FOB mine (2008) wellhead (Jan. 2008)
2%
2006 2030 |
| Slide 4 Source: EIA, Platts and NYMEX |
| Increased utilization at existing coal-fueled
generation plants can expand demand
Just filling in troughs could equate to an
incremental 100+ million tons of coal demand (1)
Peaking
Oil/Gas
Nat Gas (cc)
Inter-
mediate Coal (cycling)
Coal (baseload)
Baseload
Nuclear
Hydro
Summer Spring Winter Fall
(1) Assumes 80% peak utilization vs. 73% average utilization
Assumes a 14.8-million-ton increase for every 1% increase in utilization
Slide 5 Source: ACI (for illustrative purposes only) |
| Construction is now underway on more than 11 GW of new coal-fueled capacity |
| WPS Weston #4 (Wisc.) Cleco Rodemacher #3 (La.) OPP Nebraska City #2 (Neb.) 500 MW / June
2008 600 MW / June 2008 663 MW / May 2009 |
| .S. Power Boulder Valley (Nev.) MidAmer. Council Bluffs (Iowa) Elm Road Generating (Wis.) 200 MW /
Jan. 2010 790 MW / May 2007 600 MW / July 2009 |
| Powder River Basin is expected to supply majority of new coal-fueled capacity |
| Under Construction Advanced Development Early Development
11.0 10.5 20.7 GW GWGW
PRB Illinois PRB Illinois Other PRB Illinois
Other CAPP NAPP NAPP WBIT Lignite NAPP Lignite &nbs
p; CAPP |
| Total coal demand of Total coal demand of Total coal
demand of 40.8 million tons 36.1 million tons 74.3 million tons Powder River Basin
Powder River Basin Powder River Basin expected to capture expected to
capture expected to capture 33.8 million tons 16.9 million tons 26.3 million tons |
| New coal-fueled generating capacity announcements total over 90 GW. |
| Slide 7 Source: Platts and ACI estimates |
| We expect railroads to facilitate future growth in moving Western coals eastward |
| Railroads have facilitated |
| doubling of production in 39 Miles Caballo Mine Powder River Basin since 1992
(North End of Joint Line) |
| New expansion projects are Black Thunder
underway 3rd Main Reno Jct (North Load out)
added in Black Thunder
` 39 miles of triple track to be 2006 (South Load out) added north of Reno Junction West Nacco Jct |
| ` 15 miles of quadruple track to Converse Jct
4th Main
be added at Logan Hill @ Logan
` 15 Miles
42 miles of quadruple track Bill planned for Shawnee Junction
These expansions are projected 4th Main Walker
42 Miles
to increase capacity by at least
75 million tons Shawnee Jct |
| Over the long-term, clean-coal technologies can create new markets for coal |
| A plug-in hybrid is one Coal can be converted Gasification can
reduce entry for coal into the into ultra-low-sulfur emissions & transform transportation market
diesel fuel coal into pipeline-quality natural gas |
| ` Likely to create ` At current oil prices, significant coal-to-liquids
` IGCC & CCS should off-peak demand facilities appear enable coal to for
electricity economically prosper in a carbon feasible constrained world |
| Public policy initiatives aimed at domestic energy security are leading to energy legislation
and financial incentives for clean-coal-technology development. |
Debate on potential future CO2 regulation
is focused on energy security and climate |
| Cannot reduce dependence on foreign oil without increased coal use |
| ` Can advance clean-coal technology investment |
| Progress on carbon capture and storage (CCS) is accelerating |
| ` Stabilizing CO2 concentrations without CCS is virtually
impossible |
| ` Recent announcement by AEP shows real progress on CCS |
| IGCC plants are now gaining traction |
| ` Technology providers eager to establish the industry standard |
| Most realistic way to de-carbonize automotive fleet is to electrify (employing
centralized CCS) |
| ` Plug-in hybrids increasingly viewed as key part of solution |
| ` Off-peak power demand will most benefit lowest cost fuels |
| Coal will remain a vital part of America’s –and the developing world’s – energy future |
| U.S. Energy Reserves Cumulative 4-Yr Percent Change (in trillion Btu) in
Global Energy Consumption |
| (2001-2005, in millions toe) |
| Coal (95%)
Coal 23.0%
Coal (50%)
Hydro 12.1% |
| Nuke 4.4% Oil (2%) Natural Gas (3%) |
| China & India Rest of World |
| Slide 11 Source: EIA, Platts and BP Statistical Review of World Energy 2006 |
| One of the largest U.S. coal producers |
| Headquartered in St. Louis, MO, with large, modern mining operations and strategic
reserves spread across the U.S. |
| Core business is providing U.S. power generators with clean-burning, low-sulfur
coal for electric generation |
` Supplies roughly 11% of U.S. coal needs
` Provides source fuel for roughly 6% of U.S. electricity |
| Industry leader in mine safety, productivity and land reclamation |
| Arch’s long-term success hinges on
three crucial areas of performance
Operating the world’s safest
coal mines
Acting as highly responsible
stewards of the land and good
corporate citizens
Delivering superior shareholder value
` Achieving industry-leading rates of
productivity
` Implementing continuous
improvements and cost control
initiatives
` Serving the growing needs of our
utility and industrial customers
Slide 13 Source: ACI |
| Arch has the cleanest balance sheet among major U.S. coal producers |
| Legacy Liabilities of Largest U.S. Coal Companies 12/31/06 (in millions)
Pension Reclamation $3,357 Postretirement Medical Workers’ Comp |
| $2,267
$771 $397 $337
Competitor #1 Competitor #2 Competitor #3 Competitor #4 Arch Coal |
| Slide 14 Source: SEC filings compiled by ACI |
| Arch’s national scope of operations includes presence in four major U.S. coal basins |
1. Coal Creek
2. Black Thunder |
| 12
12 4 Knight Hawk 21
3 3
45 Centra |
| Western Bituminous 3. Mingo Logan |
| 1. Skyline 5. Lone Mountain
2. Dugout
3. Sufco
4. West Elk |
| Reserve base of 2.9 billion tons (over 85% low-sulfur coal)
Leading operating position in all three major low-sulfur basins Equity
interest in an Illinois Basin producer, Knight Hawk |
| Arch is expanding coal markets through investment in coal-conversion technologies |
| Medicine Bow Mine End Products |
| 11,000 bpd diesel fuel CTL
Facility* |
| gasificationtechnology chemical Arch as mine
operator feedstock FT liquefaction technology |
| SNC-Lavalin to provide EPC services |
| Arch owns a 25% stake in DKRW Advanced Fuels |
| Long-term contract in place with Sinclair Oil Corporation to sell
ultra-low-sulfur diesel fuel from planned CTL facility |
| Arch’s 2006 operating results demonstrated significant progress |
| Earnings per share Adjusted EBITDA |
| (per diluted share basis) (in millions) $1.80 $545 $290
$0.17
2005 2006 2005 2006 |
| Achieved rising price realization per ton in all regions due to the roll-off
of lower-priced contracts |
| Expanded operating margin per ton in all regions due to better price
realization and cost control initiatives |
| Note: Reconciliation appears on last page of handout, may not tie due to rounding |
| Arch plans to reduce production levels and contain costs in weak market cycle |
| Reduce production targets (charts in millions)
` Preserve value of reserves for 2006 $502 future when demand rebounds 2007E |
| Lower capital spending 127 133 |
| ` Align spending with market
demand and reduced Volume midpoint* Capex midpoint** |
| ` Focus on cost control Unpriced tons at 12/31/06 |
| Maintain upside exposure 110 — 120
` Unpriced position translates 75 — 85 into more upside potential when market rebounds |
| ` Creates long-term value for 11 — 16 shareholders |
| *Volume excludes pass-through tons associated with Magnum transaction |
| Slide 18 **Capex excludes reserve additions Source: ACI |
| Arch’s future strategic growth possibilities are exciting |
| Invest in core businesses to enhance profit growth and return on capital as well
as evaluate opportunities to further upgrade and expand reserve base Consider
acquisitions or investments that strategically fit and create shareholder value Expand
market for coal through Btu conversion technologies that provide significant upside |
| Reconciliation to Non-GAAP Measures (Adjusted EBITDA) |
| 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. |
| Year Ended December 31, 2006 2005 (Unaudited) Net income $ 260,931 $ 38,123
Income tax (benefit) expense 7,650 (34,650) Interest expense, net 60,639 63,120
Depreciation, depletion and amortization 208,354 212,301 Expenses from early debt
extinguishment and other non-operating 7,447 11,264 |
| Adjusted EBITDA $545,021$290,158
Slide 20 Source: ACI |
