Table of Contents
UNITED STATES 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): April 26, 2007 (April 26, 2007)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 1-13105 | 43-0921172 | ||
| (State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
| incorporation) |
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))
TABLE OF CONTENTS
| Item 7.01 Regulation FD Disclosure | ||||||||
| Item 8.01 Other Events | ||||||||
| Item 9.01 Financial Statements and Exhibits | ||||||||
| Signatures | ||||||||
| Exhibit Index | ||||||||
| Slides from Presentation | ||||||||
| Press Release | ||||||||
Table of Contents
Item 7.01 Regulation FD Disclosure.
Steven F. Leer, Chairman and Chief Executive Officer of Arch Coal, Inc. (the “Company”), will
deliver a presentation at the Company’s 2007 annual meeting of stockholders to be held at 10:00
a.m., St. Louis time, on April 26, 2007. 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
http://investor.archcoal.com/events.cfm for 30 days.
Item 8.01 Other Events.
On April 26, 2007, the board of directors of the Company authorized an increase in the
quarterly common stock cash dividend from $0.06 per share to
$0.07 per share. A quarterly cash
dividend of $0.07 per share of common stock will be paid on June 15, 2007 to stockholders of record
on June 1, 2007. A copy of the press release announcing the increase is attached hereto as Exhibit
99.2 and is hereby incorporated by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are attached hereto and filed herewith.
| Exhibit | ||
| No. | Description | |
99.1
|
Slides from presentation at the 2007 annual meeting of stockholders. | |
99.2
|
Press release dated April 26, 2007. |
1
Table of Contents
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: April 26, 2007 | Arch Coal, Inc. | |||||
| By: | /s/ Robert G. Jones | |||||
| Robert G. Jones | ||||||
| Vice President – Law, General Counsel and Secretary | ||||||
2
Table of Contents
Exhibit Index
| Exhibit | ||
| No. | Description | |
99.1
|
Slides from presentation at the 2007 annual meeting of stockholders. | |
99.2
|
Press release dated April 26, 2007. |
Exhibit 99.1
| Annual Shareholders Meeting Saint Louis, Missouri April 26, 2007 Unearthing ValueArch Coal, Inc. |
| 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 degree s, 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 t hose 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 me asures 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. Slide 2 |
| In 2006, Arch Coal unearthed value for our shareholders through: Growth Opportunities `Coal Creek `Skyline `Mountain Laurel `Knight Hawk Technology Leadership `DKRW Advanced Fuels Stock Optimization `Two-for-one stock split `50% increase in stock dividend `Share buy-back program And we laid the foundation for even greater growth in the years ahead Slide 3Source: ACI |
| Coal will remain a vital part of America’s –and the developing world’s – energy future U.S. Energy ReservesCumulative 4-Yr Percent Change (in trillion Btu)in Global Energy Consumption 2001-2005 Coal (95%)(in millions of tons of oil equivalent) Coal (50%)Coal23.0% Hydro12.1% Nat Gas11.7% Oil7.9% Oil (2%)Natural Gas (3%)Nuke4.4% China & IndiaRest of World Slide 4Source: EIA, Platts and BP Statistical Review of World Energy 2006 |
| EIA projects U.S. coal use and market share to increase over next 25 years Market Share by Fuel TypeU.S. Fuel Prices (in billion kWh)($/mm BTU, at 3/30/07) 57% Coal 49% 15% Nuclear$12.04 19% $9.89 17% Natural Gas 20% 5% Hydro 7% 4%$0.52 Renewable 3% PRB 8800Nat. Gas Crude Oil 2% Crude OilFOB mine (2008)wellhead (Jan. 2008) 2% 20062030 Slide 5Source: EIA, Platts and NYMEX |
| 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 2008600 MW / June 2008663 MW / May 2009 T.S. Power Boulder Valley (Nev.) MidAmer. Council Bluffs (Iowa) Elm Road Generating (Wis.) 200 MW / Jan. 2010790 MW / May 2007600 MW / July 2009 Slide 6Source: ACI |
| Arch’s PRB operations may prove advantageous for sourcing new coal plants Under ConstructionAdvanced DevelopmentEarly Development 10.4 10.0 21.4 GWGWGW PRBCAPPWBITPRBCAPPIllinois PRBCAPPIllinois IllinoisNAPPLigniteOtherNAPPLignite Total coal demand Total coal demand of Total coal demand of of 40 million tons34 million tons79 million tons Powder River Basin Powder River Basin Powder River Basin expected to capture expected to capture expected to capture 35 million tons12 million tons34 million tons Net new coal-fueled generating capacity announcements total close to 80 GW Slide 7Source: Platts and ACI estimates |
| 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 marketdiesel fuelcoal into pipeline-quality natural gas `Likely to create `At current oil prices, significantcoal-to-liquids `IGCC & CCS should off-peak demand facilities appear enable coal to for electricityeconomically prosper in a carbon feasibleconstrained world Public policy initiatives aimed at domestic energy security are leading to energy legislation and financial incentives for clean-coal-technology development Slide 8Source: ACI |
| 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 Slide 9Source: ACI |
| About Arch Coal, Inc. One of the largest coal producers in the nation with a leading position in all three major low-sulfur basins 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 Talented workforce operates large, modern mines Industry leader in mine safety, productivity and reclamation Slide 10Source: ACI |
| Arch’s national scope of operations includes presence in four major U.S. coal basins Powder River Basin Illinois Basin 1.Coal Creek 2.Black Thunder 1 2 12 4Knight Hawk21 33 45Central Appalachia 1.Mountain Laurel 2.Coal-Mac Western Bituminous3. Mingo Logan 4.Cumberland River 1.Skyline5. Lone Mountain 2.Dugout 3.Sufco 4.West Elk Leading operating position in all three major low-sulfur basins Equity interest in an Illinois Basin producer, Knight Hawk Slide 11Source: ACI |
| Arch’s long-term success hinges on three crucial areas of performance Achieving industry-leading productivity rates `Three of top eight most productive longwall mines `Sufco most productive underground mine in 2006 `Surface mines produced 210% more tons than industry average Operating the world’s safest coal mines `Sentinels of Safety — Safest underground coal mine `Second best-year on record for lost-time incidents `Outperformed the industry safety average by three times Acting as responsible citizens and environmental stewards `National Good Neighbor Award `Greenlands Award — Best reclamation in West Virginia Slide 12Source: ACI and Public Sources |
| 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 $3,357Postretirement Medical Workers’ Comp $2,267 $771 $397$337 Competitor #1 Competitor #2 Competitor #3 Competitor #4Arch Coal Slide 13Source: SEC filings compiled by ACI |
| U.S. coal markets weakened in 2006, but appears to be on the rebound Factors causing demand decline 2006 (in millions of tons)`Mild winter; mild summer (East) +26 `Near-record nuclear availability Supply+26`Strong hydro year +8 Low gas prices allowed coal -10Demandstockpile conservation efforts Led to generator stockpile increase of an estimated 35 million tons Correction may be near `Stronger gas prices`Seaborne coal markets strengthening `Return of normal weather `Met market – tugging at steam `Electric generation up 4.6% YTD`Long-term supply pressures in East `Coal production down 1.8% YTD `New plants on horizon `Renewed CAPP permitting issues Slide 14Source: ACI and NMA |
| We’ve reduced production levels and are containing costs in weak market cycle Reduce production targetsGuidance (charts in millions) `Preserve value of reserves for 2006$502 future when demand rebounds2007E $260 Lower capital spending133 127 `Align spending with market demand and reduced production levelsVolume midpoint*Capex midpoint** Focus on cost controlUnpriced tons at 3/30/07 110 — 120 Maintain upside exposure `Unpriced position translates 70 — 80 into more upside potential when market rebounds `Creates long-term value for 10-15 shareholders 2007 2008 2009 *Volume excludes pass-through tons associated with Magnum transaction Slide 15 **Capex excludes reserve additionsSource: ACI |
| Arch’s 2006 operating results demonstrated significant progress Earnings per shareAdjusted EBITDA (per diluted share basis)(in millions) $1.80$545 $290 $0.17 2005 20062005 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 Slide 16Source: ACI |
| Arch records solid performance in 1Q07 despite a weak market environment Earnings per shareAdjusted EBITDA (per diluted share basis)(in millions) $0.42$140.0$108.5 $0.20 1Q06 1Q071Q06 1Q07 Reduced production volume targets impacted 1Q results Benefited from higher price realizations at our Western operations compared to 4Q06 Plan to expand on our results and expect improving market fundamentals as the year progresses Note: Reconciliation appears on last page of handout, may not tie due to rounding Slide 17Source: 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 Slide 18Source: ACI |
| Reconciliation to Non-GAAP Measures (Adjusted EBITDA) 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 believ e 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, 20062005 (Unaudited) Net income$ 260,931$ 38,123 Income tax (benefit) expense7,650(34,650) Interest expense, net60,63963,120 Depreciation, depletion and amortization 208,354212,301 Expenses from early debt extinguishment and other non-operating7,44711,264 Adjusted EBITDA$ 545,021$ 290,158 Slide 19Source: ACI |
| Reconciliation to Non-GAAP Measures (Adjusted EBITDA) Adjusted EBITDA: Adjusted EBITDA is defined as net income before the effect of net interest expense; income taxes; 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 believ e 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 tables below show how we calculate Adjusted EBITDA. Three Months Ended March 31, 20072006 (Unaudited) Net income$ 28,724$ 60,687 Income tax expense4,65017,900 Interest expense, net16,58714,157 Depreciation, depletion and amortization 57,62045,821 Expenses from early debt extinguishment and other non-operating9021,393 Adjusted EBITDA$ 108,483$ 139,958 Slide 20Source: ACI |
Exhibit 99.2
News from
Arch Coal, Inc.
Arch Coal, Inc.
FOR FURTHER INFORMATION:
Media — Kim Link (314) 994-2936
Media — Kim Link (314) 994-2936
FOR IMMEDIATE RELEASE
Thursday, April 26, 2007
Thursday, April 26, 2007
Arch Coal Announces Dividend Increase
ST. LOUIS (April 26, 2007) — Arch Coal, Inc. (NYSE:ACI) today announced that its board of
directors has approved an increase in the quarterly cash dividend from $0.06 per common share to
$0.07 per common share. The dividend is payable June 15, 2007 to shareholders of record on June 1,
2007.
“I’m pleased to announce Arch’s third dividend increase in four years,” said Steven F. Leer,
chairman and chief executive officer of Arch Coal. “Today’s announcement reflects the board’s
continued confidence in Arch’s long-term success.”
St. Louis-based Arch Coal is one of the nation’s largest coal producers. Through its national
network of mines, Arch provides the fuel for approximately 6 percent 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.