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): April 24, 2009 (April 24, 2009)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation) |
1-13105 (Commission File Number) |
43-0921172 (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 April 24, 2009, Arch Coal, Inc. (the “Company”) issued a press release containing its first
quarter 2009 financial results and providing guidance on its 2009 forecasted results. A copy of
the press release is attached hereto as exhibit 99.1.
The information contained in Item 2.02 and the exhibit attached hereto 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 exhibits are attached hereto and filed herewith.
| Exhibit | ||
| No. | Description | |
99.1
|
Press release dated April 24, 2009 announcing first quarter 2009 results. |
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: April 24, 2009 | Arch Coal, Inc. |
|||
| By: | /s/ Robert G. Jones | |||
| Robert G. Jones | ||||
| Senior Vice President — Law, General Counsel and Secretary | ||||
2
Exhibit Index
| Exhibit | ||
| No. | Description | |
99.1
|
Press release dated April 24, 2009 announcing first quarter 2009 results. |
Exhibit 99.1
FOR FURTHER INFORMATION:
Deck S. Slone
Vice President, Government, Investor and Public Affairs
314/994-2717
Deck S. Slone
Vice President, Government, Investor and Public Affairs
314/994-2717
FOR IMMEDIATE RELEASE
Arch Coal, Inc. Reports First Quarter 2009 Results
Arch Coal records solid performance despite weak market conditions
Arch Coal records solid performance despite weak market conditions
Earnings Highlights
| Quarter Ended | ||||||||
| In $ millions, except per share data | 3/31/09 | 3/31/08 | ||||||
Revenues |
$ | 681.0 | $ | 699.4 | ||||
Income from Operations |
38.6 | 116.7 | ||||||
Net Income1 |
30.6 | 81.1 | ||||||
Fully Diluted EPS |
0.21 | 0.56 | ||||||
Adjusted EBITDA2 |
$ | 111.6 | $ | 189.5 | ||||
| 1/- | Net income attributable to ACI. | |
| 2/- | Adjusted EBITDA is defined and reconciled under “Reconciliation of Non-GAAP Measures” in this release. |
ST. LOUIS (April 24, 2009) — Arch Coal, Inc. (NYSE: ACI) today reported first quarter
2009 net income of $30.6 million, or $0.21 per fully diluted share, compared with $81.1
million, or $0.56 per fully diluted share, in the prior-year period. The company earned
adjusted earnings before interest, taxes, depreciation, depletion and amortization
(“EBITDA”) of $111.6 million in the quarter just ended compared with $189.5 million of
adjusted EBITDA earned in the first quarter of 2008 when market conditions were
considerably stronger. Sales volumes declined
10.8 percent and revenues declined 2.6 percent versus a year ago, in line with previously
announced reduced volume expectations.
“Arch continues to manage its business effectively and profitably in a severe U.S.
economic recession and depressed coal markets,” said Steven F. Leer, Arch’s chairman and
chief executive officer. “Our operations achieved strong safety and environmental
performances while turning in solid financial results for the first quarter, underscoring
the company’s commitment to our three key pillars of performance.”
During the first quarter of 2009, income from operations and adjusted EBITDA were
impacted by $3.4 million of expenses associated with the company’s pending acquisition of
the Jacobs Ranch mine. Arch also recorded a $6.9 million excise tax refund in the quarter
just ended, nearly all of which was reported as interest income.
1
“Looking ahead, given current weak electric generation and coal demand trends, we
have elected to further reduce volume and capital spending levels in 2009,” said Leer.
“In the near term, we remain acutely focused on controlling costs, eliminating
discretionary capital programs across the organization, preserving liquidity and
maintaining a strong balance sheet.”
“While recognizing the recessionary environment of 2009, we are also positioning
ourselves for an inevitable market rebound,” continued Leer. “We are executing on our
long-term growth strategy, as evidenced by the recently announced Jacobs Ranch
transaction. With our low-cost assets and reserves in place, we are poised to capitalize
when global energy markets strengthen in the future. Our goal is to profitably manage
through the downturn while never losing sight of running the company for the long term.”
Arch Enhances Long-Term Growth Prospects
On March 9, 2009, Arch announced its intent to purchase Rio Tinto’s Jacobs Ranch mine
in the Powder River Basin of Wyoming for $761 million. The transaction includes 381
million tons of low-cost coal reserves (at Dec. 31, 2008, as reported by Rio Tinto) that
are contiguous to Arch’s Black Thunder mine, as well as a high-speed rail loadout; a
recently added overland conveyor and near-pit crushing system; strong customer commitments;
an expansive fleet of highly
efficient mining equipment; and a highly skilled workforce. In 2008, Jacobs Ranch
produced 42.1 million tons of high-quality sub-bituminous coal for sale to power generators
located throughout the United States.
“Once completed, we believe this transaction will create significant value for Arch,
its customers and its shareholders,” said Leer. “Jacobs Ranch represents an excellent
strategic fit with Arch’s existing assets in the Powder River Basin. The integration of
Jacobs Ranch into the Black Thunder mine will create one of the world’s largest and most
efficient mining complexes. The transaction also will enable Arch to provide more
efficient and flexible service to its customers in the power generation industry.”
Arch currently anticipates financing this transaction with a combination of internally
generated cash flow from operations, borrowings under the company’s $800 million revolving
credit facility and other debt instruments. Consummation of the transaction is subject to
certain governmental and regulatory conditions and approvals and other customary
conditions.
Arch Operations Achieve Solid Results
“Our operations performed as expected in the first quarter of 2009,” said John W.
Eaves, Arch’s president and chief operating officer. “Our Central Appalachian operations
ran well, although price realizations declined due to lower metallurgical coal sales. Our
western operations achieved higher price realizations, but lower volume levels and higher
hedged diesel prices impacted unit costs. As predicted, our Western Bituminous region was
adversely affected by difficult geologic conditions encountered during West Elk’s
transition to the E-seam.”
“As we progress through 2009, we anticipate our cost structure will continue to be
impacted by lower volume levels at our operations driven by reduced coal demand as well as
higher hedged diesel costs,” said Eaves. “However, we do expect to offset some cost
pressures with cost control and mitigation efforts implemented at our mines.”
2
| Arch Coal, Inc. | ||||||||||||||
| 1Q09 | 4Q08 | 1Q08 | ||||||||||||
Tons sold (in millions) |
30.6 | 34.2 | 34.3 | |||||||||||
Average sales price per ton |
$ | 20.94 | $ | 19.76 | $ | 18.49 | ||||||||
Cash cost per ton |
$ | 16.53 | $ | 14.04 | $ | 13.05 | ||||||||
Cash margin per ton |
$ | 4.41 | $ | 5.72 | $ | 5.44 | ||||||||
Total operating cost per ton |
$ | 18.90 | $ | 16.24 | $ | 15.17 | ||||||||
Operating margin per ton |
$ | 2.04 | $ | 3.52 | $ | 3.32 | ||||||||
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.
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.
Consolidated average sales price increased $1.18 per ton in the first quarter of 2009
compared with the fourth quarter of 2008, due to higher price realizations in Arch’s
western operations. First quarter 2009 volumes declined 3.6 million tons from the
prior-quarter period. Consolidated per-ton operating costs increased $2.66 over the same
time period, reflecting higher operating costs in each of the company’s segments. Arch
earned $2.04 per ton in consolidated operating margin during the first quarter of 2009
compared with $3.52 per ton in the prior-quarter period.
| Powder River Basin | ||||||||||||||
| 1Q09 | 4Q08 | 1Q08 | ||||||||||||
Tons sold (in millions) |
23.1 | 25.8 | 25.8 | |||||||||||
Average sales price per ton |
$ | 13.25 | $ | 11.44 | $ | 11.15 | ||||||||
Cash cost per ton |
$ | 10.65 | $ | 9.20 | $ | 8.79 | ||||||||
Cash margin per ton |
$ | 2.60 | $ | 2.24 | $ | 2.36 | ||||||||
Total operating cost per ton |
$ | 11.92 | $ | 10.37 | $ | 9.93 | ||||||||
Operating margin per ton |
$ | 1.33 | $ | 1.07 | $ | 1.22 | ||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
In the Powder River Basin, first quarter 2009 volumes declined 2.7 million tons from
the prior-quarter period, reflecting planned reduced volume levels as well as the effect of
weather-related events that reduced shipments late in the quarter. Average sales price
rose by $1.81 per ton in the first quarter of 2009 compared with the fourth quarter of
2008, benefiting from stronger contract pricing offset to some degree by lower pricing on
market-indexed tons and a larger percentage of lower-priced Coal Creek tons. Operating
costs increased $1.55 per ton over the same time period, driven by the impact of lower
volume levels, higher sales-sensitive costs, increased repair and maintenance expense and
higher hedged diesel costs. The region’s operating margin expanded by $0.26 per
ton in the first quarter of 2009 compared with the prior-quarter period.
3
| Western Bituminous Region | ||||||||||||||
| 1Q09 | 4Q08 | 1Q08 | ||||||||||||
Tons sold (in millions) |
4.0 | 4.7 | 5.1 | |||||||||||
Average sales price per ton |
$ | 28.11 | $ | 25.99 | $ | 26.76 | ||||||||
Cash cost per ton |
$ | 25.40 | $ | 17.29 | $ | 15.92 | ||||||||
Cash margin per ton |
$ | 2.71 | $ | 8.70 | $ | 10.84 | ||||||||
Total operating cost per ton |
$ | 30.33 | $ | 21.76 | $ | 20.17 | ||||||||
Operating margin per ton |
($2.22 | ) | $ | 4.23 | $ | 6.59 | ||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
In the Western Bituminous Region, first quarter 2009 volumes declined 0.7 million tons
from the prior-quarter period, reflecting the impact of operational challenges at West Elk
and reduced volume levels. Average sales price increased $2.12 per ton in the first
quarter of 2009 compared with the fourth quarter of 2008, benefiting from stronger contract
pricing offset by a reduction in the coal quality shipped from West Elk. Operating costs
rose by $8.57 per ton over the same time period, driven by the expected difficult geologic
conditions in the first panel of the new coal seam at West Elk as well as the impact of
reduced volume levels. As a result, the Western Bituminous Region incurred an operating
loss of $2.22 per ton in the first quarter of 2009 compared with an operating profit of
$4.23 per ton in the prior-quarter period.
“West Elk has absorbed its start-up issues and is managing the situation increasingly
well,” said Eaves. “Going forward, we are continuing efforts to improve coal quality
through better segregation procedures and blending efforts. We also expect mining
conditions and coal quality to improve as the longwall progresses in the current panel.”
| Central Appalachia | ||||||||||||||
| 1Q09 | 4Q08 | 1Q08 | ||||||||||||
Tons sold (in millions) |
3.5 | 3.7 | 3.5 | |||||||||||
Average sales price per ton |
$ | 63.47 | $ | 69.80 | $ | 60.73 | ||||||||
Cash cost per ton |
$ | 45.22 | $ | 43.64 | $ | 40.45 | ||||||||
Cash margin per ton |
$ | 18.25 | $ | 26.16 | $ | 20.28 | ||||||||
Total operating cost per ton |
$ | 51.94 | $ | 50.13 | $ | 46.71 | ||||||||
Operating margin per ton |
$ | 11.53 | $ | 19.67 | $ | 14.02 | ||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
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.
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.
In Central Appalachia, volumes decreased 0.2 million tons and average price realizations declined $6.33 per ton in the
first quarter of 2009 compared with the fourth quarter of 2008, reflecting reduced metallurgical coal shipments and lower pricing
on metallurgical coal sales. Operating costs per ton rose slightly over the same time period, due to the impact of lower volume levels
and an unfavorable comparison with the fourth quarter of 2008, which included an excise tax refund of $9.3 million in the region’s results.
Arch’s Central Appalachian operations contributed $11.53 per ton in operating margin in the first quarter of 2009 versus $19.67 per ton in
the prior-quarter period.
4
Arch Remains Focused on Core Values
In the first quarter of 2009, Arch’s lost-time safety incident rate declined to 0.34
incidents per 200,000 hours worked — representing a 72-percent improvement from the
year-ago quarter. Two-thirds of Arch’s individual mines, preparation plants and terminals
completed the first three months of the year without a lost-time incident. Also during the
quarter, Arch’s Coal-Mac subsidiary earned West Virginia’s top honor for best safety
performance among the state’s surface coal mines in 2008. Additionally, both Coal-Mac and
Mountain Laurel were awarded West Virginia’s Mountaineer Guardian Awards for achievements
in employee safety.
Arch also received several awards to date in 2009 for ongoing environmental
stewardship efforts. Arch subsidiaries earned three top state honors in West Virginia for
wildlife preservation and environmental excellence in the past year. The West Elk mine in
Colorado received two state awards in the first quarter of 2009 for its proactive
reconstruction of Monument Dam and for conservation and recycling measures. Lastly, all
three mines in Utah — Sufco, Dugout Canyon and Skyline — recently earned state Earth Day
Awards for outstanding stewardship practices, particularly in the areas of wildlife habitat
enhancement and land restoration.
“We are off to a great start in 2009 in terms of safety and environmental
performance,” said Eaves. “We are proud of these awards, and of our ability to
continuously build upon our industry-leading safety and environmental records.”
Arch Further Reduces Capital Spending Levels in 2009
Arch traditionally invests a high percentage of its total capital budget in the first
quarter, and that was again the case in 2009. During the first quarter, Arch recorded
spending on land, equipment and infrastructure of approximately $192 million — $128 million
of which related to investment in reserve additions, including the final payment on the
Little Thunder lease in the Powder River Basin. The balance of capital spending in the
first quarter is attributable to maintenance programs and completion of the E-seam
transition at West Elk.
For full year 2009, Arch has elected to further trim its discretionary capital
spending beyond the previously announced reduced levels. The company now expects to spend
$195 million to $215 million for capital programs and $140 million to $160 million for land
and reserve additions during 2009.
“We are trimming Arch’s previously announced capital spending levels by more than $80
million in 2009 in response to current market conditions and to preserve our liquidity,”
said John T. Drexler, Arch’s senior vice president and chief financial officer. “While we
have a positive long-term outlook for U.S. coal markets, our projected capital expenditures
reflect our reduced planned volume levels and our expectation for soft near-term demand.”
Arch Further Reduces Production Levels in 2009
Given the current weakness in the U.S. economy and international and domestic coal
markets, Arch has again reduced its production targets for 2009. The company now projects
sales volumes from company-controlled operations of 116 million to 120 million tons for the
full year. Volumes are being reduced generally on a pro-rata basis by region. In
particular, the
company has elected to idle another dragline and a shovel at the Black Thunder mine.
5
“This further reduction in volume is predicated upon the weak demand trends and high
generator stockpiles that we’re seeing in the marketplace, and eliminates virtually all of
the company’s unsold tonnage for 2009,” said Leer. “We believe our efforts to reduce
volumes will preserve our low-cost reserve base for the future, when market conditions are
expected to substantially improve.”
As a result of lower metallurgical coal shipments in the first quarter, the company’s
planned reduced volume levels and the flexibility to profitably shift some low-cost tons
into steam coal markets, Arch now expects to sell between 1.5 million and 2.0 million tons
of coal into international and domestic metallurgical markets in 2009 versus 4.4 million
tons in 2008.
Given Arch’s revised volume levels and the signing of a few, small, 12-to-24 month
contracts during the first quarter of 2009, the company now has unpriced coal volumes of 5
million to 6 million tons in 2009, nearly all of which is committed. Based on 2009
forecasted production levels, Arch has uncommitted volumes of 25 million to 35 million tons
in 2010, with an additional 10 million tons committed but not yet priced. In 2011, the
company has uncommitted volumes of 75 million to 85 million tons, with an additional 10
million tons committed but not yet priced.
Coal Markets Remain Depressed; Current Trends Unsustainable Over Long Term
Arch believes current depressed coal market trends are unsustainable over the long
term. According to the Edison Electric Institute, overall electric generation has declined
3.4 percent year-to-date through April 18. Arch currently forecasts power generation to
decline roughly 4.0 percent this year, which would represent the largest decline in power
demand on record.
The company now expects U.S. coal consumption to decline more than 100 million tons in
2009, based on just released data through February as reported by the Energy Information
Administration. This expected decline in coal consumption reflects overall weaker power
generation trends, stronger nuclear utilization, increased precipitation in hydroelectric
power regions, fuel switching to natural gas, weak demand facing industrial customers,
reduced need for coking coal from domestic steel producers as well as the impact of lower
coal exports.
Given anticipated coal consumption declines and growing generator stockpile levels,
Arch believes that coal production and capital spending levels industry-wide are in the
process of significant rationalization, setting the stage for the next market upswing when
global economies begin to improve.
Year-to-date, coal production has declined 3.8 percent through the third week of
April, according to government estimates. Arch believes that the cash costs per ton for
more than one-third of current production in Central Appalachia are above forward coal
index price levels in the region, and thus anticipates additional supply rationalization if
weak pricing levels continue. The company also estimates that announced domestic
production cuts exceed 50 million tons to date in 2009, and expects that further production
cuts are likely as the year progresses — potentially marking 2009 as the largest U.S. coal
supply contraction in history.
6
Arch’s long-term outlook for domestic and global coal markets remains strong. The
company estimates that at least 170 gigawatts of new coal-fueled electric generating capacity are
currently under construction around the world – with 16 gigawatts under construction in the United
States. This domestic coal plant build-out translates into an estimated 55 million tons of
incremental annual coal demand to be phased in during the next four years.
Arch’s Guidance Reflects Reduced Volume and Capital Spending Levels in 2009
Based on the company’s current expectations and existing sales commitments and absent
any effect of the pending Jacobs Ranch transaction, Arch forecasts the following:
| • | As previously stated, 2009 sales volume from company-controlled operations in the 116 million to 120 million ton range, excluding purchased coal from third parties. | ||
| • | 2009 earnings per fully diluted share in the $0.20 to $0.60 range. | ||
| • | Adjusted EBITDA in the $395 million to $470 million range. | ||
| • | Capital spending in the $195 million to $215 million range, excluding reserve additions. | ||
| • | Depreciation, depletion and amortization expense in the $295 million to $305 million range. |
“Arch’s guidance range reflects the current challenging conditions in the broader U.S.
economy and global energy markets,” said Leer. “We are going to operate the company under
the assumption that no new coal commitments will be made for 2009 volumes, and our
production levels will be matched to existing sales commitments. While significantly
reduced production levels will have predictable short-term implications, we firmly believe
this strategy will provide long-term benefits for our company and our shareholders.”
Arch anticipates that second quarter 2009 will be impacted by reduced sales volume
levels across the company’s operating platform, some remaining coal quality issues at West
Elk and four longwall moves – three in Utah and one in West Virginia – scheduled in the
quarter.
“Looking ahead, Arch remains committed to following a market-driven strategy, with a
goal of matching our future production levels with our expectation of market demand,”
continued Leer. “We expect to weather the weak part of the energy market cycle, take
advantage of opportunities as they develop and be in a position to excel when markets
rebound. Our solid liquidity levels and strong balance sheet will allow the company to
capitalize on growth opportunities for the long term.”
A conference call regarding Arch Coal’s first quarter 2009 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 (www.archcoal.com
<http://www.archcoal.com>).
St. Louis-based Arch Coal is one of the largest U.S. coal producers, with revenues of
$3.0 billion in 2008. Through its national network of mines, Arch supplies
cleaner-burning, low-sulfur coal to fuel roughly 6 percent of the nation’s electricity.
The company also ships coal to domestic and international steel manufacturers as well as
international power producers.
7
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.
# # #
8
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 | ||||||||
| March 31, | ||||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Revenues |
||||||||
Coal sales |
$ | 681,040 | $ | 699,350 | ||||
Costs, expenses and other |
||||||||
Cost of coal sales |
547,126 | 514,404 | ||||||
Depreciation, depletion and amortization |
73,041 | 73,042 | ||||||
Selling, general and administrative expenses |
25,114 | 25,680 | ||||||
Change in fair value of coal derivatives and coal trading activities, net |
(528 | ) | (30,558 | ) | ||||
Costs related to acquisition of Jacobs Ranch |
3,350 | — | ||||||
Other operating (income) expense, net |
(5,635 | ) | 58 | |||||
| 642,468 | 582,626 | |||||||
Income from operations |
38,572 | 116,724 | ||||||
Interest expense, net: |
||||||||
Interest expense |
(20,018 | ) | (20,488 | ) | ||||
Interest income |
6,468 | 425 | ||||||
| (13,550 | ) | (20,063 | ) | |||||
Income before income taxes |
25,022 | 96,661 | ||||||
Provision for (benefit from) income taxes |
(5,550 | ) | 15,240 | |||||
Net income |
30,572 | 81,421 | ||||||
Less: Net (income) loss attributable to noncontrolling interest |
7 | (274 | ) | |||||
Net income attributable to Arch Coal, Inc. |
$ | 30,579 | $ | 81,147 | ||||
Earnings per common share |
||||||||
Basic earnings per common share |
$ | 0.21 | $ | 0.56 | ||||
Diluted earnings per common share |
$ | 0.21 | $ | 0.56 | ||||
Weighted average shares outstanding |
||||||||
Basic |
142,789 | 143,497 | ||||||
Diluted |
142,848 | 144,596 | ||||||
Dividends declared per common share |
$ | 0.09 | $ | 0.07 | ||||
Adjusted EBITDA (A) |
$ | 111,620 | $ | 189,492 | ||||
| (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)
Condensed Consolidated Balance Sheets
(In thousands)
| March 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 27,766 | $ | 70,649 | ||||
Trade accounts receivable |
224,964 | 215,053 | ||||||
Other receivables |
42,481 | 43,419 | ||||||
Inventories |
205,770 | 191,568 | ||||||
Prepaid royalties |
35,401 | 43,780 | ||||||
Deferred income taxes |
32,121 | 52,918 | ||||||
Coal derivative assets |
25,335 | 43,173 | ||||||
Other |
53,459 | 45,818 | ||||||
Total current assets |
647,297 | 706,378 | ||||||
Property, plant and equipment, net |
2,797,697 | 2,703,083 | ||||||
Other assets |
||||||||
Prepaid royalties |
86,151 | 66,918 | ||||||
Goodwill |
46,832 | 46,832 | ||||||
Deferred income taxes |
327,617 | 294,682 | ||||||
Equity investments |
89,207 | 87,761 | ||||||
Other |
94,948 | 73,310 | ||||||
Total other assets |
644,755 | 569,503 | ||||||
Total assets |
$ | 4,089,749 | $ | 3,978,964 | ||||
Liabilities and Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 165,955 | $ | 186,322 | ||||
Coal derivative liabilities |
10,044 | 10,757 | ||||||
Accrued expenses and other current liabilities |
201,689 | 249,203 | ||||||
Current maturities of debt and short-term borrowings |
205,167 | 213,465 | ||||||
Total current liabilities |
582,855 | 659,747 | ||||||
Long-term debt |
1,238,807 | 1,098,948 | ||||||
Asset retirement obligations |
260,876 | 255,369 | ||||||
Accrued pension benefits |
76,023 | 73,486 | ||||||
Accrued postretirement benefits other than pension |
58,943 | 58,163 | ||||||
Accrued workers’ compensation |
28,728 | 30,107 | ||||||
Other noncurrent liabilities |
80,409 | 65,526 | ||||||
Total liabilities |
2,326,641 | 2,241,346 | ||||||
Equity |
||||||||
Common stock |
1,448 | 1,447 | ||||||
Paid-in capital |
1,385,073 | 1,381,496 | ||||||
Treasury stock, at cost |
(53,848 | ) | (53,848 | ) | ||||
Retained earnings |
496,451 | 478,734 | ||||||
Accumulated other comprehensive loss |
(74,894 | ) | (79,096 | ) | ||||
Total Arch Coal, Inc. stockholders’ equity |
1,754,230 | 1,728,733 | ||||||
Noncontrolling interest |
8,878 | 8,885 | ||||||
Total equity |
1,763,108 | 1,737,618 | ||||||
Total liabilities and equity |
$ | 4,089,749 | $ | 3,978,964 | ||||
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Condensed Consolidated Statements of Cash Flows
(In thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Operating activities |
||||||||
Net income |
$ | 30,572 | $ | 81,421 | ||||
Adjustments to reconcile to cash provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
73,041 | 73,042 | ||||||
Prepaid royalties expensed |
9,461 | 8,863 | ||||||
Gain on dispositions of property, plant and equipment |
(54 | ) | (399 | ) | ||||
Employee stock-based compensation expense |
3,520 | 3,634 | ||||||
Changes in: |
||||||||
Receivables |
(9,005 | ) | (8,752 | ) | ||||
Inventories |
(14,202 | ) | (18,381 | ) | ||||
Coal derivative assets and liabilities |
11,298 | (29,597 | ) | |||||
Accounts payable, accrued expenses and other current liabilities |
(37,891 | ) | 16,025 | |||||
Deferred income taxes |
(14,440 | ) | (811 | ) | ||||
Other |
4,827 | 8,684 | ||||||
Cash provided by operating activities |
57,127 | 133,729 | ||||||
Investing activities |
||||||||
Capital expenditures |
(191,886 | ) | (244,491 | ) | ||||
Proceeds from dispositions of property, plant and equipment |
214 | 422 | ||||||
Purchases of investments and advances to affiliates |
(5,881 | ) | (812 | ) | ||||
Additions to prepaid royalties |
(20,315 | ) | (19,079 | ) | ||||
Reimbursement of deposits on equipment |
3,209 | — | ||||||
Cash used in investing activities |
(214,659 | ) | (263,960 | ) | ||||
Financing activities |
||||||||
Net proceeds from commercial paper and net borrowings on lines of credit |
137,265 | 150,646 | ||||||
Net payments on other debt |
(5,363 | ) | (4,414 | ) | ||||
Debt financing costs |
(4,449 | ) | — | |||||
Dividends paid |
(12,862 | ) | (10,010 | ) | ||||
Issuance of common stock under incentive plans |
58 | 2,163 | ||||||
Cash provided by financing activities |
114,649 | 138,385 | ||||||
Increase (decrease) in cash and cash equivalents |
(42,883 | ) | 8,154 | |||||
Cash and cash equivalents, beginning of period |
70,649 | 5,080 | ||||||
Cash and cash equivalents, end of period |
$ | 27,766 | $ | 13,234 | ||||
Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands)
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 as reported under GAAP.
Adjusted EBITDA:
Adjusted EBITDA is defined as net income before the effect of net interest expense, income taxes and our depreciation,
depletion and amortization; less the income or loss of subsidiaries attributable to noncontrolling interests.
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 | ||||||||
| March 31, | ||||||||
| 2009 | 2008 | |||||||
| (Unaudited) | ||||||||
Net income |
$ | 30,572 | $ | 81,421 | ||||
Income tax expense (benefit) |
(5,550 | ) | 15,240 | |||||
Interest expense, net |
13,550 | 20,063 | ||||||
Depreciation, depletion and amortization |
73,041 | 73,042 | ||||||
(Income) loss attributable to noncontrolling interest |
7 | (274 | ) | |||||
Adjusted EBITDA |
$ | 111,620 | $ | 189,492 | ||||
Reconciliation of Adjusted EBITDA to Net Income — 2009 Targets
| Targeted Results | ||||||||
| Year Ended | ||||||||
| December 31, 2009 | ||||||||
| Low | High | |||||||
| (Unaudited) | ||||||||
Net income attributable to Arch Coal, Inc. |
$ | 29,000 | $ | 86,000 | ||||
Income tax
benefit |
(14,000 | ) | (2,000 | ) | ||||
Interest expense, net |
85,000 | 81,000 | ||||||
Depreciation, depletion and amortization |
295,000 | 305,000 | ||||||
Adjusted EBITDA |
$ | 395,000 | $ | 470,000 | ||||