Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2009
| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number: 333-107569-03
Arch Western Resources, LLC
(Exact name of registrant as specified in its charter)
| Delaware | 43-1811130 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
| One CityPlace Drive, Suite 300, St. Louis, Missouri | 63141 | |
| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (314) 994-2700
Indicate by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
At August 14, 2009, the registrant’s common equity consisted solely of undenominated
membership interests, 99.5% of which were held by Arch Western Acquisition Corporation and 0.5% of
which were held by a subsidiary of BP p.l.c.
Table of Contents
PART I
FINANCIAL INFORMATION
FINANCIAL INFORMATION
Item 1. Financial Statements.
Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands)
Condensed Consolidated Statements of Income
(In thousands)
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (unaudited) | ||||||||||||||||
Revenues |
||||||||||||||||
Coal sales |
$ | 360,806 | $ | 459,953 | $ | 777,056 | $ | 897,162 | ||||||||
Costs, expenses and other |
||||||||||||||||
Cost of coal sales |
320,295 | 359,126 | 681,667 | 695,849 | ||||||||||||
Depreciation, depletion and amortization |
36,361 | 37,870 | 74,598 | 77,526 | ||||||||||||
Selling, general and administrative expenses |
7,240 | 9,333 | 17,068 | 16,890 | ||||||||||||
Other operating income, net |
(922 | ) | (1,169 | ) | (1,871 | ) | (2,120 | ) | ||||||||
| 362,974 | 405,160 | 771,462 | 788,145 | |||||||||||||
Income (loss) from operations |
(2,168 | ) | 54,793 | 5,594 | 109,017 | |||||||||||
Interest income (expense), net: |
||||||||||||||||
Interest expense |
(15,831 | ) | (16,107 | ) | (33,349 | ) | (33,582 | ) | ||||||||
Interest income, primarily from Arch Coal, Inc. |
11,566 | 18,154 | 23,366 | 39,999 | ||||||||||||
| (4,265 | ) | 2,047 | (9,983 | ) | 6,417 | |||||||||||
Net income (loss) |
$ | (6,433 | ) | $ | 56,840 | $ | (4,389 | ) | $ | 115,434 | ||||||
Net income (loss) attributable to redeemable
membership interest |
$ | (35 | ) | $ | 274 | (42 | ) | 548 | ||||||||
Net income (loss) attributable to
non-redeemable membership interest |
$ | (6,398 | ) | $ | 56,566 | $ | (4,347 | ) | $ | 114,886 | ||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
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Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
Condensed Consolidated Balance Sheets
(In thousands)
| June 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
| (unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 7,617 | $ | 2,851 | ||||
Receivables |
2,528 | 2,930 | ||||||
Inventories |
152,831 | 133,726 | ||||||
Other |
22,818 | 21,617 | ||||||
Total current assets |
185,794 | 161,124 | ||||||
Property, plant and equipment, net |
1,378,606 | 1,391,841 | ||||||
Other assets: |
||||||||
Receivable from Arch Coal, Inc. |
1,467,606 | 1,528,068 | ||||||
Other |
14,996 | 24,051 | ||||||
Total other assets |
1,482,602 | 1,552,119 | ||||||
Total assets |
$ | 3,047,002 | $ | 3,105,084 | ||||
LIABILITIES AND MEMBERSHIP INTERESTS |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 78,197 | $ | 113,611 | ||||
Accrued expenses |
130,669 | 134,540 | ||||||
Commercial paper |
38,744 | 65,671 | ||||||
Total current liabilities |
247,610 | 313,822 | ||||||
Long-term debt |
955,465 | 956,148 | ||||||
Asset retirement obligations |
237,458 | 227,397 | ||||||
Accrued postretirement benefits other than pension |
39,370 | 37,491 | ||||||
Accrued pension benefits |
37,517 | 36,616 | ||||||
Accrued workers’ compensation |
3,757 | 3,681 | ||||||
Other noncurrent liabilities |
25,590 | 25,551 | ||||||
Total liabilities |
1,546,767 | 1,600,706 | ||||||
Redeemable membership interest |
8,844 | 8,765 | ||||||
Non-redeemable membership interest |
1,491,391 | 1,495,613 | ||||||
Total liabilities and membership interests |
$ | 3,047,002 | $ | 3,105,084 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
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Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Condensed Consolidated Statements of Cash Flows
(In thousands)
| Six Months Ended June 30 | ||||||||
| 2009 | 2008 | |||||||
| (unaudited) | ||||||||
OPERATING ACTIVITIES |
||||||||
Net income (loss) |
$ | (4,389 | ) | $ | 115,434 | |||
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
74,598 | 77,526 | ||||||
Net gain on dispositions of property, plant and equipment |
(30 | ) | (337 | ) | ||||
Changes in: |
||||||||
Receivables |
402 | 1,688 | ||||||
Inventories |
(19,105 | ) | 7,146 | |||||
Accounts payable and accrued expenses |
(18,600 | ) | 11,946 | |||||
Other |
22,823 | 17,823 | ||||||
Cash provided by operating activities |
55,699 | 231,226 | ||||||
INVESTING ACTIVITIES |
||||||||
Capital expenditures |
(85,377 | ) | (171,380 | ) | ||||
Change in receivable from Arch Coal, Inc. |
60,464 | (86,119 | ) | |||||
Proceeds from dispositions of property, plant and equipment |
30 | 379 | ||||||
Additions to prepaid royalties |
(2,207 | ) | — | |||||
Reimbursement of deposits on equipment |
3,209 | 2,455 | ||||||
Cash used in investing activities |
(23,881 | ) | (254,665 | ) | ||||
FINANCING ACTIVITIES |
||||||||
Net proceeds from (repayments of) commercial paper |
(26,927 | ) | 23,616 | |||||
Debt financing costs |
(125 | ) | (219 | ) | ||||
Cash provided by (used in) financing activities |
(27,052 | ) | 23,397 | |||||
Increase (decrease) in cash and cash equivalents |
4,766 | (42 | ) | |||||
Cash and cash equivalents, beginning of period |
2,851 | 248 | ||||||
Cash and cash equivalents, end of period |
$ | 7,617 | $ | 206 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
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Arch Western Resources, LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of
Arch Western Resources, LLC and its subsidiaries and controlled entities (the “Company”). Arch
Coal, Inc. (“Arch Coal”) has a 99.5% common membership interest in the Company, while BP p.l.c. has
a 0.5% common membership interest and a preferred membership interest in the Company. The terms of
the Company’s membership agreement grant a put right to BP p.l.c., where BP p.l.c. may require Arch
Coal to purchase its membership interest. The terms of the agreement state that the price of the
membership interest shall be determined by mutual agreement between the members. Intercompany
transactions and accounts have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim financial
reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management,
all adjustments, consisting of normal, recurring accruals considered necessary for a fair
presentation, have been included. Results of operations for the three and six month periods ended
June 30, 2009 are not necessarily indicative of results to be expected for the year ending December
31, 2009. These financial statements should be read in conjunction with the audited financial
statements and related notes as of and for the year ended December 31, 2008 included in Arch
Western Resources, LLC’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission.
The Company’s management evaluated the period from June 30, 2009 to August 14, 2009 for
subsequent events requiring recognition or disclosure in the financial statements. No events that
require recognition or disclosure in the financial statements were identified.
2. Accounting Policies
New Accounting Pronouncements
On January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 160,
Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51
(“Statement No. 160”). Statement No. 160 requires that a noncontrolling interest (previously
referred to as minority interest) be displayed in the consolidated balance sheet as a separate
component of equity and the amount of net income attributable to the noncontrolling interest be
included in consolidated net income on the face of the consolidated statement of income. A
noncontrolling interest is defined in Statement No. 160 as the portion of equity in a subsidiary
not attributable, directly or indirectly, to a parent or a parent’s affiliates. Arch Coal owns a
35% interest in the Company’s subsidiary, Canyon Fuel Company, LLC (“Canyon Fuel”), which was
previously presented as a minority interest. The adoption of Statement No. 160 resulted in Arch
Coal’s interest in Canyon Fuel at December 31, 2008 of $195.4 million, which was previously
presented as a minority interest, to be reflected as part of the non-redeemable membership interest
on the accompanying condensed consolidated balance sheet. The income allocable to Arch Coal’s
interest in Canyon Fuel was previously reported as a deduction in arriving at net income. As a
result, net income in the accompanying condensed consolidated income statements is $2.0 million and
$5.7 million higher for the three and six months ended June 30, 2008, respectively, under Statement
No. 160 than was previously reported.
In June 2009, Statement of Financial Accounting Standards No. 165, Subsequent Events
(“Statement No. 165”) became effective. Statement No. 165 describes circumstances under which an
entity shall recognize events or transactions occurring after the balance sheet date in its
financial statements and requires disclosures related to those events. See Note 1,
“Basis of Presentation” above for the subsequent events disclosure required by Statement No.
165.
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3. Inventories
Inventories consist of the following:
| June 30, | December 31, | |||||||
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
Coal |
$ | 38,550 | $ | 26,989 | ||||
Repair parts and supplies, net of allowance |
114,281 | 106,737 | ||||||
| $ | 152,831 | $ | 133,726 | |||||
4. Debt
Economic conditions have impacted the Company’s ability to issue commercial paper up to the
$100.0 million maximum aggregate principal amount of the program. The commercial paper placement
program is supported by a line of credit that expires on April 30, 2010.
At June 30, 2009 and December 31, 2008, the fair value of the Company’s debt, including
amounts classified as current, was $905.6 million and $887.4 million, respectively.
5. Comprehensive Income (Loss)
Comprehensive
income (loss) consists of net income (loss) and other comprehensive income. Other
comprehensive income items are transactions recorded in membership interests during the year,
excluding net income and transactions with members.
The
following table details the components of comprehensive income (loss):
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (In thousands) | ||||||||||||||||
Net income (loss) |
$ | (6,433 | ) | $ | 56,840 | $ | (4,389 | ) | $ | 115,434 | ||||||
Other comprehensive income: |
||||||||||||||||
Net pension, postretirement and
other post-employment benefits
adjustments reclassified to
income |
375 | 22 | 293 | 160 | ||||||||||||
Total comprehensive income (loss) |
$ | (6,058 | ) | $ | 56,862 | $ | (4,096 | ) | $ | 115,594 | ||||||
6. Related Party Transactions
Transactions with Arch Coal may not be at arms length. If the transactions were negotiated
with an unrelated party, the impact could be material to the Company’s results of operations.
The Company’s cash transactions are managed by Arch Coal. Cash paid to or from the Company
that is not considered a distribution or a contribution is recorded in an Arch Coal receivable
account. In addition, any amounts owed between the Company and Arch Coal are recorded in the
account. At both June 30, 2009 and December 31, 2008, the receivable from Arch Coal was $1.5
billion. This amount earns interest from Arch Coal at the prime interest rate. Interest earned on
the note was $11.6 million and $18.1 million for the three months ended June 30, 2009 and 2008,
respectively, and $23.3 million and $39.9 million for the six months ended June 30, 2009 and 2008,
respectively. The receivable is payable on demand by the Company; however, it is currently
management’s intention to not demand payment of the receivable within the next year. Therefore, the
receivable is classified on the accompanying condensed consolidated balance sheets as noncurrent.
The Company is a party to Arch Coal’s accounts receivable securitization program. Under the
program, the Company sells its receivables to Arch Coal without recourse at a discount based on the
prime interest rate and days sales outstanding. During the three months ended June 30, 2009 and
2008, the Company sold $322.5 million and $430.8 million, respectively, of trade accounts
receivable to Arch Coal at a total discount of $0.8 million and $1.8 million, respectively. During
the six months ended June 30, 2009 and 2008, the Company sold $707.6 million and $843.7 million,
respectively, of trade accounts receivable to Arch Coal at a total discount of $1.8 million and
$4.1
5
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million, respectively. These transactions are recorded through the Arch Coal receivable
account.
For the three month periods ended June 30, 2009 and 2008, the Company incurred production
royalties of $9.9 million and $8.7 million, respectively, payable to Arch Coal under sublease
agreements. For the six month periods ended June 30, 2009 and 2008, the Company incurred
production royalties of $21.2 million and $17.8 million, respectively, payable to Arch Coal under
sublease agreements.
The Company is charged selling, general and administrative services fees by Arch Coal.
Expenses are allocated based on Arch Coal’s best estimates of proportional or incremental costs,
whichever is more representative of costs incurred by Arch Coal on behalf of the Company. Amounts
allocated to the Company by Arch Coal were $7.2 million and $9.3 million for the three months ended
June 30, 2009 and 2008, respectively, and $17.1 million and $16.9 million for the six months ended
June 30, 2009 and 2008, respectively.
7. Contingencies
The Company is a party to numerous claims and lawsuits with respect to various matters. The
Company provides for costs related to contingencies when a loss is probable and the amount is
reasonably estimable. After conferring with counsel, it is the opinion of management that the
ultimate resolution of pending claims will not have a material adverse effect on the consolidated
financial condition, results of operations or liquidity of the Company.
8. Segment Information
The Company has two reportable business segments, which are based on the major low-sulfur coal
basins in which the Company operates. Both of these reportable business segments include a number
of mine complexes. The Company manages its coal sales by coal basin, not by individual mine
complex. Geology, coal transportation routes to customers, regulatory environments and coal quality
are generally consistent within a basin. Accordingly, market and contract pricing have developed by
coal basin. Mine operations are evaluated based on their per-ton operating costs (defined as
including all mining costs but excluding pass-through transportation expenses), as well as on other
non-financial measures, such as safety and environmental performance. The Company’s reportable
segments are the Powder River Basin (PRB) segment, with operations in Wyoming, and the Western
Bituminous (WBIT) segment, with operations in Utah, Colorado and southern Wyoming.
Operating segment results for the three and six month periods ended June 30, 2009 and 2008 are
presented below. Results for the operating segments include all direct costs of mining. Corporate,
Other and Eliminations includes corporate overhead, other support functions, and the elimination of
intercompany transactions.
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| Corporate, | ||||||||||||||||
| Other and | ||||||||||||||||
| PRB | WBIT | Eliminations | Consolidated | |||||||||||||
| (In thousands) | ||||||||||||||||
Three months ended June 30, 2009 |
||||||||||||||||
Coal sales |
$ | 248,785 | $ | 112,021 | $ | — | $ | 360,806 | ||||||||
Income (loss) from operations |
9,330 | (4,265 | ) | (7,233 | ) | (2,168 | ) | |||||||||
Depreciation, depletion and amortization |
17,919 | 18,442 | — | 36,361 | ||||||||||||
Capital expenditures |
8,092 | 27,412 | — | 35,504 | ||||||||||||
Three months ended June 30, 2008 |
||||||||||||||||
Coal sales |
$ | 268,568 | $ | 191,385 | $ | — | $ | 459,953 | ||||||||
Income (loss) from operations |
20,262 | 44,642 | (10,111 | ) | 54,793 | |||||||||||
Depreciation, depletion and amortization |
18,125 | 19,745 | — | 37,870 | ||||||||||||
Capital expenditures |
38,385 | 34,500 | — | 72,885 | ||||||||||||
Six months ended June 30, 2009 |
||||||||||||||||
Coal sales |
$ | 544,095 | $ | 232,961 | $ | — | $ | 777,056 | ||||||||
Income (loss) from operations |
34,722 | (11,302 | ) | (17,826 | ) | 5,594 | ||||||||||
Total assets |
1,880,823 | 2,070,520 | (904,341 | ) | 3,047,002 | |||||||||||
Depreciation, depletion and amortization |
36,745 | 37,853 | — | 74,598 | ||||||||||||
Capital expenditures |
41,871 | 43,506 | — | 85,377 | ||||||||||||
Six months ended June 30, 2008 |
||||||||||||||||
Coal sales |
$ | 544,256 | $ | 352,906 | $ | — | $ | 897,162 | ||||||||
Income (loss) from operations |
49,049 | 78,603 | (18,635 | ) | 109,017 | |||||||||||
Total assets |
1,763,537 | 2,032,949 | (779,158 | ) | 3,017,328 | |||||||||||
Depreciation, depletion and amortization |
36,348 | 41,178 | — | 77,526 | ||||||||||||
Capital expenditures |
76,562 | 94,818 | — | 171,380 | ||||||||||||
A
reconciliation of segment income (loss) from operations to
consolidated net income (loss) follows:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| (In thousands) | ||||||||||||||||
Income (loss) from operations |
$ | (2,168 | ) | $ | 54,793 | $ | 5,594 | $ | 109,017 | |||||||
Interest expense |
(15,831 | ) | (16,107 | ) | (33,349 | ) | (33,582 | ) | ||||||||
Interest income |
11,566 | 18,154 | 23,366 | 39,999 | ||||||||||||
Net income (loss) |
$ | (6,433 | ) | $ | 56,840 | $ | (4,389 | ) | $ | 115,434 | ||||||
9. Supplemental Condensed Consolidating Financial Information
Pursuant to the indenture governing the Arch Western Finance senior notes, certain
wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes
on a joint and several basis. The following tables present unaudited condensed consolidating
financial information for (i) the Company, (ii) the issuer of the senior notes (Arch Western
Finance, LLC, a wholly-owned subsidiary of the Company), (iii) the Company’s wholly-owned
subsidiaries (Thunder Basin Coal Company, L.L.C., Mountain Coal Company, L.L.C., and Arch of
Wyoming, LLC), on a combined basis, which are guarantors under the Notes, and (iv) its majority
owned subsidiary (Canyon Fuel Company, LLC) which is not a guarantor under the Notes:
7
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CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended June 30, 2009
(in thousands)
Three Months Ended June 30, 2009
(in thousands)
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales |
$ | — | $ | — | $ | 283,203 | $ | 77,603 | $ | — | $ | 360,806 | ||||||||||||
Cost of coal sales |
30 | — | 258,283 | 62,604 | (622 | ) | 320,295 | |||||||||||||||||
Depreciation, depletion and
amortization |
— | — | 24,030 | 12,331 | — | 36,361 | ||||||||||||||||||
Selling, general and administrative
expenses |
7,240 | — | — | — | — | 7,240 | ||||||||||||||||||
Other operating income, net |
(63 | ) | — | (571 | ) | (910 | ) | 622 | (922 | ) | ||||||||||||||
| 7,207 | — | 281,742 | 74,025 | — | 362,974 | |||||||||||||||||||
Income from investment in subsidiaries |
6,060 | — | — | — | (6,060 | ) | — | |||||||||||||||||
Income (loss) from operations |
(1,147 | ) | — | 1,461 | 3,578 | (6,060 | ) | (2,168 | ) | |||||||||||||||
Interest expense |
(16,807 | ) | (16,004 | ) | 1,151 | (203 | ) | 16,032 | (15,831 | ) | ||||||||||||||
Interest income |
11,521 | 16,032 | 2 | 43 | (16,032 | ) | 11,566 | |||||||||||||||||
| (5,286 | ) | 28 | 1,153 | (160 | ) | — | (4,265 | ) | ||||||||||||||||
Net income (loss) |
$ | (6,433 | ) | $ | 28 | $ | 2,614 | $ | 3,418 | $ | (6,060 | ) | $ | (6,433 | ) | |||||||||
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CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended June 30, 2008
(in thousands)
Three Months Ended June 30, 2008
(in thousands)
| Non- | ||||||||||||||||||||||||
| Parent | Guarantor | Guarantor | ||||||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales |
$ | — | $ | — | $ | 352,248 | $ | 107,705 | $ | — | $ | 459,953 | ||||||||||||
Cost of coal sales |
824 | — | 272,046 | 86,747 | (491 | ) | 359,126 | |||||||||||||||||
Depreciation, depletion
and amortization |
— | — | 23,429 | 14,441 | — | 37,870 | ||||||||||||||||||
Selling, general and
administrative expenses |
9,333 | — | — | — | — | 9,333 | ||||||||||||||||||
Other operating income, net |
(46 | ) | — | (889 | ) | (725 | ) | 491 | (1,169 | ) | ||||||||||||||
| 10,111 | — | 294,586 | 100,463 | — | 405,160 | |||||||||||||||||||
Income from investment in
subsidiaries |
67,366 | — | — | — | (67,366 | ) | — | |||||||||||||||||
Income from operations |
57,255 | — | 57,662 | 7,242 | (67,366 | ) | 54,793 | |||||||||||||||||
Interest expense |
(18,290 | ) | (13,254 | ) | (171 | ) | (424 | ) | 16,032 | (16,107 | ) | |||||||||||||
Interest income |
17,875 | 16,032 | 54 | 225 | (16,032 | ) | 18,154 | |||||||||||||||||
| (415 | ) | 2,778 | (117 | ) | (199 | ) | — | 2,047 | ||||||||||||||||
Net income |
$ | 56,840 | $ | 2,778 | $ | 57,545 | $ | 7,043 | $ | (67,366 | ) | $ | 56,840 | |||||||||||
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CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Six Months Ended June 30, 2009
(in thousands)
Six Months Ended June 30, 2009
(in thousands)
| Non- | ||||||||||||||||||||||||
| Parent | Guarantor | Guarantor | ||||||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales |
$ | — | $ | — | $ | 609,147 | $ | 167,909 | $ | — | $ | 777,056 | ||||||||||||
Cost of coal sales |
864 | — | 547,285 | 134,985 | (1,467 | ) | 681,667 | |||||||||||||||||
Depreciation, depletion
and amortization |
— | — | 48,977 | 25,621 | — | 74,598 | ||||||||||||||||||
Selling, general and
administrative expenses |
17,068 | — | — | — | — | 17,068 | ||||||||||||||||||
Other operating income, net |
(132 | ) | — | (1,212 | ) | (1,994 | ) | 1,467 | (1,871 | ) | ||||||||||||||
| 17,800 | — | 595,050 | 158,612 | — | 771,462 | |||||||||||||||||||
Income from investment in
subsidiaries |
24,139 | — | — | — | (24,139 | ) | — | |||||||||||||||||
Income from operations |
6,339 | — | 14,097 | 9,297 | (24,139 | ) | 5,594 | |||||||||||||||||
Interest expense |
(33,902 | ) | (32,037 | ) | 982 | (455 | ) | 32,063 | (33,349 | ) | ||||||||||||||
Interest income |
23,174 | 32,063 | 29 | 163 | (32,063 | ) | 23,366 | |||||||||||||||||
| (10,728 | ) | 26 | 1,011 | (292 | ) | — | (9,983 | ) | ||||||||||||||||
Net income (loss) |
$ | (4,389 | ) | $ | 26 | $ | 15,108 | $ | 9,005 | $ | (24,139 | ) | $ | (4,389 | ) | |||||||||
10
Table of Contents
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Six Months Ended June 30, 2008
(in thousands)
Six Months Ended June 30, 2008
(in thousands)
| Non- | ||||||||||||||||||||||||
| Parent | Guarantor | Guarantor | ||||||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales |
$ | — | $ | — | $ | 692,382 | $ | 204,780 | $ | — | $ | 897,162 | ||||||||||||
Cost of coal sales |
1,822 | — | 538,567 | 156,582 | (1,122 | ) | 695,849 | |||||||||||||||||
Depreciation, depletion
and amortization |
— | — | 46,169 | 31,357 | — | 77,526 | ||||||||||||||||||
Selling, general and
administrative expenses |
16,890 | — | — | — | — | 16,890 | ||||||||||||||||||
Other operating income, net |
(77 | ) | — | (1,664 | ) | (1,501 | ) | 1,122 | (2,120 | ) | ||||||||||||||
| 18,635 | — | 583,072 | 186,438 | — | 788,145 | |||||||||||||||||||
Income from investment in
subsidiaries |
131,832 | — | — | — | (131,832 | ) | — | |||||||||||||||||
Income from operations |
113,197 | — | 109,310 | 18,342 | (131,832 | ) | 109,017 | |||||||||||||||||
Interest expense |
(37,072 | ) | (27,411 | ) | (276 | ) | (886 | ) | 32,063 | (33,582 | ) | |||||||||||||
Interest income |
39,309 | 32,063 | 142 | 548 | (32,063 | ) | 39,999 | |||||||||||||||||
| 2,237 | 4,652 | (134 | ) | (338 | ) | — | 6,417 | |||||||||||||||||
Net income |
$ | 115,434 | $ | 4,652 | $ | 109,176 | $ | 18,004 | $ | (131,832 | ) | $ | 115,434 | |||||||||||
11
Table of Contents
CONDENSED CONSOLIDATING BALANCE SHEETS
June 30, 2009
(in thousands)
June 30, 2009
(in thousands)
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents |
$ | 7,489 | $ | — | $ | 61 | $ | 67 | $ | — | $ | 7,617 | ||||||||||||
Receivables |
565 | — | 1,399 | 564 | — | 2,528 | ||||||||||||||||||
Inventories |
— | — | 113,305 | 39,526 | — | 152,831 | ||||||||||||||||||
Other |
6,226 | 2,146 | 5,453 | 8,993 | — | 22,818 | ||||||||||||||||||
Total current assets |
14,280 | 2,146 | 120,218 | 49,150 | — | 185,794 | ||||||||||||||||||
Property, plant and equipment, net |
— | — | 1,062,707 | 315,899 | — | 1,378,606 | ||||||||||||||||||
Investment in subsidiaries |
2,376,858 | — | — | — | (2,376,858 | ) | — | |||||||||||||||||
Receivable from Arch Coal |
1,441,642 | — | — | 25,964 | — | 1,467,606 | ||||||||||||||||||
Intercompanies |
(2,267,630 | ) | 993,470 | 1,106,492 | 167,668 | — | — | |||||||||||||||||
Other |
1,414 | 6,399 | 2,783 | 4,400 | — | 14,996 | ||||||||||||||||||
Total other assets |
1,552,284 | 999,869 | 1,109,275 | 198,032 | (2,376,858 | ) | 1,482,602 | |||||||||||||||||
Total assets |
$ | 1,566,564 | $ | 1,002,015 | $ | 2,292,200 | $ | 563,081 | $ | (2,376,858 | ) | $ | 3,047,002 | |||||||||||
Accounts payable |
$ | 1,874 | $ | — | $ | 60,571 | $ | 15,752 | $ | — | $ | 78,197 | ||||||||||||
Accrued expenses |
3,692 | 32,063 | 85,966 | 8,948 | — | 130,669 | ||||||||||||||||||
Commercial paper |
38,744 | — | — | — | — | 38,744 | ||||||||||||||||||
Total current liabilities |
44,310 | 32,063 | 146,537 | 24,700 | — | 247,610 | ||||||||||||||||||
Long-term debt |
— | 955,465 | — | — | — | 955,465 | ||||||||||||||||||
Asset retirement obligations |
— | — | 223,873 | 13,585 | — | 237,458 | ||||||||||||||||||
Accrued postretirement benefits other
than pension |
8,827 | — | 18,374 | 12,169 | — | 39,370 | ||||||||||||||||||
Accrued pension benefits |
13,040 | — | 19,364 | 5,113 | — | 37,517 | ||||||||||||||||||
Accrued workers’ compensation |
(1,350 | ) | — | 1,123 | 3,984 | — | 3,757 | |||||||||||||||||
Other noncurrent liabilities |
1,502 | — | 24,072 | 16 | — | 25,590 | ||||||||||||||||||
Total liabilities |
66,329 | 987,528 | 433,343 | 59,567 | — | 1,546,767 | ||||||||||||||||||
Redeemable membership interest |
8,844 | — | — | — | — | 8,844 | ||||||||||||||||||
Non-redeemable membership interest |
1,491,391 | 14,487 | 1,858,857 | 503,514 | (2,376,858 | ) | 1,491,391 | |||||||||||||||||
Total liabilities and membership
interests |
$ | 1,566,564 | $ | 1,002,015 | $ | 2,292,200 | $ | 563,081 | $ | (2,376,858 | ) | $ | 3,047,002 | |||||||||||
12
Table of Contents
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2008
(in thousands)
December 31, 2008
(in thousands)
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents |
$ | 2,690 | $ | — | $ | 84 | $ | 77 | $ | — | $ | 2,851 | ||||||||||||
Receivables |
1,250 | — | 1,138 | 542 | — | 2,930 | ||||||||||||||||||
Inventories |
— | — | 102,216 | 31,510 | — | 133,726 | ||||||||||||||||||
Other |
10,330 | 2,154 | 4,669 | 4,464 | — | 21,617 | ||||||||||||||||||
Total current assets |
14,270 | 2,154 | 108,107 | 36,593 | — | 161,124 | ||||||||||||||||||
Property, plant and equipment, net |
— | — | 1,065,064 | 326,777 | — | 1,391,841 | ||||||||||||||||||
Investment in subsidiaries |
2,362,717 | — | — | — | (2,362,717 | ) | — | |||||||||||||||||
Receivable from Arch Coal |
1,498,201 | — | — | 29,867 | — | 1,528,068 | ||||||||||||||||||
Intercompanies |
(2,238,175 | ) | 993,048 | 1,090,674 | 154,453 | — | — | |||||||||||||||||
Other |
700 | 7,471 | 11,474 | 4,406 | — | 24,051 | ||||||||||||||||||
Total other assets |
1,623,443 | 1,000,519 | 1,102,148 | 188,726 | (2,362,717 | ) | 1,552,119 | |||||||||||||||||
Total assets |
$ | 1,637,713 | $ | 1,002,673 | $ | 2,275,319 | $ | 552,096 | $ | (2,362,717 | ) | $ | 3,105,084 | |||||||||||
Accounts payable |
$ | 7,167 | $ | — | $ | 88,938 | $ | 17,506 | $ | — | $ | 113,611 | ||||||||||||
Accrued expenses |
4,293 | 32,063 | 90,605 | 7,579 | — | 134,540 | ||||||||||||||||||
Commercial paper |
65,671 | — | — | — | — | 65,671 | ||||||||||||||||||
Total current liabilities |
77,131 | 32,063 | 179,543 | 25,085 | — | 313,822 | ||||||||||||||||||
Long-term debt |
— | 956,148 | — | — | — | 956,148 | ||||||||||||||||||
Asset retirement obligations |
— | — | 214,388 | 13,009 | — | 227,397 | ||||||||||||||||||
Accrued postretirement benefits other
than pension |
23,492 | — | 2,485 | 11,514 | — | 37,491 | ||||||||||||||||||
Accrued pension benefits |
32,671 | — | — | 3,945 | — | 36,616 | ||||||||||||||||||
Accrued workers’ compensation |
(1,045 | ) | — | 642 | 4,084 | — | 3,681 | |||||||||||||||||
Other noncurrent liabilities |
1,086 | — | 24,465 | — | — | 25,551 | ||||||||||||||||||
Total liabilities |
133,335 | 988,211 | 421,523 | 57,637 | — | 1,600,706 | ||||||||||||||||||
Redeemable membership interest |
8,765 | — | — | — | — | 8,765 | ||||||||||||||||||
Non-redeemable membership interest |
1,495,613 | 14,462 | 1,853,796 | 494,459 | (2,362,717 | ) | 1,495,613 | |||||||||||||||||
Total liabilities and membership
interests |
$ | 1,637,713 | $ | 1,002,673 | $ | 2,275,319 | $ | 552,096 | $ | (2,362,717 | ) | $ | 3,105,084 | |||||||||||
13
Table of Contents
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2009
(in thousands)
Six Months Ended June 30, 2009
(in thousands)
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||||||
Cash provided by (used in) operating
activities |
$ | (54,165 | ) | $ | 422 | $ | 85,110 | $ | 24,332 | $ | 55,699 | |||||||||
Investing Activities |
||||||||||||||||||||
Capital expenditures |
— | — | (70,322 | ) | (15,055 | ) | (85,377 | ) | ||||||||||||
Change in receivable from Arch Coal |
56,561 | — | — | 3,903 | 60,464 | |||||||||||||||
Proceeds from dispositions of property, plant and equipment |
— | — | 5 | 25 | 30 | |||||||||||||||
Additions to prepaid royalties |
— | — | (2,207 | ) | — | (2,207 | ) | |||||||||||||
Reimbursement of deposits on equipment |
— | — | 3,209 | — | 3,209 | |||||||||||||||
Cash provided by (used in) investing activities |
56,561 | — | (69,315 | ) | (11,127 | ) | (23,881 | ) | ||||||||||||
Financing Activities |
||||||||||||||||||||
Net payments on commercial paper |
(26,927 | ) | — | — | — | (26,927 | ) | |||||||||||||
Debt financing costs |
(125 | ) | — | — | — | (125 | ) | |||||||||||||
Transactions with affiliates, net |
29,455 | (422 | ) | (15,818 | ) | (13,215 | ) | — | ||||||||||||
Cash provided by (used in) financing
activities |
2,403 | (422 | ) | (15,818 | ) | (13,215 | ) | (27,052 | ) | |||||||||||
Increase (decrease) in cash and cash equivalents |
4,799 | — | (23 | ) | (10 | ) | 4,766 | |||||||||||||
Cash and cash equivalents, beginning of
period |
2,690 | — | 84 | 77 | 2,851 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 7,489 | $ | — | $ | 61 | $ | 67 | $ | 7,617 | ||||||||||
14
Table of Contents
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2008
(in thousands)
Six Months Ended June 30, 2008
(in thousands)
| Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
| Company | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||||||
Cash provided by operating
activities |
$ | 49,042 | $ | 5,049 | $ | 116,216 | $ | 60,919 | $ | 231,226 | ||||||||||
Investing Activities |
||||||||||||||||||||
Capital expenditures |
— | — | (160,219 | ) | (11,161 | ) | (171,380 | ) | ||||||||||||
Increase in receivable from Arch Coal |
(81,770 | ) | — | (112 | ) | (4,237 | ) | (86,119 | ) | |||||||||||
Proceeds from dispositions of property, plant and equipment |
— | — | 356 | 23 | 379 | |||||||||||||||
Reimbursement of deposits on equipment |
— | — | 2,455 | — | 2,455 | |||||||||||||||
Cash used in investing activities |
(81,770 | ) | — | (157,520 | ) | (15,375 | ) | (254,665 | ) | |||||||||||
Financing Activities |
||||||||||||||||||||
Net proceeds from commercial paper |
23,616 | — | — | — | 23,616 | |||||||||||||||
Debt financing costs |
(219 | ) | — | — | — | (219 | ) | |||||||||||||
Transactions with affiliates, net |
9,291 | (5,049 | ) | 41,306 | (45,548 | ) | — | |||||||||||||
Cash provided by (used in) financing
activities |
32,688 | (5,049 | ) | 41,306 | (45,548 | ) | 23,397 | |||||||||||||
Increase (decrease) in cash and cash equivalents |
(40 | ) | — | 2 | (4 | ) | (42 | ) | ||||||||||||
Cash and cash equivalents, beginning of
period |
78 | — | 16 | 154 | 248 | |||||||||||||||
Cash and cash equivalents, end of period |
$ | 38 | $ | — | $ | 18 | $ | 150 | $ | 206 | ||||||||||
15
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This document 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, see “Risk Factors” under
Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008 and under Part III,
Item 1A of this report.
Overview
We are a subsidiary of Arch Coal, Inc., one of the largest coal producers in the United
States. Our two reportable business segments are based on the low-sulfur U.S. coal producing
regions in which we operate — the Powder River Basin and the Western Bituminous region. These
geographically distinct areas are characterized by geology, coal transportation routes to
consumers, regulatory environments and coal quality. These regional similarities have caused market
and contract pricing environments to develop by coal region and form the basis for the segmentation
of our operations.
The Powder River Basin is located in northeastern Wyoming and southeastern Montana. The coal
we mine from surface operations in this region has a very low sulfur content and a low heat value
compared to the other region in which we operate. The price of Powder River Basin coal is generally
less than that of coal produced in other regions because Powder River Basin coal exists in greater
abundance, is easier to mine and thus has a lower cost of production. In addition, Powder River
Basin coal is generally lower in heat value, which requires some electric power generation
facilities to blend it with higher Btu coal or retrofit some existing coal plants to accommodate
lower Btu coal. The Western Bituminous region includes western Colorado, eastern Utah and southern
Wyoming. Coal we mine from underground and surface mines in this region typically has a low sulfur
content and varies in heat value.
We estimate that year-to-date U.S. power generation has declined approximately 4.2% through
the third week of July 2009 in response to weak domestic and international economic conditions.
U.S. coal consumption has declined significantly, primarily as a result of weak industrial demand
in geographic regions that traditionally rely more heavily on coal-fueled electricity generation
caused by the current U.S. economic recession. As a result of these market pressures, coupled with
continued geological challenges in certain regions, cost pressures, regulatory hurdles and limited
access to capital, we expect that coal production and capital spending across the domestic coal
industry have been, and will continue to be, curtailed. In response to weakened demand caused by
challenging domestic and international economic conditions, we have curtailed production in both
operating regions. In the Powder River Basin, we idled a second dragline and associated equipment
in the second quarter of 2009. In the Western Bituminous region, we reduced production at our West
Elk mine in response to declining demand from power generation and industrial customers for Western
Bituminous coal and elevated levels of lower-quality, mid-ash coal currently being produced at the
mine resulting from intermittent sandstone intrusions. As a result of the curtailment, we have
laid off 61 employees, discontinued the use of 38 contractors and plan to reduce production by more
than 2.5 million tons at the West Elk mining complex in 2009.
Results of Operations
Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008
Summary. Our results during the second quarter of 2009 when compared to the second quarter of
2008 were influenced primarily by lower sales volumes due to weak market conditions and more
production days spent in longwall moves.
16
Table of Contents
Revenues. The following table summarizes information about coal sales during the three months
ended June 30, 2009 and compares it with the information for the three months ended June 30, 2008:
| Three Months Ended June 30 | Decrease | |||||||||||||||
| 2009 | 2008 | Amount | % | |||||||||||||
| (Amounts in thousands, except per ton data and percentages) | ||||||||||||||||
Coal sales |
$ | 360,806 | $ | 459,953 | $ | (99,147 | ) | (21.6 | )% | |||||||
Tons sold |
23,649 | 29,692 | (6,043 | ) | (20.4 | )% | ||||||||||
Coal sales realization per ton sold |
$ | 15.26 | $ | 15.49 | $ | (0.23 | ) | (1.5 | )% | |||||||
Coal sales decreased in the second quarter of 2009 from the second quarter of 2008 due to
lower sales volumes in both segments and the effect of the regional sales mix. We have provided
more information about the tons sold and the coal sales realizations per ton by operating segment
under the heading “Operating segment results” below.
Costs, expenses and other. The following table summarizes costs, expenses and other
components of operating income for the three months ended June 30, 2009 and compares them with the
information for the three months ended June 30, 2008:
| Increase (Decrease) | ||||||||||||||||
| Three Months Ended June 30 | in Net Income | |||||||||||||||
| 2009 | 2008 | $ | % | |||||||||||||
| (Amounts in thousands, except percentages) | ||||||||||||||||
Cost of coal sales |
$ | 320,295 | $ | 359,126 | $ | 38,831 | 10.8 | % | ||||||||
Depreciation, depletion and amortization |
36,361 | 37,870 | 1,509 | 4.0 | ||||||||||||
Selling, general and administrative expenses |
7,240 | 9,333 | 2,093 | 22.4 | ||||||||||||
Other operating income, net |
(922 | ) | (1,169 | ) | (247 | ) | (21.1 | ) | ||||||||
| $ | 362,974 | $ | 405,160 | $ | 42,186 | 10.4 | % | |||||||||
Cost of coal sales. Our cost of coal sales decreased in the second quarter of 2009 from the
second quarter of 2008 due primarily to the lower sales volumes in both operating segments. We
have provided more information about our operating segments’ sales and profitability under the
heading “Operating segment results” below.
Depreciation, depletion and amortization. When compared with the second quarter of 2008, lower
depreciation, depletion and amortization costs in the second quarter of 2009 resulted from the
impact of lower volume levels on depletion and amortization costs calculated on a
units-of-production method.
Selling, general and administrative expenses. Selling, general and administrative expenses
represent expenses allocated to us from Arch Coal. Expenses are allocated based on Arch Coal’s best
estimates of proportional or incremental costs, whichever is more representative of costs incurred
by Arch Coal on our behalf.
Operating segment results. The following table shows results by operating segment for the
three months ended June 30, 2009 and compares it with information for the three months ended June
30, 2008:
| Three Months Ended June 30 | Increase (Decrease) | |||||||||||||||
| 2009 | 2008 | $ | % | |||||||||||||
Powder River Basin |
||||||||||||||||
Tons sold (in thousands) |
20,176 | 24,077 | (3,901 | ) | (16.2 | )% | ||||||||||
Coal sales realization per ton sold (1) |
$ | 12.28 | $ | 11.12 | $ | 1.16 | 10.4 | % | ||||||||
Operating margin per ton sold (2) |
$ | 0.43 | $ | 0.81 | $ | (0.38 | ) | (46.9 | )% | |||||||
Western Bituminous |
||||||||||||||||
Tons sold (in thousands) |
3,473 | 5,615 | (2,142 | ) | (38.1 | )% | ||||||||||
Coal sales realization per ton sold (1) |
$ | 29.93 | $ | 29.93 | $ | — | — | % | ||||||||
Operating margin per ton sold (2) |
$ | (1.51 | ) | $ | 7.78 | $ | (9.29 | ) | (119.4 | )% | ||||||
| (1) | Coal sales prices per ton exclude certain transportation costs that we pass through to our customers. We use these financial measures because we believe the amounts as adjusted better represent the coal sales prices we achieved within our operating segments. Since other companies may calculate coal sales prices per ton differently, our calculation may not be comparable to similarly titled measures used by those companies. For the three months ended June 30, 2009, transportation costs per ton were $0.05 for the Powder River Basin and $2.32 for the Western Bituminous region. For the three months ended June 30, 2008, transportation costs were $0.03 for the Powder River Basin and $4.16 for the Western Bituminous region. | |
| (2) | Operating margin per ton sold is calculated as coal sales revenues less cost of coal sales and depreciation, depletion and amortization divided by tons sold. |
17
Table of Contents
Powder River Basin — The decrease in sales volume in the Powder River Basin in the second
quarter of 2009 when compared with the second quarter of 2008 is due to weak market conditions. At
the Black Thunder mining complex, in response to these conditions, we reduced production and idled
one dragline in the fourth quarter of 2008 and another dragline in May 2009, along with related
equipment. Increases in sales prices during the second quarter of 2009 when compared with the
second quarter of 2008 primarily reflect higher pricing from contracts committed during 2008, when
market conditions were more favorable, partially offset by the effect of lower pricing on
market-index priced tons. On a per-ton basis, operating margins in the second quarter of 2009
decreased from the second quarter of 2008 due to an increase in per-ton costs, which more than
offset the contribution from higher sales prices. The increase in per-ton costs, despite our cost
containment efforts, resulted primarily from the effect of spreading fixed costs over lower volume
levels.
Western Bituminous — In the Western Bituminous region, we sold fewer tons in the second
quarter of 2009 than in the second quarter of 2008 due to more production days spent in longwall
moves in 2009 as well as quality issues at the West Elk mining complex. We have encountered
sandstone intrusions at the West Elk mining complex that have resulted in a higher ash content in
the coal produced, and declining coal demand has had an impact on our efforts to market this coal.
As a result of the weak market demand for this coal, we have reduced our production levels at the
mine. To address any ongoing quality issues, we plan to build a preparation plant at the mine by
mid-2010, with estimated capital costs of $25 million to $30 million. The detrimental impact on
our per-ton realizations of selling coal with a higher ash content offset the beneficial impact of
the roll-off of lower-priced legacy contracts in 2008. Lower per-ton operating margins in the
second quarter of 2009 were the result of the West Elk quality issues and lower production levels.
Net interest expense. The following table summarizes our net interest expense for the three
months ended June 30, 2009 and compares it with the information for the three months ended June 30,
2008:
| Increase (Decrease) in Net | ||||||||||||||||
| Three Months Ended June 30 | Income | |||||||||||||||
| 2009 | 2008 | $ | % | |||||||||||||
| (Amounts in thousands, except percentages) | ||||||||||||||||
Interest expense |
$ | (15,831 | ) | $ | (16,107 | ) | $ | 276 | 1.7 | % | ||||||
Interest income |
11,566 | 18,154 | (6,588 | ) | (36.3 | )% | ||||||||||
| $ | (4,265 | ) | $ | 2,047 | $ | (6,312 | ) | (308.4 | )% | |||||||
Interest expense consists of interest on our 6.75% senior notes, the discount on trade
accounts receivable sold to Arch Coal under Arch Coal’s accounts receivable securitization program
and interest on our commercial paper.
Our cash transactions are managed by Arch Coal. Cash paid to or from us that is not
considered a distribution or a contribution is recorded as a receivable from Arch Coal. The
receivable balance earns interest from Arch Coal at the prime interest rate. The decrease in
interest income results primarily from a lower prime interest rate during the three months ended
June 30, 2009 as compared to the three months ended June 30, 2008.
Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008
Summary. Our results during the first half of 2009 when compared to the first half of 2008
were influenced primarily by lower sales volumes due to weak market conditions and more production
days spent in longwall moves.
Revenues. The following table summarizes information about coal sales during the six months
ended June 30, 2009 and compares it with the information for the six months ended June 30, 2008:
| Six Months Ended June 30 | Decrease | |||||||||||||||
| 2009 | 2008 | Amount | % | |||||||||||||
| (Amounts in thousands, except per ton data and percentages) | ||||||||||||||||
Coal sales |
$ | 777,056 | $ | 897,162 | $ | (120,106 | ) | (13.4 | )% | |||||||
Tons sold |
49,905 | 59,878 | (9,973 | ) | (16.7 | )% | ||||||||||
Coal sales realization per ton sold |
$ | 15.57 | $ | 14.98 | $ | 0.59 | 3.9 | % | ||||||||
Coal sales decreased in the first half of 2009 from the first half of 2008 due to lower sales
volumes in both segments partially offset by the effect of higher price realizations in both
segments. We have provided more information about the tons sold and the coal sales realizations
per ton by operating segment under the heading
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“Operating segment results” below.
Costs, expenses and other. The following table summarizes costs, expenses and other
components of operating income for the six months ended June 30, 2009 and compares them with the
information for the six months ended June 30, 2008:
| Increase (Decrease) | ||||||||||||||||
| Six Months Ended June 30 | in Net Income | |||||||||||||||
| 2009 | 2008 | $ | % | |||||||||||||
| (Amounts in thousands, except percentages) | ||||||||||||||||
Cost of coal sales |
$ | 681,667 | $ | 695,849 | $ | 14,182 | 2.0 | % | ||||||||
Depreciation, depletion and amortization |
74,598 | 77,526 | 2,928 | 3.8 | ||||||||||||
Selling, general and administrative expenses |
17,068 | 16,890 | (178 | ) | (1.1 | ) | ||||||||||
Other operating income, net |
(1,871 | ) | (2,120 | ) | (249 | ) | (11.7 | ) | ||||||||
| $ | 771,462 | $ | 788,145 | $ | 16,683 | 2.1 | % | |||||||||
Cost of coal sales. Our cost of coal sales decreased in the first half of 2009 from the first
half of 2008 due primarily to the lower sales volumes in both operating segments. We have provided
more information about our operating segments’ sales and profitability under the heading “Operating
segment results” below.
Depreciation, depletion and amortization. When compared with the six months ended June 30,
2008, lower depreciation, depletion and amortization costs in the six months ended June 30, 2009
resulted from the impact of lower volume levels on depletion and amortization costs calculated on a
units-of-production method.
Selling, general and administrative expenses. Selling, general and administrative expenses
represent expenses allocated to us from Arch Coal. Expenses are allocated based on Arch Coal’s best
estimates of proportional or incremental costs, whichever is more representative of costs incurred
by Arch Coal on our behalf.
Operating segment results. The following table shows results by operating segment for the six
months ended June 30, 2009 and compares it with information for the six months ended June 30, 2008:
| Six Months Ended June 30 | Increase (Decrease) | |||||||||||||||
| 2009 | 2008 | $ | % | |||||||||||||
Powder River Basin |
||||||||||||||||
Tons sold (in thousands) |
42,533 | 49,229 | (6,696 | ) | (13.6 | )% | ||||||||||
Coal sales realization per ton sold (3) |
$ | 12.66 | $ | 11.01 | $ | 1.65 | 15.0 | % | ||||||||
Operating margin per ton sold (4) |
$ | 0.79 | $ | 0.97 | $ | (0.18 | ) | (18.6 | )% | |||||||
Western Bituminous |
||||||||||||||||
Tons sold (in thousands) |
7,372 | 10,649 | (3,277 | ) | (30.8 | )% | ||||||||||
Coal sales realization per ton sold (3) |
$ | 28.96 | $ | 28.42 | $ | 0.54 | 1.9 | % | ||||||||
Operating margin per ton sold (4) |
$ | (1.82 | ) | $ | 7.22 | $ | (9.04 | ) | (125.2 | )% | ||||||
| (3) | Coal sales prices per ton exclude certain transportation costs that we pass through to our customers. We use these financial measures because we believe the amounts as adjusted better represent the coal sales prices we achieved within our operating segments. Since other companies may calculate coal sales prices per ton differently, our calculation may not be comparable to similarly titled measures used by those companies. For the six months ended June 30, 2009, transportation costs per ton were $0.13 for the Powder River Basin and $2.64 for the Western Bituminous region. For the six months ended June 30, 2008, transportation costs were $0.04 for the Powder River Basin and $4.72 for the Western Bituminous region. | |
| (4) | Operating margin per ton sold is calculated as coal sales revenues less cost of coal sales and depreciation, depletion and amortization divided by tons sold. |
Powder River Basin —The decrease in sales volume in the Powder River Basin in 2009 when
compared with 2008 is due to weak market conditions. At the Black Thunder mining complex, in
response to these conditions, we reduced production and idled one dragline in the fourth quarter of
2008 and another dragline in May 2009, along with related equipment. Increases in sales prices
during 2009 when compared with 2008 primarily reflect higher pricing from contracts committed
during 2008, when market conditions were more favorable, partially offset by the effect of lower
pricing on market-index priced tons. On a per-ton basis, operating margins in 2009 decreased from
2008 due to an increase in per-ton costs, which more than offset the contribution from higher sales
prices. The increase in per-ton costs, despite our cost containment efforts, resulted primarily
from the effect of spreading fixed costs over lower volume levels and higher labor, repairs and
maintenance costs.
Western Bituminous — In the Western Bituminous region, we sold fewer tons in 2009 than in 2008
due to more production days spent in longwall moves in 2009 as well as quality issues at the West
Elk mining complex. We
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have encountered sandstone intrusions at the West Elk mining complex that have resulted in a
higher ash content in the coal produced, and declining coal demand has had an impact on our efforts
to market this coal. As a result of the weak market demand for this coal, we have reduced our
production levels at the mine. To address any ongoing quality issues at the mine, we plan to build
a preparation plant at the mine by mid-2010, with estimated capital costs of $25 million to $30
million. The detrimental impact on our per-ton realizations of selling coal with a higher ash
content offset the beneficial impact of the roll-off of lower-priced legacy contracts in 2008.
Lower per-ton operating margins during the first half of 2009 were the result of the West Elk
quality issues and the lower production levels.
Net interest expense. The following table summarizes our net interest expense for the six
months ended June 30, 2009 and compares it with the information for the six months ended June 30,
2008:
| Increase (Decrease) in Net | ||||||||||||||||
| Six Months Ended June 30 | Income | |||||||||||||||
| 2009 | 2008 | $ | % | |||||||||||||
| (Amounts in thousands, except percentages) | ||||||||||||||||
Interest expense |
$ | (33,349 | ) | $ | (33,582 | ) | $ | 233 | 0.7 | % | ||||||
Interest income |
23,366 | 39,999 | (16,633 | ) | (41.6 | )% | ||||||||||
| $ | (9,983 | ) | $ | 6,417 | $ | (16,400 | ) | (255.6 | )% | |||||||
Interest expense consists of interest on our 6.75% senior notes, the discount on trade
accounts receivable sold to Arch Coal under Arch Coal’s accounts receivable securitization program
and interest on our commercial paper.
Our cash transactions are managed by Arch Coal. Cash paid to or from us that is not
considered a distribution or a contribution is recorded as a receivable from Arch Coal. The
receivable balance earns interest from Arch Coal at the prime interest rate. The decrease in
interest income results primarily from a lower prime interest rate during the six months ended June
30, 2009 as compared to the six months ended June 30, 2008.
Liquidity and Capital Resources
Credit crisis and economic environment
The crisis in domestic and international financial markets has had a significant adverse
impact on a number of financial institutions. Since the beginning of the crisis, our ability to
issue commercial paper up to the maximum amount allowed under the program has been constrained. The
ongoing uncertainty in the financial markets may have an impact in the future on: the market values
of certain securities and commodities; the financial stability of our customers and counterparties;
and the cost and availability of insurance and financial surety programs, among others. At this
point in time, however, our liquidity has not been materially affected. While we expect that our
ability to issue commercial paper will continue to be affected by the current credit markets, we
believe we have sufficient liquidity, as supported by Arch Coal’s credit facilities, to satisfy
working capital requirements and fund capital expenditures, if needed. Management will continue to
closely monitor our liquidity, credit markets and counterparty credit risk. Management cannot
predict with any certainty the impact to our liquidity of any further disruption in the credit
environment.
Liquidity and capital resources
Our primary sources of cash include sales of our coal production to customers, our commercial
paper program and debt related to significant transactions. Excluding any significant acquisitions,
we generally satisfy our working capital requirements and fund capital expenditures and
debt-service obligations with cash generated from operations and, if necessary, cash from Arch
Coal. Arch Coal manages our cash transactions. Cash paid to or from us that is not considered a
distribution or a contribution is recorded in an Arch Coal receivable account. The receivable
balance earns interest from Arch Coal at the prime interest rate. We are also party to Arch Coal’s
accounts receivable securitization program. Under the program, we sell our receivables to a
subsidiary of Arch Coal without recourse at a discount based on the prime rate and days sales
outstanding.
We believe that cash generated from operations will be sufficient to meet working capital
requirements, anticipated capital expenditures and scheduled debt payments for at least the next
several years. We manage our exposure to changing commodity prices for our long-term coal contract
portfolio through the use of long-term coal supply agreements. We enter into fixed price, fixed
volume supply contracts with terms generally greater than one year with customers with whom we have
historically had limited collection issues. Our ability to satisfy debt service
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obligations, to fund planned capital expenditures and to make acquisitions will depend upon
our future operating performance, which will be affected by prevailing economic conditions in the
coal industry and financial, business and other factors, some of which are beyond our control.
We had commercial paper outstanding of $38.7 million at June 30, 2009 and $65.7 million at
December 31, 2008. Our commercial paper placement program provides short-term financing at rates
that are generally lower than the rates available under Arch Coal’s revolving credit facility.
Under the program, as amended, we may sell up to $100.0 million in interest-bearing or discounted
short-term unsecured debt obligations with maturities of no more than 270 days. The commercial
paper placement program is supported by a revolving credit facility that is subject to renewal
annually with a maturity date of April 30, 2010. The current credit market has affected our ability
to issue commercial paper up to the maximum amount allowed under the program, but we believe that
our cash from operations is sufficient to satisfy our liquidity needs.
During the six months ended June 30, 2009, we sold $707.6 million of trade accounts receivable
to Arch Coal at a total discount of $1.8 million.
Our subsidiary, Arch Western Finance LLC, has outstanding an aggregate principal amount of
$950.0 million of 6.75% senior notes due on July 1, 2013. The senior notes are guaranteed by
certain of our subsidiaries and are secured by our intercompany note to Arch Coal. The indenture
under which the senior notes were issued contains certain restrictive covenants that limit our
ability to, among other things, incur additional debt, sell or transfer assets and make certain
investments.
The following is a summary of cash provided by or used in each of the indicated types of
activities:
| Six Months Ended June 30 | ||||||||
| 2009 | 2008 | |||||||
| (in thousands) | ||||||||
Cash provided by (used in): |
||||||||
Operating activities |
$ | 55,699 | $ | 231,226 | ||||
Investing activities |
(23,881 | ) | (254,665 | ) | ||||
Financing activities |
(27,052 | ) | 23,397 | |||||
Cash provided by operating activities decreased $175.5 million in the first half of 2009
compared to the first half of 2008, primarily as a result of a decrease in our profitability in
2009.
Cash used in investing activities for the first half of 2009 was $230.8 million less than was
used in investing activities for the first half of 2008. Our capital expenditures were $85.4
million during the first half of 2009, $86.0 million less than we spent during the first half of
2008. During the first six months of 2009, we spent approximately $19.0 million on additional
longwall equipment at the West Elk mining complex in Colorado and approximately $38.0 million on a
new shovel and haul trucks at the Black Thunder mine in Wyoming. During the first six months of
2008, we spent approximately $60.0 million on the construction of the loadout facility at our Black
Thunder mine in Wyoming and approximately $85.0 million for the transition to the new reserve area
at our West Elk mining complex. We completed the work on the loadout facility and transitioned to
the new seam at West Elk in the fourth quarter of 2008. In addition, the receivable from Arch Coal
decreased approximately $60.5 million in the first six months of 2009 compared with a $171.4
million increase in the first six months of 2008.
Cash used in financing activities was $27.1 million during the first six months of 2009
compared to cash provided by financing activities of $23.4 million during the first six months of
2008, primarily the result of net payments made on commercial paper in 2009. During the first half
of 2008, the maximum aggregate principal amount under the commercial paper program was increased
from $75.0 million to $100.0 million. As discussed previously, the current credit market has
affected our ability to issue commercial paper up to the maximum amount allowed under the program.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In addition to the other quantitative and qualitative disclosures about market risk contained
in this report, you should see Item 7A of our Annual Report on Form 10-K for the year ended
December 31, 2008. There have been no
other material changes in our exposure to market risk since December 31, 2008.
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Item 4T. Controls and Procedures.
We performed an evaluation under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of June 30, 2009. Based on that
evaluation, our management, including our chief executive officer and chief financial officer,
concluded that the disclosure controls and procedures were effective as of such date. There were
no changes in internal control over financial reporting that occurred during our fiscal quarter
ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II
OTHER INFORMATION
OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved in various claims and legal actions in the ordinary course of business. In
the opinion of management, the outcome of such ordinary course of business proceedings and
litigation currently pending will not have a material adverse effect on our results of operations
or financial results.
You should see Part I, Item 3 of our Annual Report on Form 10-K for the year ended December
31, 2008 for more information about some of the proceedings and litigation in which we are
involved.
Item 1A. Risk Factors.
Our business inherently involves certain risks and uncertainties. The risks and uncertainties
described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008 are not
the only ones we face. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business operations. Should one or more of any of
these risks materialize, our business, financial condition, results of operations or liquidity
could be materially adversely affected.
Certain of our customers have deferred, and other customers may in the future seek to defer,
contracted shipments of coal, which could affect our results of operations and liquidity.
As the ongoing global economic recession has caused the price of, and demand for, coal to
decline, certain of our thermal and metallurgical coal customers have delayed shipments, or
requested deferrals, pursuant to our existing long-term coal supply agreements. Other customers
similarly may seek to delay shipments or request deferrals under existing agreements. In the
current economic environment, the spot market for coal may not provide an acceptable alternative to
sell our uncommitted tons. We currently are evaluating customer deferrals and are in negotiations
with a number of the customers that have made such requests. There is no assurance that we will be
able to resolve existing and potential deferrals on favorable terms, or at all.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
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Item 6. Exhibits.
Exhibits filed as part of this Quarterly Report on Form 10-Q are as follows:
| Exhibit | Description | |
3.1
|
Certificate of Formation (incorporated herein by reference to Exhibit 3.3 to the Form S-4 (File No. 333-107569) filed on August 1, 2003 by Arch Western Finance, LLC, Arch Western Resources, LLC, Arch of Wyoming, LLC, Mountain Coal Company, L.L.C., and Thunder Basin Coal Company, L.L.C.). | |
3.2
|
Limited Liability Company Agreement (incorporated herein by reference to Exhibit 3.4 to the Form S-4 (File No. 333-107569) filed on August 1, 2003 by Arch Western Finance, LLC, Arch Western Resources, LLC, Arch of Wyoming, LLC, Mountain Coal Company, L.L.C., and Thunder Basin Coal Company, L.L.C.). | |
31.1
|
Rule 13a-14(a)/15d-14(a) Certification of Paul A. Lang. | |
31.2
|
Rule 13a-14(a)/15d-14(a) Certification of John T. Drexler. | |
32.1
|
Section 1350 Certification of Paul A. Lang. | |
32.2
|
Section 1350 Certification of John T. Drexler. |
23
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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, thereunto duly authorized.
| Arch Western Resources, LLC | ||||||
| By: | /s/ John T. Drexler | |||||
| John T. Drexler | ||||||
| Vice President | ||||||
| August 14, 2009 | ||||||
24
Exhibit 31.1
Certification
I, Paul A. Lang, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Arch Western Resources, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Paul A. Lang | ||||
| Paul A. Lang | ||||
| President |
Date: August 14, 2009
Exhibit 31.2
Certification
I, John T. Drexler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Arch Western Resources, LLC;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | ||
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ John T. Drexler | ||||
| John T. Drexler | ||||
| Vice President |
Date: August 14, 2009
Exhibit 32.1
Certification of Periodic Financial Reports
I, Paul A. Lang, President of Arch Western Resources, LLC, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 (the
“Periodic Report”) which this statement accompanies fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) information contained in the Periodic Report fairly presents, in all material respects,
the financial condition and results of operations of Arch Western Resources, LLC.
| /s/ Paul A. Lang | ||||
| Paul A. Lang | ||||
| President |
Date: August 14, 2009
Exhibit 32.2
Certification of Periodic Financial Reports
I, John T. Drexler, Vice President of Arch Western Resources, LLC, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009 (the
“Periodic Report”) which this statement accompanies fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) information contained in the Periodic Report fairly presents, in all material respects,
the financial condition and results of operations of Arch Western Resources, LLC.
| /s/ John T. Drexler | ||||
| John T. Drexler | ||||
| Vice President |
Date: August 14, 2009