ST. LOUIS, July 27, 2017 /PRNewswire/ -- Arch Coal, Inc.
(NYSE: ARCH) today reported second quarter 2017 net income of
$37.2 million, or $1.48 per diluted share, compared with
$51.7 million, or $2.03 per diluted share, in the first quarter of
2017. Excluding certain charges, adjusted diluted earnings per
share ("adjusted EPS") 1 was $1.85. The charges for the second quarter include
non-cash sales contract amortization, reorganization expenses and
early debt extinguishment charges and related tax impact. The
company earned adjusted earnings before interest, taxes,
depreciation, depletion, amortization, reorganization items and
early debt extinguishment charges ("adjusted EBITDAR") 1
of $95.4 million in the second
quarter of 2017.
Revenues totaled $549.9 million
for the three months ended June 30,
2017, representing a sequential decline and reflective of
the timing of sales in the metallurgical segment as well as
anticipated reduced shipment levels in the Powder River Basin
typical of the shoulder season.
"While extreme volatility in global metallurgical markets
delayed the timing of second quarter spot sales, Arch continued to
generate strong free cash flow, execute its operational strategy
and make progress on many fronts," said John W. Eaves, Arch's chief executive officer.
"Since the last update, Arch returned nearly $60 million to shareholders through share
repurchases and quarterly dividends; further streamlined its
operational structure with the announced sale of the Lone Mountain
complex and two other idled facilities; and capitalized on
favorable dynamics in seaborne thermal markets. Looking ahead, we
are confident in our strengthened annual guidance for coking coal
sales, and we continue to execute on our strategic priorities and
return capital to shareholders."
Capital Allocation Progress and Financial Position
During the second quarter, Arch utilized its healthy cash
generation to repurchase 711,000 shares of common stock,
representing 2.8 percent of shares outstanding, at a total cost of
$51 million and an average price of
$71.82 per share. At quarter-end,
$249 million remained available in
the current share repurchase authorization. As previously
announced, the share repurchase plan has no time limit.
"We continue to be optimistic about the company's strong
long-term prospects," said John T.
Drexler, Arch's chief financial officer. "We fully expect to
continue to make significant and ongoing purchases under the
existing authorization during the remainder of 2017."
In addition, the company paid $8.6
million in cash dividends to shareholders during the second
quarter of 2017. The next quarterly cash dividend payment of
$0.35 per common share was approved
by the board of directors, and will be paid on September 15, 2017 to stockholders of record at
the close of business on August 31,
2017.
Future dividend declarations and share repurchases will be
subject to ongoing board review and authorization and will be based
on a number of factors, including business and market conditions,
Arch's future financial performance and other capital
priorities.
Including the impact of the share repurchases and dividends,
Arch's cash and short-term investment balance grew by $23 million from the end of the first quarter
2017 to over $490 million at
June 30, 2017. At quarter-end, Arch's
debt level totaled $330 million,
inclusive of the term loan, equipment financing and other debt.
Arch Executes Sale of Lone Mountain Complex
On July 21, 2017, Arch signed a
definitive agreement to sell its wholly-owned subsidiary, Lone
Mountain Processing Company, LLC. ("Lone Mountain"), to Revelation
Energy, LLC ("Revelation") for $8.3
million. The sale includes the Lone Mountain complex as well
as two other idled properties in Central Appalachia. Revelation
will assume responsibility for all reclamation liabilities and
final mine closure expenses for the properties.
"While we have been successful in placing Lone Mountain's
products in domestic thermal and pulverized coal injection (PCI)
markets, margins have been thin or negative in recent months in the
face of cost pressures," said Eaves. "This strategic divestiture
will further streamline and strengthen Arch's key metallurgical
segment and allow the company to deepen its focus on its four core
coking coal operations."
As a result of the sale of the company's highest-cost
Appalachian operation, Arch expects the cost structure of its
metallurgical segment to benefit over time. After customary working
capital adjustments, the company expects to record a pre-tax gain
of approximately $15 million to $20
million related to the sale of Lone Mountain. Closing of the
transaction is subject to customary closing conditions and is
expected to occur within the next 60 days.
Arch's Commitment to its Fundamental Values
Arch continued to deliver industry-leading safety and
environmental performances in the second quarter of 2017. Arch's
total-incident rate for the first half of 2017 was more than three
times better than the national coal industry average. Arch also
achieved a perfect environmental compliance record for the period.
Notably, the Coal Creek operation was recognized with the Rocky
Mountain Coal Mining Institute regional safety award. This is the
fifth time Coal Creek has received this prestigious honor.
"We congratulate our mine personnel for continuing to earn
external recognition for outstanding safety and environmental
performances," said Paul A. Lang,
Arch's president and chief operating officer. "In addition,
three operations attained A Perfect Zero – a dual goal of
operating without a reportable safety incident or SMCRA
environmental violation – in the second quarter. These achievements
exemplify our constant commitment to operating in a safe and
environmentally responsible manner. We commend the hard work and
focus of our employees in these critical areas of performance."
Arch's Operational Results
"During the second quarter, Arch's mining complexes ran well and
each operating segment delivered solid cash flow," said Lang. "Good
cost control and judicious capital spending are top priorities at
Arch, and we are currently expecting to deliver strong operational
results in the year's second half. At the same time, we are working
to opportunistically and selectively place our uncommitted volume,
with the objective of enhancing future profitability."
|
|
Metallurgical
|
|
|
2Q17
|
|
|
1Q17
|
|
|
|
|
|
|
Tons sold (in
millions)
|
|
2.1
|
|
|
2.1
|
Coking
|
|
1.5
|
|
|
1.5
|
PCI
|
|
0.3
|
|
|
0.1
|
Thermal
|
|
0.3
|
|
|
0.5
|
Average sales
price per ton
|
|
$90.59
|
|
|
$90.84
|
Coking
|
|
$103.44
|
|
|
$105.51
|
PCI
|
|
$72.26
|
|
|
$62.34
|
Thermal
|
|
$42.02
|
|
|
$47.64
|
Cash cost per
ton
|
|
$60.95
|
|
|
$57.67
|
Cash margin per
ton
|
|
$29.64
|
|
|
$33.17
|
|
Cash cost per ton
is defined and reconciled under "Reconciliation of non-GAAP
measures".
|
Mining complexes
included in this segment are Beckley, Leer, Lone Mountain,
Mountain Laurel and Sentinel
|
In the Metallurgical segment, Arch delivered solid cash margins
despite limited spot buying activity in seaborne metallurgical
markets during much of the quarter. Average coking coal
realizations continued to benefit from strong pricing on
index-linked tons that priced in the second quarter, but were
offset to some degree by an increased percentage of annual
fixed-priced tons that shipped during the period. Higher per-ton
cash costs in the segment were driven mainly by higher costs at the
Lone Mountain complex and challenging operating conditions in the
last panel of the Alma seam at the Mountain Laurel complex.
Excluding Lone Mountain, segment cash costs for the second quarter
would have been $57.15 per ton –
which, while higher than the expected cash costs in the year's
second half, would still place Arch well below the average cost
structure for the U.S. metallurgical coal industry. Due to the
outlook for increased coking coal volumes in the back half of the
year, Arch remains confident in its 2017 cash cost guidance of
$51.00 per ton to $56.00 per ton, excluding Lone Mountain.
|
Powder River
Basin
|
|
|
2Q17
|
|
|
1Q17
|
|
|
|
|
|
|
Tons sold (in
millions)
|
|
18.1
|
|
|
21.3
|
Average sales price
per ton
|
|
$12.55
|
|
|
$12.57
|
Cash cost per
ton
|
|
$10.82
|
|
|
$10.33
|
Cash margin per
ton
|
|
$1.73
|
|
|
$2.24
|
Cash cost per ton
is defined and reconciled under "Reconciliation of non-GAAP
measures".
|
Mining complexes
included in this segment are Black Thunder and Coal
Creek
|
In the Powder River Basin, second quarter 2017 sales volumes
declined 15 percent when compared with the first quarter of 2017
due largely to typical shoulder season decline, while the average
sales price per ton was essentially flat when compared with the
prior-quarter period. Segment cash costs increased $0.49 per ton over the first quarter of 2017,
primarily reflecting the impact of lower volume levels in the
segment and an unplanned repair expense. Given strong cost control
coupled with expected shipment levels in the year's second half,
Arch is reducing the top end of its cost guidance for the segment.
The company now expects cash costs to be in the range of
$10.20 per ton to $10.60 per ton for 2017.
|
|
Other
Thermal
|
|
|
2Q17
|
|
|
1Q17
|
|
|
|
|
|
|
Tons sold (in
millions)
|
|
2.3
|
|
|
2.3
|
Average sales price
per ton
|
|
$33.41
|
|
|
$35.51
|
Cash cost per
ton
|
|
$22.06
|
|
|
$23.82
|
Cash margin per
ton
|
|
$11.35
|
|
|
$11.69
|
Cash cost per ton
is defined and reconciled under "Reconciliation of non-GAAP
measures".
|
Mining complexes
included in this segment are Coal-Mac, Viper and West
Elk
|
In the Other Thermal segment, Arch recorded a second quarter
2017 cash margin of $11.35 per ton
compared with $11.69 per ton in the
first quarter. Sales volumes were flat during the period, supported
by strong international and domestic demand for West Elk, while
average sales price per ton declined slightly due to mix of
customer shipments. Cash costs per ton declined 7 percent when
compared to the prior quarter, reflecting increased sales volume
from the low-cost West Elk mine and strong cost control from the
other operations in the segment. Given the ongoing demand for
Arch's West Elk product in both domestic and international thermal
markets and increased interest in Coal-Mac's higher-quality
product, Arch is lowering its full-year cost guidance for the
segment. The company now anticipates cash costs to be in the range
of $23.00 per ton to $27.00 per ton for 2017.
Key Market Developments
Metallurgical Coal Markets
- At the outset of the second quarter, global coking coal prices
increased dramatically to nearly $300
per metric ton following the cyclone-driven rail closures in
Queensland. However, very few tons
were sold at peak levels as buyers headed to the sidelines and
coking coal prices retraced back to pre-cyclone levels by
mid-June.
- Since then, the market has found support, with recent global
supply disruptions moving near-term pricing up strongly. The Platts
East Coast price assessment shows all products up roughly
$20 per metric ton on average, with
High-vol A marks increasing more than $23 to reach $167
per metric ton, since June 20,
2017.
- Additionally, imports into China are up strongly year to date and it
appears buyers have returned to the market, encouraged in part by
the fact that seaborne metallurgical coal is trading at a discount
to Chinese domestic production.
- Moreover, global hot metal production has provided support with
demand up 2.5 percent through the first half of 2017, while global
steel prices remain in a fairly healthy and sustainable range.
- Counterbalancing the positive demand trends somewhat, global
coking coal supply is increasing in response to the stronger
pricing environment, led by the United
States and Mozambique. Arch
continues to believe that metallurgical prices will need to remain
well above historical levels to keep these tons in the market and
keep the market balanced.
Thermal Coal Markets
- Higher temperatures across much of the country in recent weeks
should support natural gas prices and advance the continued
liquidation of stockpiles. Cooling degree days (CDDs), which are a
good indicator of summer temperatures, are more than 2 percent
above the five-year average at present.
- With a reasonably normal summer and relatively stable natural
gas prices, coal inventories could fall below 70 days of supply by
year-end. While that is still above projected target levels, it's a
dramatic improvement from the 108 days of supply with which we
started 2016.
- Moreover, the recent heat has prompted some large U.S. coal
consumers – particularly Powder River Basin users – to approach the
market to fulfill spot volume
needs.
- Globally, fundamentals for moving U.S. coal into seaborne
thermal markets have remained positive. Arch has continued to
leverage higher Newcastle and API2 prices to opportunistically move
West Elk and other thermal products into seaborne thermal
markets.
Company Outlook
Based on the company's current expectations regarding the
outlook for metallurgical coal markets, Arch has raised its coking
coal volume guidance for 2017. Arch now expects to sell between 6.9
million tons and 7.1 million tons of coking coal. At the midpoint
of its volume guidance level, Arch is now more than 90-percent
committed on coking coal sales for the full year, with more than 20
percent of that committed volume exposed to index-based pricing. At
the midpoint of guidance, Arch's thermal sales are 95-percent
committed for the full year 2017.
"Looking ahead, Arch is in a uniquely competitive position to
leverage its complementary lines of business to capitalize on
strong metallurgical markets and dynamic thermal markets," said
Eaves. "As we progress through the balance of the year, Arch
remains financially sound, operationally strong, strategically
positioned and completely committed to creating long-term value for
our shareholders."
|
|
|
2017
|
|
2018
|
|
|
|
Tons
|
$ per
ton
|
|
Tons
|
$ per ton
|
Sales Volume
(in millions of tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
Coking
|
|
|
6.9
|
|
-
|
7.1
|
|
|
|
|
|
|
|
|
|
Thermal
|
|
|
87.0
|
|
-
|
95.0
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
93.9
|
|
-
|
102.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metallurgical
(in millions of tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed, Priced
Coking
|
|
|
|
|
5.0
|
|
|
|
$97.14
|
|
|
0.1
|
|
$97.37
|
Committed, Unpriced
Coking
|
|
|
|
|
1.4
|
|
|
|
|
|
|
2.0
|
|
|
Total Committed
Coking
|
|
|
|
|
6.4
|
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed, Priced
Thermal Byproduct
|
|
|
0.9
|
|
|
|
$24.45
|
|
|
0.4
|
|
$30.33
|
Committed, Unpriced
Thermal Byproduct
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
Total Committed
Thermal Byproduct
|
|
|
0.9
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Metallurgical
Cash Cost
|
|
|
|
|
$51.00
|
|
-
|
$56.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Powder River Basin
(in millions of tons)
|
|
|
|
|
|
|
|
|
|
|
|
Committed,
Priced
|
|
|
|
|
|
76.4
|
|
|
|
$12.47
|
|
|
36.5
|
|
$12.20
|
Committed,
Unpriced
|
|
|
|
|
1.8
|
|
|
|
|
|
|
3.0
|
|
|
Total
Committed
|
|
|
|
|
|
78.2
|
|
|
|
|
|
|
39.5
|
|
|
Average Cash
Cost
|
|
|
|
|
|
$10.20
|
|
-
|
$10.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Thermal
(in millions of tons)
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed,
Priced
|
|
|
|
|
|
8.4
|
|
|
|
$34.61
|
|
|
2.9
|
|
$37.94
|
Committed,
Unpriced
|
|
|
|
|
-
|
|
|
|
|
|
|
-
|
|
|
Total
Committed
|
|
|
|
|
|
8.4
|
|
|
|
|
|
|
2.9
|
|
|
Average Cash
Cost
|
|
|
|
|
|
$23.00
|
|
-
|
$27.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate (in $
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D,D&A excluding
Sales Contract Amortization
|
$124
|
|
-
|
$132
|
|
|
|
|
|
Sales Contract
Amortization
|
|
|
|
|
|
$50
|
|
-
|
$58
|
|
|
|
|
|
ARO
Accretion
|
|
|
|
|
|
|
$30
|
|
-
|
$32
|
|
|
|
|
|
S,G&A
|
|
|
|
|
|
|
$85
|
|
-
|
$89
|
|
|
|
|
|
Interest
Expense
|
|
|
|
|
|
|
$23
|
|
-
|
$27
|
|
|
|
|
|
Capital
Expenditures
|
|
|
|
|
|
$52
|
|
-
|
$60
|
|
|
|
|
|
Tax
Provision
|
|
|
|
|
|
|
0%
|
|
-
|
3%
|
|
|
|
|
|
As a result of the
sale of Lone Mountain, all of its related information has been
removed from the guidance table and the thermal line item contained in the
Metallurgical Segment has been changed to ''Thermal
Byproducts" to more
accurately reflect the product. Through June 30, 2017, Lone
Mountain had shipped 344,000 tons of thermal coal
and 374,000 tons of PCI coal. For
full year, the complex has committed 796,000 tons of thermal coal
and 772,000 tons of PCI coal. Cash cost guidance for the metallurgical segment
excludes the Lone Mountain complex.
|
A conference call regarding Arch Coal's second quarter 2017
financial results will be webcast live today at 10 a.m. Eastern time. The conference call can be
accessed via the "investor" section of the Arch Coal website
(http://investor.archcoal.com).
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.
|
|
|
1
Adjusted EPS and Adjusted EBITDAR are defined and reconciled in
the "Reconciliation of Non-GAAP measures" in this
release.
|
Arch Coal, Inc.
and Subsidiaries
|
|
Condensed
Consolidated Statements of Operations
|
|
(In thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
Successor
|
Predecessor
|
|
|
Three Months
Ended
June 30, 2017
|
Three Months
Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2017
|
Six Months
Ended
June 30, 2016
|
|
|
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Revenues
|
$
549,866
|
$
420,298
|
|
$
1,150,841
|
$
848,404
|
|
|
|
|
|
|
|
|
Costs, expenses
and other operating
|
|
|
|
|
|
|
Cost of
sales
|
435,038
|
410,992
|
|
896,448
|
822,002
|
|
Depreciation,
depletion and amortization
|
30,701
|
58,459
|
|
62,622
|
122,158
|
|
Accretion on asset
retirement obligations
|
7,623
|
8,050
|
|
15,246
|
16,356
|
|
Amortization of sales
contracts, net
|
14,352
|
1
|
|
29,042
|
(832)
|
|
|
|
|
|
|
|
|
Change in fair value
of coal derivatives and coal trading activities, net
|
863
|
1,158
|
|
1,717
|
2,368
|
|
Asset impairment and
mine closure costs
|
-
|
43,701
|
|
-
|
129,221
|
|
Selling, general and
administrative expenses
|
22,146
|
19,019
|
|
42,669
|
38,845
|
|
Other operating
income, net
|
(3,549)
|
(10,561)
|
|
(5,859)
|
(12,781)
|
|
|
507,174
|
530,819
|
|
1,041,885
|
1,117,337
|
|
|
|
|
|
|
|
|
Income
(loss) from operations
|
42,692
|
(110,521)
|
|
108,956
|
(268,933)
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
|
|
|
|
Interest
expense
|
(6,003)
|
(45,273)
|
|
(15,428)
|
(89,724)
|
|
Interest and
investment income
|
842
|
933
|
|
1,369
|
2,071
|
|
|
(5,161)
|
(44,340)
|
|
(14,059)
|
(87,653)
|
|
|
|
|
|
|
|
|
Income (loss) before
nonoperating expenses
|
37,531
|
(154,861)
|
|
94,897
|
(356,586)
|
|
|
|
|
|
|
|
|
Nonoperating
expense
|
|
|
|
|
|
|
Net loss resulting
from early retirement of debt and debt restructuring
|
(31)
|
-
|
|
(2,061)
|
(2,213)
|
|
Reorganization items,
net
|
(21)
|
(21,271)
|
|
(2,849)
|
(25,146)
|
|
|
(52)
|
(21,271)
|
|
(4,910)
|
(27,359)
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
37,479
|
(176,132)
|
|
89,987
|
(383,945)
|
|
Provision for
(benefit from) income taxes
|
319
|
(245)
|
|
1,159
|
(1,356)
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
37,160
|
$
(175,887)
|
|
$
88,828
|
$
(382,589)
|
|
|
|
|
|
|
|
|
Net income (loss)
per common share
|
|
|
|
|
|
|
Basic EPS
(LPS)
|
$
1.51
|
$
(8.26)
|
|
$
3.58
|
$
(17.97)
|
|
Diluted EPS
(LPS)
|
$
1.48
|
$
(8.26)
|
|
$
3.52
|
$
(17.97)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
Basic weighted
average shares outstanding
|
24,659
|
21,293
|
|
24,834
|
21,293
|
|
Diluted weighted
average shares outstanding
|
25,082
|
21,293
|
|
25,245
|
21,293
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
0.35
|
$
-
|
|
$
0.35
|
$
-
|
|
|
|
|
|
|
|
|
Adjusted EBITDAR
(A) (Unaudited)
|
$
95,368
|
$
(310)
|
|
$
215,866
|
$
(2,030)
|
|
Adjusted diluted
income (loss) per common share (A)
|
$
1.85
|
$
(5.32)
|
|
$
4.41
|
$
(10.80)
|
|
|
(A) Adjusted EBITDAR
and Adjusted diluted income per common share are defined and
reconciled under "Reconciliation of Non-GAAP Measures" later in
this release.
|
Arch Coal, Inc.
and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
|
|
|
|
|
|
|
June
30,
|
December
31,
|
|
2017
|
2016
|
|
(Unaudited)
|
|
Assets
|
|
|
Current
assets
|
|
|
Cash and cash
equivalents
|
$
333,548
|
$
305,372
|
Short term
investments
|
159,822
|
88,072
|
Restricted
cash
|
41,755
|
71,050
|
Trade accounts
receivable
|
190,256
|
184,483
|
Other
receivables
|
21,504
|
19,877
|
Inventories
|
137,056
|
113,462
|
Other current
assets
|
61,474
|
96,306
|
Total current
assets
|
945,415
|
878,622
|
|
|
|
Property, plant
and equipment, net
|
1,007,570
|
1,053,603
|
|
|
|
Other
assets
|
|
|
Equity
investments
|
104,015
|
96,074
|
Other noncurrent
assets
|
75,058
|
108,298
|
Total
other assets
|
179,073
|
204,372
|
Total
assets
|
$2,132,058
|
$
2,136,597
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$
127,059
|
$
95,953
|
Accrued expenses and
other current liabilities
|
169,533
|
205,240
|
Current maturities of
debt
|
7,414
|
11,038
|
Total
current liabilities
|
304,006
|
312,231
|
Long-term
debt
|
315,639
|
351,841
|
Asset retirement
obligations
|
342,680
|
337,227
|
Accrued pension
benefits
|
32,092
|
38,884
|
Accrued
postretirement benefits other than pension
|
101,407
|
101,445
|
Accrued workers'
compensation
|
186,128
|
184,568
|
Other noncurrent
liabilities
|
65,048
|
63,824
|
Total
liabilities
|
1,347,000
|
1,390,020
|
|
|
|
Stockholders'
equity
|
|
|
Common
Stock
|
250
|
250
|
Paid-in
capital
|
694,780
|
688,424
|
Retained
earnings
|
113,574
|
33,449
|
Treasury stock, at
cost
|
(51,043)
|
-
|
Accumulated other
comprehensive income
|
27,497
|
24,454
|
Total
stockholders' equity
|
785,058
|
746,577
|
Total liabilities and
stockholders' equity
|
$2,132,058
|
$
2,136,597
|
Arch Coal, Inc.
and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
Six Months
Ended
June 30, 2017
|
Six Months
Ended
June 30, 2016
|
|
(Unaudited)
|
(Unaudited)
|
Operating
activities
|
|
|
Net income
(loss)
|
$
88,828
|
$
(382,589)
|
Adjustments to
reconcile to cash provided by operating activities:
|
|
|
Depreciation,
depletion and amortization
|
62,622
|
122,158
|
Accretion on asset
retirement obligations
|
15,246
|
16,356
|
Amortization of sales
contracts, net
|
29,042
|
(832)
|
Prepaid royalties
expensed
|
2,288
|
1,770
|
Deferred income
taxes
|
5,996
|
(418)
|
Employee stock-based
compensation expense
|
4,942
|
1,435
|
Gains on disposals
and divestitures
|
(2,005)
|
(6,269)
|
Asset impairment and
noncash mine closure costs
|
—
|
119,194
|
Net loss resulting
from early retirement of debt and debt restructuring
|
2,061
|
2,213
|
Non-cash bankruptcy
reorganization items
|
—
|
(14,892)
|
Amortization relating
to financing activities
|
1,565
|
7,657
|
Changes
in:
|
|
|
Receivables
|
(3,864)
|
(7,776)
|
Inventories
|
(23,594)
|
21,152
|
Accounts
payable, accrued expenses and other current liabilities
|
(89)
|
84,160
|
Income
taxes, net
|
(3,796)
|
(937)
|
Other
|
21,557
|
(22,634)
|
Cash provided by
(used in) operating activities
|
200,799
|
(60,252)
|
|
|
|
Investing
activities
|
|
|
Capital
expenditures
|
(16,922)
|
(74,137)
|
Minimum royalty
payments
|
(4,211)
|
(217)
|
Proceeds from
(consideration paid for) disposals and divestitures
|
4,186
|
(3,303)
|
Purchases of short
term investments
|
(157,364)
|
(98,750)
|
Proceeds from sales
of short term investments
|
85,035
|
94,589
|
Investments in and
advances to affiliates, net
|
(8,934)
|
(2,890)
|
Withdrawals
(deposits) of restricted cash
|
29,295
|
(4,695)
|
Cash used in
investing activities
|
(68,915)
|
(89,403)
|
|
|
|
Financing
activities
|
|
|
Proceeds from
issuance of term loan due 2024
|
298,500
|
—
|
Payments to
extinguish term loan due 2021
|
(325,684)
|
—
|
Payments on term loan
due 2024
|
(750)
|
—
|
Net payments on other
debt
|
(5,207)
|
(10,293)
|
Debt financing
costs
|
(8,900)
|
(18,806)
|
Net loss resulting
from early retirement of debt and debt restructuring
|
(2,061)
|
(2,213)
|
Dividends
paid
|
(8,563)
|
—
|
Purchases of treasury
stock
|
(51,043)
|
—
|
Cash
used in financing activities
|
(103,708)
|
(31,312)
|
|
|
|
Increase (decrease)
in cash and cash equivalents
|
28,176
|
(180,967)
|
Cash and cash
equivalents, beginning of period
|
305,372
|
450,781
|
|
|
|
Cash and cash
equivalents, end of period
|
$
333,548
|
$
269,814
|
Arch Coal, Inc.
and Subsidiaries
|
Schedule of
Consolidated Debt
|
(In
thousands)
|
|
|
|
|
|
|
June
30,
|
December
31,
|
|
|
2017
|
2016
|
|
|
(Unaudited)
|
|
|
|
|
|
Term loan due 2024
($299.3 million face value)
|
|
$ 297,808
|
$
-
|
Term loan due 2021
($325.7 million face value)
|
|
-
|
325,684
|
Other
|
|
32,065
|
37,195
|
Debt issuance
costs
|
|
(6,820)
|
—
|
|
|
323,053
|
362,879
|
Less: current
maturities of debt
|
7,414
|
11,038
|
Long-term
debt
|
|
$ 315,639
|
$
351,841
|
|
|
|
|
Calculation of net
debt
|
|
|
|
Total debt (excluding
debt issuance costs)
|
|
$ 329,873
|
$
362,879
|
Less liquid
assets:
|
|
|
|
Cash and cash
equivalents
|
|
333,548
|
305,372
|
Short term
investments
|
|
159,822
|
88,072
|
|
|
493,370
|
393,444
|
Net debt
|
|
$(163,497)
|
$
(30,565)
|
Arch Coal, Inc.
and Subsidiaries
|
Operational
Performance
|
(In millions,
except per ton data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
Successor
|
Predecessor
|
|
Three Months
Ended
June 30, 2017
|
|
Three Months
Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2017
|
|
Six Months
Ended
June 30, 2016
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Powder River
Basin
|
|
|
|
|
|
|
|
|
|
|
|
Tons Sold
|
18.1
|
|
|
15.6
|
|
|
39.4
|
|
|
32.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Sales
|
$
227.1
|
$12.55
|
|
$
204.5
|
$13.08
|
|
$
495.2
|
$12.56
|
|
$
423.0
|
$13.16
|
Segment Cash Cost of
Sales
|
195.7
|
10.82
|
|
183.2
|
11.72
|
|
416.0
|
10.55
|
|
388.9
|
12.10
|
Segment Cash
Margin
|
31.4
|
1.73
|
|
21.3
|
1.36
|
|
79.1
|
2.01
|
|
34.1
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
Metallurgical
|
|
|
|
|
|
|
|
|
|
|
|
Tons Sold
|
2.1
|
|
|
2.3
|
|
|
4.2
|
|
|
4.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Sales
|
$
190.6
|
$90.59
|
|
$
122.1
|
$52.94
|
|
$
377.7
|
$90.72
|
|
$
232.7
|
$52.05
|
Segment Cash Cost of
Sales
|
128.2
|
60.95
|
|
125.8
|
54.52
|
|
247.0
|
59.33
|
|
230.1
|
51.45
|
Segment Cash
Margin
|
62.4
|
29.64
|
|
(3.6)
|
(1.58)
|
|
130.7
|
31.39
|
|
2.7
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Thermal
|
|
|
|
|
|
|
|
|
|
|
|
Tons Sold
|
2.3
|
|
|
1.4
|
|
|
4.6
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Sales
|
$
77.7
|
$33.41
|
|
$
51.4
|
$35.76
|
|
$
159.1
|
$34.45
|
|
$
102.1
|
$37.66
|
Segment Cash Cost of
Sales
|
51.3
|
22.06
|
|
52.3
|
36.39
|
|
105.9
|
22.93
|
|
99.9
|
36.83
|
Segment Cash
Margin
|
26.4
|
11.35
|
|
(0.9)
|
(0.63)
|
|
53.2
|
11.52
|
|
2.3
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Cash
Margin
|
$
120.2
|
|
|
$
16.8
|
|
|
$
263.0
|
|
|
$
39.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
(22.1)
|
|
|
(19.0)
|
|
|
(42.7)
|
|
|
(38.8)
|
|
Liquidated damages
under export logistics contracts
|
-
|
|
|
-
|
|
|
-
|
|
|
(1.6)
|
|
Other
|
(2.7)
|
|
|
2.0
|
|
|
(4.5)
|
|
|
(0.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDAR
|
$
95.4
|
|
|
$
(0.3)
|
|
|
$
215.9
|
|
|
$
(2.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Measures
|
Successor
|
Predecessor
|
|
Successor
|
Predecessor
|
|
Three Months Ended
June 30, 2017
|
|
Three Months Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2017
|
|
Six Months
Ended
June 30, 2016
|
Total segment
sales
|
$
495.4
|
|
|
$
378.0
|
|
|
$1,032.0
|
|
|
$
757.9
|
|
Transportation costs
billed to customers
|
54.5
|
|
|
37.8
|
|
|
118.8
|
|
|
75.3
|
|
Coal risk management
derivative settlements
|
-
|
|
|
0.2
|
|
|
-
|
|
|
0.3
|
|
Other (1)
|
(0.0)
|
|
|
4.3
|
|
|
0.1
|
|
|
14.9
|
|
Revenues
|
$
549.9
|
|
|
$
420.3
|
|
|
$1,150.8
|
|
|
$
848.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other includes
coal sales associated with mines that have operated historically
but have been idled or disposed of and are no longer part of a segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
Successor
|
Predecessor
|
|
Three Months Ended
June 30, 2017
|
|
Three Months Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2017
|
|
Six Months
Ended
June 30, 2016
|
Total segment cash
cost of sales
|
$
375.2
|
|
|
$
361.2
|
|
|
$
768.9
|
|
|
$
718.9
|
|
Transportation costs
billed to customers
|
54.5
|
|
|
37.8
|
|
|
118.8
|
|
|
75.3
|
|
Risk management
derivative settlements--diesel fuel
|
(0.9)
|
|
|
(1.2)
|
|
|
(1.5)
|
|
|
(2.5)
|
|
Other (1)
|
6.2
|
|
|
13.1
|
|
|
10.2
|
|
|
30.3
|
|
Cost of
Sales
|
$
435.0
|
|
|
$
411.0
|
|
|
$
896.4
|
|
|
$
822.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Other includes
costs associated with mines that have operated historically but
have been idled or disposed of and are no longer part of a segment and operating
overhead.
|
|
|
|
|
|
|
|
|
|
|
|
|
Arch Coal, Inc.
and Subsidiaries
|
Reconciliation of
Non-GAAP Measures
|
(In thousands,
except per share data)
|
|
|
|
|
|
|
Included in the
accompanying release, we have disclosed certain non-GAAP measures
as defined by Regulation G.
|
The following
reconciles these items to net income and cash flows as reported
under GAAP.
|
|
|
|
|
|
|
Adjusted
EBITDAR
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAR is
defined as net income attributable to the Company before the effect
of net interest expense, income taxes,
depreciation, depletion and
amortization, accretion on asset retirement obligations,
amortization of sales contracts and reorganization items,
net. Adjusted EBITDAR may also be
adjusted for items that may not reflect the trend of future
results.
|
|
Adjusted EBITDAR is
not a measure of financial performance in accordance with generally
accepted accounting principles, and items excluded
from Adjusted EBITDAR are significant in
understanding and assessing our financial condition. Therefore,
Adjusted EBITDAR 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. The Company uses adjusted EBITDAR to
measure the operating performance of its segments and allocate resources to
the segments. Furthermore, analogous measures are used by
industry analysts and investors to evaluate our operating performance. Investors
should be aware that our presentation of Adjusted EBITDAR may not
be comparable to similarly titled measures used by other companies. The table below
shows how we calculate Adjusted EBITDAR.
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
Successor
|
Predecessor
|
|
Three Months
Ended
June 30, 2017
|
Three Months
Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2017
|
Six Months
Ended
June 30, 2016
|
|
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
(Unaudited)
|
Net income
(loss)
|
$
37,160
|
$
(175,887)
|
|
$
88,828
|
$
(382,589)
|
Income tax (benefit)
expense
|
319
|
(245)
|
|
1,159
|
(1,356)
|
Interest expense,
net
|
5,161
|
44,340
|
|
14,059
|
87,653
|
Depreciation,
depletion and amortization
|
30,701
|
58,459
|
|
62,622
|
122,158
|
Accretion on asset
retirement obligations
|
7,623
|
8,050
|
|
15,246
|
16,356
|
Amortization of sales
contracts, net
|
14,352
|
1
|
|
29,042
|
(832)
|
Asset impairment and
mine closure costs
|
-
|
43,701
|
|
-
|
129,221
|
Net loss resulting
from early retirement of debt and debt restructuring
|
31
|
-
|
|
2,061
|
2,213
|
Reorganization items,
net
|
21
|
21,271
|
|
2,849
|
25,146
|
|
|
|
|
|
|
Adjusted
EBITDAR
|
$
95,368
|
$
(310)
|
|
$
215,866
|
$
(2,030)
|
|
|
|
|
|
|
Adjusted net
income (loss) and adjusted diluted income (loss) per
share
|
|
|
|
|
|
|
|
Adjusted net income
(loss) and adjusted diluted income (loss) per common share are
adjusted for the after-tax impact of reorganization items,
net and are not measures of
financial performance in accordance with generally accepted
accounting principles. We believe that adjusted
net income (loss) and adjusted diluted
income (loss) per common share better reflect the trend of our
future results by excluding items relating to significant transactions. The adjustments made to
arrive at these measures are significant in understanding and
assessing our financial condition. Therefore, adjusted net income (loss) and adjusted
diluted income (loss) per share should not be considered in
isolation, nor as an alternative to net income (loss) or diluted income (loss) per common
share under generally accepted accounting principles.
|
|
|
|
|
|
|
|
Successor
|
Predecessor
|
|
Successor
|
Predecessor
|
|
Three Months
Ended
June 30, 2017
|
Three Months
Ended
June 30, 2016
|
|
Six Months
Ended
June 30, 2017
|
Six Months
Ended
June 30, 2016
|
|
(Unaudited)
|
(Unaudited)
|
|
(Unaudited)
|
(Unaudited)
|
Net income
(loss)
|
$
37,160
|
$
(175,887)
|
|
$
88,828
|
$
(382,589)
|
|
|
|
|
|
|
Amortization of sales
contracts, net
|
14,352
|
1
|
|
29,042
|
(832)
|
Asset impairment and
mine closure costs
|
-
|
43,701
|
|
-
|
129,221
|
Net loss resulting
from early retirement of debt and debt restructuring
|
31
|
-
|
|
2,061
|
2,213
|
Reorganization items,
net
|
21
|
21,271
|
|
2,849
|
25,146
|
Tax impact of
adjustment
|
(5,180)
|
(2,298)
|
|
(11,505)
|
(3,213)
|
|
|
|
|
|
|
Adjusted net income
(loss)
|
$
46,384
|
$
(113,212)
|
|
$
111,275
|
$
(230,054)
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
25,082
|
21,293
|
|
25,245
|
21,293
|
|
|
|
|
|
|
Diluted income (loss)
per share
|
$
1.48
|
$
(8.26)
|
|
$
3.52
|
$
(17.97)
|
|
|
|
|
|
|
Amortization of sales
contracts, net
|
0.57
|
-
|
|
1.16
|
(0.04)
|
Asset impairment and
mine closure costs
|
-
|
2.05
|
|
-
|
6.07
|
Net loss resulting
from early retirement of debt and debt restructuring
|
-
|
-
|
|
0.08
|
0.10
|
Reorganization items,
net
|
-
|
1.00
|
|
0.11
|
1.18
|
Tax impact of
adjustments
|
(0.20)
|
(0.11)
|
|
(0.46)
|
(0.14)
|
Adjusted diluted
income (loss) per share
|
$
1.85
|
$
(5.32)
|
|
$
4.41
|
$
(10.80)
|
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SOURCE Arch Coal, Inc.