Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - ARCH RESOURCES, INC. | c62682e8vk.htm |
News from
Arch Coal, Inc.
Arch Coal, Inc.
FOR FURTHER INFORMATION:
Deck S. Slone
Vice President, Government, Investor and Public Affairs
314/994-2717
Deck S. Slone
Vice President, Government, Investor and Public Affairs
314/994-2717
FOR IMMEDIATE RELEASE
Arch Coal, Inc. Reports Fourth Quarter and Full Year 2010 Results
Arch generates record free cash flow in 2010
EBITDA expands 58% versus a year ago
Annual revenues reach record $3.2 billion
Arch generates record free cash flow in 2010
EBITDA expands 58% versus a year ago
Annual revenues reach record $3.2 billion
Earnings Highlights
| Quarter Ended | Year Ended | ||||||||||||||||
| In $ millions, except per share data | 12/31/10 | 12/31/09 | 12/31/10 | 12/31/09 | |||||||||||||
Revenues |
$ | 835.4 | $ | 725.5 | $ | 3,186.3 | $ | 2,576.1 | |||||||||
Income from Operations |
86.9 | 29.5 | 324.0 | 123.7 | |||||||||||||
Net Income1 |
47.8 | 1.5 | 158.9 | 42.2 | |||||||||||||
Fully Diluted EPS |
0.29 | 0.01 | 0.97 | 0.28 | |||||||||||||
Adjusted EBITDA2 |
$ | 192.3 | $ | 144.3 | $ | 724.1 | $ | 458.7 | |||||||||
| 1/- | Net income attributable to ACI. | |
| 2/- | Adjusted EBITDA is defined and reconciled under “Reconciliation of Non-GAAP Measures” in this release. |
ST. LOUIS (January 28, 2011) — Arch Coal, Inc. (NYSE: ACI) today reported fourth quarter
2010 net income of $47.8 million, or $0.29 per diluted share, compared with net income of $1.5
million, or $0.01 per diluted share, in the prior-year period. Excluding certain charges, fourth
quarter 2010 adjusted net income was $53.9 million, or $0.33 per diluted share. These charges
represent non-cash amortization of coal supply agreements acquired in the Jacobs Ranch transaction.
Fourth quarter 2010 revenues grew 15 percent versus the prior-year quarter on higher sales
volume. Adjusted earnings before interest, taxes, depreciation, depletion and amortization
(“EBITDA”) increased 33 percent versus a year ago to reach $192 million in the fourth quarter of
2010. Additionally, the company generated free cash flow of $147 million in the quarter just
ended, matching the previous record set in the third quarter of 2010.
“Arch’s quarterly financial results reflect better coal market conditions than a year ago,”
said Steven F. Leer, Arch’s chairman and chief executive officer. “While our overall performance
was solid, quarterly results were dampened by lower-than-expected shipment levels, poor Eastern
rail service and lower-than-planned production at Mountain Laurel, as previously announced.”
1
For full year 2010, net income totaled $158.9 million, or $0.97 per diluted share, compared
with net income of $42.2 million, or $0.28 per diluted share, for full year 2009. Adjusted 2010
net income was $185.8 million, or $1.14 per diluted share. Annual EBITDA reached $724.1 million in
2010, representing the second highest level in company history. Arch also set a new record for
sales revenue of $3.2 billion in 2010, a nearly 25-percent increase versus the prior year.
Furthermore, cash flow from operations totaled $697 million for the year ended 2010 — the highest
in company history — while capital expenditures equaled $315 million, resulting in record free
cash flow of $382 million for 2010.
“Arch achieved a much stronger financial performance in 2010 versus 2009, resulting from
substantially higher margins earned in each operating region,” said Leer. “Among other metrics,
Arch generated record free cash flow in 2010, which served to further bolster its balance sheet.
Moreover, the company demonstrated its ongoing commitment to safety and environmental compliance by
again delivering industry-leading performances in both key areas.”
Core Values
Arch’s 2010 safety performance once again set a new record, surpassing the company’s previous
best-in-class performance. The company’s lost-time incident rate was 0.46 incidents per 200,000
hours worked — a 35 percent improvement over 2009 — ranking Arch first among diversified, public
coal companies. Arch also was honored with a national Sentinels of Safety certificate from the
U.S. Department of Labor and eight state awards for outstanding safety practices over the past
year.
The company’s flagship operation, Black Thunder, surpassed 7.5 million employee hours without
a lost-time incident on Nov. 20, 2010. In addition, four more of Arch’s coal mining complexes
completed 2010 without a lost-time incident.
Arch also excelled in environmental stewardship during 2010, achieving its best year on record
for SMCRA compliance — with a 45-percent reduction versus 2009 — and once again leading major
U.S. coal industry peers. In the past year, dedication to environmental management has earned Arch
and its subsidiaries seven national or state awards, including the U.S. Department of Interior’s
National Award for Excellence.
“Arch’s 2010 record-setting safety and environmental accomplishments were significant,” said
Leer. “In fact, we had 11 individual mines, preparation plants and facilities achieve a Perfect
Zero with either zero reportable injuries or zero environmental violations. We are proud of our
employees for these achievements, which model our ultimate goal of obtaining a Perfect Zero at
every one of our operations every year.”
Strategic Investments
During the fourth quarter of 2010, Arch increased its equity interest in Knight Hawk Holdings
LLC (“Knight Hawk”), a private Illinois Basin coal producer, from 42 percent to 49 percent, for
total consideration of $26.6 million. Knight Hawk shipped 4.0 million tons of coal from its mining
operations in 2010. Beyond the equity stake in Knight Hawk, Arch controls approximately 300
million tons of primarily low-chlorine coal reserves in Illinois, and is currently in the process
of permitting some of those reserves for the eventual development of the Lost Prairie mine in that
region. “Our growing investment in Knight Hawk, as well as the future
2
development of Lost Prairie, grants Arch additional growth opportunities in its diverse
portfolio of assets,” said Leer.
In recent developments, Arch announced that it has acquired an equity interest in Millennium
Bulk Terminals-Longview, LLC (“MBT”), the owner of a bulk commodity terminal on the Columbia River
near Longview, Wash., in exchange for $25 million plus additional consideration upon the completion
of certain project milestones. Under terms of the agreement, Arch will control 38 percent of the
terminal’s throughput and storage capacity to facilitate export shipments of coal off the western
coast of the United States. As currently planned, the MBT facility will utilize existing
infrastructure with some minor modifications to handle loading 5 million tons of coal per year,
which could begin in 2012 once required approvals and necessary permits to complete dredging and
other upgrades to the facility are obtained.
Arch also recently signed a five-year throughput agreement with Canadian Crown Corporation
Ridley Terminals Inc. (“RTI”) — a coal and other bulk commodity marine terminal located near
Prince Rupert, British Columbia — to facilitate coal exports to Pacific Rim markets. The agreement
grants Arch the ability to ship up to 2 million metric tons of coal through the RTI terminal for
2011, and up to 2.5 million metric tons of coal annually through RTI for 2012 through 2015.
“The West Coast export facility announcements will help Arch to accomplish its strategic
objective of expanding sales of Powder River Basin and Western Bituminous coals into the
Asia-Pacific region, the world’s largest and fastest-growing coal market,” said Leer. “Increasing
our direct exposure to the growing seaborne thermal market should further unlock the value inherent
in our western coal assets.”
Operational Results
“Our operating regions turned in solid cost performances during the fourth quarter of 2010 —
with the Western Bituminous Region delivering its best quarterly performance of the year,” said
John W. Eaves, Arch’s president and chief operating officer. “Looking ahead, we will continue to
focus diligently on managing our controllable costs, while setting our production targets to match
our estimate of market demand.”
| Arch Coal, Inc. | |||||||||||||||||||
| 4Q10 | 3Q10 | FY10 | FY09 | ||||||||||||||||
Tons sold (in millions) |
42.0 | 43.7 | 161.3 | 125.0 | |||||||||||||||
Average sales price per ton |
$ | 18.65 | $ | 18.77 | $ | 18.52 | $ | 19.51 | |||||||||||
Cash cost per ton |
$ | 13.59 | $ | 13.70 | $ | 13.66 | $ | 15.48 | |||||||||||
Cash margin per ton |
$ | 5.06 | $ | 5.07 | $ | 4.86 | $ | 4.03 | |||||||||||
Total operating cost per ton |
$ | 15.87 | $ | 15.81 | $ | 15.91 | $ | 17.88 | |||||||||||
Operating margin per ton |
$ | 2.78 | $ | 2.96 | $ | 2.61 | $ | 1.63 | |||||||||||
Consolidated results may not tie to regional breakout due to rounding.
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Amortization of acquired coal supply agreements not included in results.
Amounts reflected in this table exclude certain coal sales and purchases which have no effect
on company results. For further description of the excluded transactions, please refer to
the supplemental regional schedule that can be found at http://investor.archcoal.com.
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Amortization of acquired coal supply agreements not included in results.
Amounts reflected in this table exclude certain coal sales and purchases which have no effect
on company results. For further description of the excluded transactions, please refer to
the supplemental regional schedule that can be found at http://investor.archcoal.com.
When compared with the third quarter of 2010, consolidated per-ton operating margin in
the fourth quarter of 2010 declined modestly on lower overall sales volume. Consolidated
3
average sales price declined over the same time period, mostly offset by lower overall cash
costs.
Consolidated annual operating margin increased 60 percent in 2010 versus 2009, benefiting from
improved coal market conditions. Consolidated 2010 sales volume rose nearly 30 percent versus the
prior year, reflecting a full year of Jacobs Ranch volume. Consolidated average sales price and
operating costs per ton declined over the same time period, due to a higher percentage of Powder
River Basin coal in the company’s overall volume mix. Operating costs in 2010 also declined as a
result of the full integration of Jacobs Ranch into Black Thunder.
| Powder River Basin | |||||||||||||||||||
| 4Q10 | 3Q10 | FY10 | FY09 | ||||||||||||||||
Tons sold (in millions) |
34.6 | 36.1 | 132.4 | 96.1 | |||||||||||||||
Average sales price per ton |
$ | 12.51 | $ | 12.12 | $ | 12.06 | $ | 12.43 | |||||||||||
Cash cost per ton |
$ | 9.56 | $ | 9.08 | $ | 9.30 | $ | 10.10 | |||||||||||
Cash margin per ton |
$ | 2.95 | $ | 3.04 | $ | 2.76 | $ | 2.33 | |||||||||||
Total operating cost per ton |
$ | 10.92 | $ | 10.44 | $ | 10.70 | $ | 11.43 | |||||||||||
Operating margin per ton |
$ | 1.59 | $ | 1.68 | $ | 1.36 | $ | 1.00 | |||||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Amortization of acquired coal supply agreements not included in results.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Amortization of acquired coal supply agreements not included in results.
In the Powder River Basin, fourth quarter 2010 operating margin declined 6 percent versus
the third quarter on lower sales volume. Average sales price rose by $0.39 per ton over the same
time period, while operating costs (excluding amortization of acquired coal supply agreements)
increased $0.48 per ton, largely due to higher diesel and higher sales-sensitive costs.
Full year 2010 operating margins per ton in the Powder River Basin increased 36 percent versus
the prior year on higher sales volumes attributable to a full year of Jacobs Ranch volume. Average
2010 sales price per ton declined 3 percent versus 2009, driven by lower-priced commitments signed
during the period of market weakness. Operating costs per ton, excluding amortization of acquired
coal supply agreements, also declined by 6 percent during the same time period, benefiting from
synergies related to the Jacobs Ranch acquisition.
| Western Bituminous Region | |||||||||||||||||||
| 4Q10 | 3Q10 | FY10 | FY09 | ||||||||||||||||
Tons sold (in millions) |
4.2 | 4.0 | 16.3 | 16.7 | |||||||||||||||
Average sales price per ton |
$ | 28.79 | $ | 30.66 | $ | 29.61 | $ | 29.11 | |||||||||||
Cash cost per ton |
$ | 19.31 | $ | 22.35 | $ | 21.35 | $ | 22.57 | |||||||||||
Cash margin per ton |
$ | 9.48 | $ | 8.31 | $ | 8.26 | $ | 6.54 | |||||||||||
Total operating cost per ton |
$ | 24.79 | $ | 27.06 | $ | 26.29 | $ | 27.55 | |||||||||||
Operating margin per ton |
$ | 4.00 | $ | 3.60 | $ | 3.32 | $ | 1.56 | |||||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Operating cost per ton includes depreciation, depletion and amortization per ton.
In the Western Bituminous Region, fourth quarter operating margin reached $4.00 per ton,
an increase of 11 percent versus the third quarter, mainly driven by the region’s strong cost
performance. Volumes increased moderately over the same time period, reflecting full quarterly
production at the Dugout Canyon mine in Utah. Average sales price declined $1.87 per ton in the
fourth quarter compared with the prior-quarter period, reflecting a
less favorable mix of customer shipments. Operating costs decreased $2.27 per ton over the same time period, as
4
lower cash costs per ton were offset somewhat by higher depreciation, depletion and amortization
expense per ton. Lower cash costs reflect an improved performance at Dugout Canyon as well as
solid cost control across all operations in the region.
Operating margins per ton in the Western Bituminous Region during 2010 more than doubled
versus 2009. Average 2010 sales price per ton rose approximately 2 percent versus the prior year,
driven by the roll-off of lower-priced sales contracts. Operating costs per ton declined nearly 5
percent during the same time period, benefiting from improved operating performances at the mines
in the region.
| Central Appalachia | |||||||||||||||||||
| 4Q10 | 3Q10 | FY10 | FY09 | ||||||||||||||||
Tons sold (in millions) |
3.2 | 3.5 | 12.6 | 12.2 | |||||||||||||||
Average sales price per ton |
$ | 71.91 | $ | 73.20 | $ | 72.01 | $ | 62.17 | |||||||||||
Cash cost per ton |
$ | 49.79 | $ | 51.09 | $ | 49.44 | $ | 48.12 | |||||||||||
Cash margin per ton |
$ | 22.12 | $ | 22.11 | $ | 22.57 | $ | 14.05 | |||||||||||
Total operating cost per ton |
$ | 57.78 | $ | 58.01 | $ | 57.19 | $ | 55.38 | |||||||||||
Operating margin per ton |
$ | 14.13 | $ | 15.19 | $ | 14.82 | $ | 6.79 | |||||||||||
Above figures exclude transportation costs billed to customers.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Arch acts as an intermediary on certain pass-through transactions that have no effect
on company results. These transactions are not reflected in this table.
Operating cost per ton includes depreciation, depletion and amortization per ton.
Arch acts as an intermediary on certain pass-through transactions that have no effect
on company results. These transactions are not reflected in this table.
In Central Appalachia, fourth quarter 2010 operating margins per ton declined by 7
percent when compared with the third quarter. Sales volumes declined 9 percent in the fourth
quarter of 2010 from the prior-quarter period — and were significantly lower than plan —
primarily due to poor rail service. Production levels were lower than planned due to geologic
challenges at Mountain Laurel in December. Average sales price declined $1.29 per ton over the
same time period, as lower pricing on steam coal sales offset modestly higher pricing on
metallurgical coal sales that shipped in the fourth quarter. Operating costs per ton decreased
modestly in the fourth quarter of 2010 compared with the prior-quarter period, due to solid cost
control across the operations in the region.
Full year 2010 operating margins per ton in Central Appalachia more than doubled versus 2009.
Sales volumes in Central Appalachia increased 4 percent in 2010 compared with a year ago,
reflecting substantially higher metallurgical coal volumes that served improved market demand
offset by lower steam volumes. Average sales price per ton increased 16 percent over the same time
period, driven by higher metallurgical coal shipments and better pricing on metallurgical coal
sales. Full year 2010 per-ton operating costs increased modestly versus 2009, due primarily to
higher sales-sensitive costs.
Coal Market Trends
U.S. coal markets improved materially in 2010, driven by a rebound in power demand spurred by
a better domestic economy and favorable weather trends. Power generation increased 4.4 percent
last year, with coal-based generation increasing 5.6 percent and thus increasing its market share
versus other fuels, according to company estimates.
U.S. coal production increased by a modest 10 million tons in 2010, according to MSHA data
released to date. Supply in the nation’s largest coal producing region — the southern Powder
5
River Basin — increased 11 million tons, while production in the second largest supply basin
— Central Appalachia — declined 12 million tons in 2010.
Improved domestic coal consumption coupled with muted production increases in 2010 led to a
meaningful reduction in U.S. generator stockpile levels. Arch estimates that power plant
stockpiles totaled approximately 170 million tons at the end of December 2010 — a 16-percent
decline from the recent peak level of 203 million tons reached at the end of November 2009, but
still 13 percent higher than the five-year average.
In addition, a strong metallurgical market helped to pull additional supply out of the steam
coal market and fueled substantial increases in U.S. coal exports in 2010. Arch estimates that
domestic coal exports reached 81 million tons last year, representing an increase of 21 million
tons versus 2009. Metallurgical coal shipments represented an estimated 70 percent of total U.S.
coal exports in 2010.
Looking ahead, market dynamics in 2011 could result in further stockpile reductions at U.S.
power generators by year-end. Arch currently projects increased U.S. coal consumption due to an
improving economy as well as the startup of 14 new coal-based power plants in the 2010-2011
timeframe. Furthermore, tight global metallurgical coal markets and growing seaborne thermal
demand should help increase U.S. coal exports in 2011, further reducing supply available to
domestic power plants. Arch currently projects that generator stockpiles will experience a further
decline of at least 25 million tons in 2011.
Production and Sales Contract Portfolio
Arch expects total sales volumes, including brokered tons, to be in the range of 155 million
to 160 million tons for full year 2011. The company’s sales volume guidance range includes tons
destined for metallurgical coal markets (coking and pulverized coal injection/PCI), which Arch
projects will reach at least 7 million tons during 2011.
| 2011 | 2012 | ||||||||||||||||||
| Tons | Price | Tons | Price | ||||||||||||||||
Powder River Basin |
|||||||||||||||||||
Committed, Priced |
98.1 | $ | 13.52 | 59.4 | $ | 13.99 | |||||||||||||
Committed, Unpriced |
7.1 | 10.2 | |||||||||||||||||
Western Bituminous Region |
|||||||||||||||||||
Committed, Priced |
17.1 | $ | 32.13 | 9.9 | $ | 35.46 | |||||||||||||
Central Appalachia |
|||||||||||||||||||
Committed, Priced (Coking/PCI) |
3.8 | $ | 105.28 | 0.2 | $ | 99.00 | |||||||||||||
Committed, Priced (Steam) |
6.4 | $ | 65.97 | 0.3 | $ | 58.30 | |||||||||||||
Committed, Unpriced (Steam) |
0.0 | 1.2 | |||||||||||||||||
2011 Earnings Guidance
Arch has set its 2011 earnings guidance as follows:
| • | Earnings per diluted share on a GAAP basis is projected to be between $1.93 and $2.42, including amortization of coal supply agreements. Excluding this charge, adjusted earnings per diluted share would be in the range of $2.00 to $2.50. |
6
| • | Adjusted EBITDA is forecasted to be in the $910 million to $1,030 million range. | ||
| • | Capital spending is expected to be in the $370 million to $410 million range. | ||
| • | Depreciation, depletion and amortization expense (excluding non-cash amortization of acquired coal supply agreements) is projected to be between $378 million and $388 million. |
As previously disclosed on Jan. 11, the idling of the longwall at Mountain Laurel will have an
impact on Arch’s financial performance during the first quarter of 2011; however, the company
expects to make up some portion of the delayed production as the year progresses.
“With our strong operating platform and assets already in place, we expect to deliver another
record year in 2011,” said Leer. “We believe Arch is exceptionally well positioned to capitalize
on the continuing recovery in U.S. coal markets — and the coal market super-cycle that we believe
is already underway globally.”
A conference call regarding Arch Coal’s fourth quarter 2010 financial results will be webcast
live today at 11 a.m. E.S.T. The conference call can be accessed via the “investor” section of the
Arch Coal Web site (http://investor.archcoal.com).
St. Louis-based Arch Coal is the second largest U.S. coal producer, with record revenues of
$3.2 billion in 2010. Through its national network of mines, Arch supplies cleaner-burning,
low-sulfur coal to U.S. power producers to fuel roughly 8 percent of the nation’s electricity. The
company also ships coal to domestic and international steel manufacturers as well as international
power producers.
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.
# # #
7
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)
Condensed Consolidated Statements of Income
(In thousands, except per share data)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Revenues |
||||||||||||||||
Coal sales |
$ | 835,394 | $ | 725,472 | $ | 3,186,268 | $ | 2,576,081 | ||||||||
Costs, expenses and other |
||||||||||||||||
Cost of coal sales |
622,348 | 566,778 | 2,395,812 | 2,070,715 | ||||||||||||
Depreciation, depletion and amortization |
95,931 | 88,529 | 365,066 | 301,608 | ||||||||||||
Amortization of acquired sales contracts, net |
9,601 | 19,716 | 35,606 | 19,623 | ||||||||||||
Selling, general and administrative expenses |
28,668 | 27,017 | 118,177 | 97,787 | ||||||||||||
Change in fair value of coal derivatives and coal trading activities, net |
(3,372 | ) | (1,728 | ) | 8,924 | (12,056 | ) | |||||||||
Gain on Knight Hawk transaction |
— | — | (41,577 | ) | — | |||||||||||
Costs related to acquisition of Jacobs Ranch |
— | 6,560 | — | 13,726 | ||||||||||||
Other operating income, net |
(4,720 | ) | (10,895 | ) | (19,724 | ) | (39,036 | ) | ||||||||
| 748,456 | 695,977 | 2,862,284 | 2,452,367 | |||||||||||||
Income from operations |
86,938 | 29,495 | 323,984 | 123,714 | ||||||||||||
Interest expense, net: |
||||||||||||||||
Interest expense |
(34,643 | ) | (35,466 | ) | (142,549 | ) | (105,932 | ) | ||||||||
Interest income |
561 | 338 | 2,449 | 7,622 | ||||||||||||
| (34,082 | ) | (35,128 | ) | (140,100 | ) | (98,310 | ) | |||||||||
Other non-operating expense |
||||||||||||||||
Loss on early extinguishment of debt |
— | — | (6,776 | ) | — | |||||||||||
| — | — | (6,776 | ) | — | ||||||||||||
Income (loss) before income taxes |
52,856 | (5,633 | ) | 177,108 | 25,404 | |||||||||||
Provision for (benefit from) income taxes |
4,825 | (7,185 | ) | 17,714 | (16,775 | ) | ||||||||||
Net income |
48,031 | 1,552 | 159,394 | 42,179 | ||||||||||||
Less: Net income attributable to noncontrolling interest |
(212 | ) | (21 | ) | (537 | ) | (10 | ) | ||||||||
Net income attributable to Arch Coal, Inc. |
$ | 47,819 | $ | 1,531 | $ | 158,857 | $ | 42,169 | ||||||||
Earnings per common share |
||||||||||||||||
Basic earnings per common share |
$ | 0.29 | $ | 0.01 | $ | 0.98 | $ | 0.28 | ||||||||
Diluted earnings per common share |
$ | 0.29 | $ | 0.01 | $ | 0.97 | $ | 0.28 | ||||||||
Weighted average shares outstanding |
||||||||||||||||
Basic |
162,442 | 162,358 | 162,398 | 150,963 | ||||||||||||
Diluted |
163,452 | 162,961 | 163,210 | 151,272 | ||||||||||||
Dividends declared per common share |
$ | 0.10 | $ | 0.09 | $ | 0.39 | $ | 0.36 | ||||||||
Adjusted EBITDA (A) (unaudited) |
$ | 192,258 | $ | 144,279 | $ | 724,119 | $ | 458,661 | ||||||||
| (A) | Adjusted EBITDA is defined and reconciled under “Reconciliation of Non-GAAP Measures” later in this release. |
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
Condensed Consolidated Balance Sheets
(In thousands)
| December 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
| (Unaudited) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 93,593 | $ | 61,138 | ||||
Trade accounts receivable |
208,060 | 190,738 | ||||||
Other receivables |
44,260 | 40,632 | ||||||
Inventories |
235,616 | 240,776 | ||||||
Prepaid royalties |
33,932 | 21,085 | ||||||
Coal derivative assets |
15,191 | 18,807 | ||||||
Other |
104,262 | 113,606 | ||||||
Total current assets |
734,914 | 686,782 | ||||||
Property, plant and equipment, net |
3,308,892 | 3,366,186 | ||||||
Other assets |
||||||||
Prepaid royalties |
66,525 | 86,622 | ||||||
Goodwill |
114,963 | 113,701 | ||||||
Deferred income taxes |
361,556 | 354,869 | ||||||
Equity investments |
177,451 | 87,268 | ||||||
Other |
116,468 | 145,168 | ||||||
Total other assets |
836,963 | 787,628 | ||||||
Total assets |
$ | 4,880,769 | $ | 4,840,596 | ||||
Liabilities and Stockholders’ Equity |
||||||||
Current liabilities |
||||||||
Accounts payable |
$ | 198,216 | $ | 128,402 | ||||
Coal derivative liabilities |
4,947 | 2,244 | ||||||
Deferred income taxes |
7,775 | 5,901 | ||||||
Accrued expenses and other current liabilities |
245,411 | 227,716 | ||||||
Current maturities of debt and short-term borrowings |
70,997 | 267,464 | ||||||
Total current liabilities |
527,346 | 631,727 | ||||||
Long-term debt |
1,538,744 | 1,540,223 | ||||||
Asset retirement obligations |
334,257 | 305,094 | ||||||
Accrued pension benefits |
49,154 | 68,266 | ||||||
Accrued postretirement benefits other than pension |
37,793 | 43,865 | ||||||
Accrued workers’ compensation |
35,290 | 29,110 | ||||||
Other noncurrent liabilities |
110,234 | 98,243 | ||||||
Total liabilities |
2,632,818 | 2,716,528 | ||||||
Redeemable noncontrolling interest |
10,444 | 8,962 | ||||||
Stockholders’ Equity |
||||||||
Common stock |
1,645 | 1,643 | ||||||
Paid-in capital |
1,734,709 | 1,721,230 | ||||||
Treasury stock, at cost |
(53,848 | ) | (53,848 | ) | ||||
Retained earnings |
561,418 | 465,934 | ||||||
Accumulated other comprehensive loss |
(6,417 | ) | (19,853 | ) | ||||
Total stockholders’ equity |
2,237,507 | 2,115,106 | ||||||
Total liabilities and stockholders’ equity |
$ | 4,880,769 | $ | 4,840,596 | ||||
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Condensed Consolidated Statements of Cash Flows
(In thousands)
| Year Ended | ||||||||
| December 31, | ||||||||
| 2010 | 2009 | |||||||
| (Unaudited) | ||||||||
Operating activities |
||||||||
Net income |
$ | 159,394 | $ | 42,179 | ||||
Adjustments to reconcile to cash provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
365,066 | 301,608 | ||||||
Amortization of acquired sales contracts, net |
35,606 | 19,623 | ||||||
Prepaid royalties expensed |
34,605 | 29,746 | ||||||
Employee stock-based compensation expense |
11,717 | 13,394 | ||||||
Amortization of debt financing costs |
9,839 | 7,450 | ||||||
Gain on Knight Hawk transaction |
(41,577 | ) | — | |||||
Loss on early extinguishment of debt |
6,776 | — | ||||||
Changes in: |
||||||||
Receivables |
(7,287 | ) | 47,794 | |||||
Inventories |
5,160 | (28,518 | ) | |||||
Coal derivative assets and liabilities |
9,554 | 32,266 | ||||||
Accounts payable, accrued expenses and other current liabilities |
87,807 | (44,764 | ) | |||||
Deferred income taxes |
(12,405 | ) | (34,668 | ) | ||||
Other |
32,892 | (3,130 | ) | |||||
Cash provided by operating activities |
697,147 | 382,980 | ||||||
Investing activities |
||||||||
Capital expenditures |
(314,657 | ) | (323,150 | ) | ||||
Payments made to acquire Jacob’s Ranch |
— | (768,819 | ) | |||||
Proceeds from dispositions of property, plant and equipment |
330 | 825 | ||||||
Purchases of investments and advances to affiliates |
(46,185 | ) | (10,925 | ) | ||||
Additions to prepaid royalties |
(27,355 | ) | (26,755 | ) | ||||
Consideration paid related to prior business acquisitions |
(1,262 | ) | (4,767 | ) | ||||
Reimbursement of deposits on equipment |
— | 3,209 | ||||||
Cash used in investing activities |
(389,129 | ) | (1,130,382 | ) | ||||
Financing activities |
||||||||
Proceeds from the issuance of long-term debt |
500,000 | 584,784 | ||||||
Repayments of long-term debt, including redemption premium |
(505,627 | ) | — | |||||
Proceeds from the sale of common stock |
— | 326,452 | ||||||
Net decrease in borrowings under lines of credit and commercial paper program |
(196,549 | ) | (85,815 | ) | ||||
Net proceeds from (payments on) other debt |
82 | (2,986 | ) | |||||
Debt financing costs |
(12,751 | ) | (29,659 | ) | ||||
Dividends paid |
(63,373 | ) | (54,969 | ) | ||||
Issuance of common stock under incentive plans |
1,764 | 84 | ||||||
Contribution from non-controlling interest |
891 | — | ||||||
Cash provided by (used in) financing activities |
(275,563 | ) | 737,891 | |||||
Increase (decrease) in cash and cash equivalents |
32,455 | (9,511 | ) | |||||
Cash and cash equivalents, beginning of period |
61,138 | 70,649 | ||||||
Cash and cash equivalents, end of period |
$ | 93,593 | $ | 61,138 | ||||
Arch Coal, Inc. and Subsidiaries
Schedule of Consolidated Debt
(In thousands)
Schedule of Consolidated Debt
(In thousands)
| December 31, | December 31, | |||||||
| 2010 | 2009 | |||||||
Commercial paper |
$ | 56,904 | $ | 49,453 | ||||
Revolving credit agreement |
— | 120,000 | ||||||
Accounts receivable securitization program |
— | 84,000 | ||||||
6.75% senior notes ($450.0 million and $950.0 million
face value, respectively) due 2013 |
451,618 | 954,782 | ||||||
8.75% senior notes ($600.0 million face value) due 2016 |
587,126 | 585,441 | ||||||
7.25% senior notes ($500.0 million face value) due 2020 |
500,000 | — | ||||||
Other |
14,093 | 14,011 | ||||||
| 1,609,741 | 1,807,687 | |||||||
Less: current maturities of debt and short-term borrowings |
70,997 | 267,464 | ||||||
Long-term debt |
$ | 1,538,744 | $ | 1,540,223 | ||||
Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands)
Reconciliation of Non-GAAP Measures
(In thousands)
Included in the accompanying release, we have disclosed certain non-GAAP measures as defined by Regulation G.
The following reconciles these items to net income and cash flows as reported under GAAP.
Adjusted EBITDA
Adjusted EBITDA is defined as net income attributable to the Company before the effect of net interest expense, income
taxes, depreciation, depletion and amortization and the amortization of acquired sales contracts. Adjusted EBITDA
may also be adjusted for items that may not reflect the trend of future results.
Adjusted EBITDA is not a measure of financial performance in accordance with generally accepted accounting
principles, and items excluded to calculate Adjusted EBITDA are significant in understanding and assessing our financial
condition. Therefore, Adjusted EBITDA should not be considered in isolation nor as an alternative to net income, income
from operations, cash flows from operations or as a measure of our profitability, liquidity or performance under generally
accepted accounting principles. We believe that Adjusted EBITDA presents a useful measure of our ability to service and
incur debt based on ongoing operations. Furthermore, analogous measures are used by industry analysts to evaluate
operating performance. In addition, acquisition and financing related expenses are excluded to make results more comparable
between periods. Investors should be aware that our presentation of Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies. The table below shows how we calculate Adjusted EBITDA.
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Net income |
$ | 48,031 | $ | 1,552 | $ | 159,394 | $ | 42,179 | ||||||||
Income tax expense (benefit) |
4,825 | (7,185 | ) | 17,714 | (16,775 | ) | ||||||||||
Interest expense, net |
34,082 | 35,128 | 140,100 | 98,310 | ||||||||||||
Depreciation, depletion and amortization |
95,931 | 88,529 | 365,066 | 301,608 | ||||||||||||
Amortization of acquired sales contracts, net |
9,601 | 19,716 | 35,606 | 19,623 | ||||||||||||
Loss on early extinguishment of debt |
— | — | 6,776 | — | ||||||||||||
Costs related to acquisition of Jacobs Ranch |
— | 6,560 | — | 13,726 | ||||||||||||
Net income attributable to noncontrolling
interest |
(212 | ) | (21 | ) | (537 | ) | (10 | ) | ||||||||
Adjusted EBITDA |
$ | 192,258 | $ | 144,279 | $ | 724,119 | $ | 458,661 | ||||||||
Adjusted net income and adjusted diluted earnings per common share
Adjusted net income and adjusted diluted earnings per common share are adjusted for the after-tax impact of acquisition
and financing related costs and are not measures of financial performance in accordance with generally accepted accounting
principles. We believe that adjusted net income and adjusted diluted earnings 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 and adjusted diluted earnings per
share should not be considered in isolation, nor as an alternative to net income or diluted earnings per common share under generally
accepted accounting principles.
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
Net income attributable to Arch Coal |
$ | 47,819 | $ | 1,531 | $ | 158,857 | $ | 42,169 | ||||||||
Amortization of acquired sales contracts, net |
9,601 | 19,716 | 35,606 | 19,623 | ||||||||||||
Loss on early extinguishment of debt |
— | — | 6,776 | — | ||||||||||||
Costs related to acquisition of Jacobs Ranch |
— | 6,560 | — | 13,726 | ||||||||||||
Tax impact of adjustments |
(3,504 | ) | (9,590 | ) | (15,469 | ) | (12,172 | ) | ||||||||
Adjusted net income attributable to Arch Coal |
$ | 53,916 | $ | 18,217 | $ | 185,770 | $ | 63,346 | ||||||||
Diluted weighted average shares outstanding |
163,452 | 162,961 | 163,210 | 151,272 | ||||||||||||
Diluted earnings per share |
$ | 0.29 | $ | 0.01 | $ | 0.97 | $ | 0.28 | ||||||||
Amortization of acquired sales contracts, net |
0.06 | 0.12 | 0.22 | 0.13 | ||||||||||||
Costs related to acquisition of Jacobs Ranch |
— | 0.04 | — | 0.09 | ||||||||||||
Loss on early extinguishment of debt |
— | — | 0.04 | — | ||||||||||||
Tax impact of adjustments |
(0.02 | ) | (0.06 | ) | (0.09 | ) | (0.08 | ) | ||||||||
Adjusted diluted earnings per share |
$ | 0.33 | $ | 0.11 | $ | 1.14 | $ | 0.42 | ||||||||
Free Cash Flow
Free cash flow is defined as operating cash flows minus capital expenditures and is not a measure of cash flow in accordance
with generally accepted accounting principles. We use free cash flow as a measure of our ability to make
investments, acquisitions and payments to our debt and equity security holders. Free cash flow should not be
considered in isolation, nor as an alternative to cash flows generated from operations.
| Three Months Ended | Year Ended | |||||||
| December 31, 2010 | December 31, 2010 | |||||||
| (Unaudited) | ||||||||
Cash provided by operating activities |
$ | 240,467 | $ | 697,147 | ||||
Capital expenditures |
(93,074 | ) | (314,657 | ) | ||||
Free cash flow |
$ | 147,393 | $ | 382,490 | ||||
Reconciliation of 2011 Targets
Adjusted EBITDA
| Targeted Results | ||||||||
| Year Ended | ||||||||
| December 31, 2010 | ||||||||
| Low | High | |||||||
| (Unaudited) | ||||||||
Net income attributable to Arch Coal, Inc. |
$ | 315,000 | $ | 395,000 | ||||
Income tax expense |
61,000 | 92,000 | ||||||
Interest expense, net |
137,000 | 134,000 | ||||||
Depreciation, depletion and amortization |
378,000 | 388,000 | ||||||
Amortization of acquired sales contracts, net |
19,000 | 21,000 | ||||||
Adjusted EBITDA |
$ | 910,000 | $ | 1,030,000 | ||||
Adjusted net income and adjusted diluted earnings per share
| Targeted Results | ||||||||
| Year Ended | ||||||||
| December 31, 2010 | ||||||||
| Low | High | |||||||
| (Unaudited) | ||||||||
Net income attributable to Arch Coal |
$ | 315,000 | $ | 395,000 | ||||
Amortization of acquired sales contracts, net |
19,000 | 21,000 | ||||||
Tax impact of adjustments |
(6,935 | ) | (7,665 | ) | ||||
Adjusted net income attributable to Arch Coal |
$ | 327,065 | $ | 408,335 | ||||
Diluted weighted average shares outstanding |
163,450 | 163,450 | ||||||
Diluted earnings per share |
$ | 1.93 | $ | 2.42 | ||||
Amortization of acquired sales contracts, net |
0.12 | 0.13 | ||||||
Tax impact of adjustments |
(0.05 | ) | (0.05 | ) | ||||
Adjusted diluted earnings per share |
$ | 2.00 | $ | 2.50 | ||||