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EX-10.4 - EX-10.4 - ARCH RESOURCES, INC.a17-12171_1ex10d4.htm
EX-10.3 - EX-10.3 - ARCH RESOURCES, INC.a17-12171_1ex10d3.htm
EX-10.2 - EX-10.2 - ARCH RESOURCES, INC.a17-12171_1ex10d2.htm
EX-10.1 - EX-10.1 - ARCH RESOURCES, INC.a17-12171_1ex10d1.htm
8-K - 8-K - ARCH RESOURCES, INC.a17-12171_18k.htm

Exhibit 99.1

 

News from

Arch Coal, Inc.

 

FOR FURTHER INFORMATION:

Logan Bonacorsi
Investor Relations

314/994-2766

 

FOR IMMEDIATE RELEASE

 

Arch Coal, Inc. Reports First Quarter 2017 Results

Earnings per share increase 55 percent
Board announces capital redeployment plan

 

ST. LOUIS, May 2, 2017 — Arch Coal, Inc. (NYSE: ARCH) today reported first quarter 2017 net income of $51.7 million, or $2.03 per diluted share, compared with $33.4 million, or $1.31 per diluted share, in the fourth quarter of 2016. Excluding certain charges, adjusted diluted earnings per share (“adjusted EPS”) (1) was $2.55 per share. The charges for the first quarter include non-cash sales contract amortization, reorganization fees and early debt extinguishment items 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 $120.5 million in the first quarter of 2017, a nearly 30-percent increase versus the previous quarter. Revenues totaled $600.9 million for the three months ended March 31, 2017.

 

“Arch executed a strong performance in the first quarter of 2017, with meaningful expansion in earnings per share and adjusted EBITDAR,” said John W. Eaves, Arch’s chief executive officer. “Our solid financial results underscore the strategic value of the company’s two complementary lines of business and our highly competitive position in our key operating segments. During the first quarter, we capitalized on resurgent global metallurgical markets while remaining poised to take advantage of improving fundamentals in the thermal coal markets as the year progresses.”

 

Arch Initiates Capital Allocation Programs

As a result of the company’s healthy liquidity position and expectations for continued cash generation in 2017, the Board of Directors has approved two capital allocation initiatives to enhance shareholder returns. First, the board has instituted a quarterly cash dividend of $0.35 per share. The quarterly dividend will begin with the second quarter and will be paid on June 15, 2017 to stockholders of record on May 31, 2017.

 


(1)  Adjusted EBITDAR and Adjusted EPS are defined and reconciled in the “Reconciliation of Non-GAAP measures” in this release.

 

1



 

In addition, the board has approved the establishment of a share repurchase program that authorizes the company to purchase up to $300 million of the company’s outstanding common stock. The repurchase program announced today has no time limit and Arch expects to fund future share repurchases with cash on hand and cash generated from operations.

 

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.

 

“Given the volatile nature of commodity markets in general, it is important that we take a prudent approach to our capital allocation initiatives,” said Eaves. “The board believes Arch’s strong free cash flow profile coupled with our low leverage will continue to provide opportunities to return value to our shareholders, while at the same time enabling us to maintain the financial flexibility to reinvest in our premier operating portfolio.”

 

As previously announced, the company decreased its total indebtedness and interest expense during the first quarter, bolstering its already strong financial position. Through its successful refinancing, Arch reduced its debt levels by more than $25 million and lowered its annual interest expense by nearly $18 million. At the end of the first quarter, Arch’s debt level totaled $334 million, comprised of the $300 million term loan and $34 million in equipment financing and other debt. Arch’s cash and short-term investment balance grew by $77 million from year- end 2016 to over $470 million at March 31, 2017.

 

On April 27, 2017, Arch entered into an inventory-only Asset Based Lending (“ABL”) facility and amended its existing accounts receivable securitization facility. The new ABL increases the borrowing base that supports Arch’s outstanding letters of credit, which would have freed up approximately $30 million of restricted cash on a pro forma basis at March 31, 2017. The combined facilities will also lower borrowing costs.

 

“We are extremely pleased with the further improvements to our capital structure,” said John T. Drexler, Arch’s chief financial officer. “Looking ahead, we remain committed to maintaining a healthy level of liquidity and managing our balance sheet carefully while creating and enhancing returns for our shareholders. ”

 

Arch Focuses on Fundamental Values

 

Arch subsidiaries earned 14 safety and environmental awards in the three months ended March 31, 2017. Most notably, Arch’s Sentinel and Coal-Mac complexes attained West Virginia’s top safety awards among large underground and surface mines, while the West Elk mine was honored with both the top safety and environmental awards in Colorado. Furthermore, four of Arch’s operations and facilities attained a Perfect Zero — a dual achievement of operating without a reportable safety incident or environmental violation — for the three months ended March 31, 2017.

 

“We commend our employees for their outstanding safety and environmental accomplishments, and for their ongoing commitment to living our core values every day,” said Paul A. Lang,

 

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Arch’s president and chief operating officer. “We are constantly striving for improvement across our operating platform, with an ultimate goal of a Perfect Zero at all of our operations.”

 

Arch Delivers Strong Operational Results

 

“Despite modestly lower sales volumes, we are off to a strong start in 2017,” said Lang. “Our mining complexes delivered strong performances during the quarter just ended. We were successful in achieving higher price realizations across all of our operating segments in the first quarter. In particular, our Metallurgical segment delivered a standout performance — attaining an average sales price 40 percent higher than the fourth quarter of 2016. At the same time, we continue to diligently focus on managing our controllable costs, driving process improvement initiatives and maximizing revenues from our strategic unpriced volume position, with the goal of enhancing margins at each of our operations.”

 

 

 

Metallurgical

 

 

 

1Q17

 

 

4Q16

 

 

 

 

 

 

 

 

Tons sold (in millions)

 

2.1

 

 

2.4

 

Coking

 

1.5

 

 

1.7

 

PCI

 

0.1

 

 

0.2

 

Thermal

 

0.5

 

 

0.5

 

Average sales price per ton

 

$

90.84

 

 

$

65.61

 

Coking

 

$

105.51

 

 

$

75.36

 

PCI

 

$

62.34

 

 

$

54.78

 

Thermal

 

$

47.64

 

 

$

36.86

 

Cash cost per ton

 

$

57.67

 

 

$

52.98

 

Cash margin per ton

 

$

33.17

 

 

$

12.63

 

 

Cash cost per ton is defined and reconciled under “Operational Performance”.

Mining complexes included in this segement are Beckley, Leer, Lone Mountain, Mountain Laurel and Sentinel

 

In the Metallurgical segment, first quarter 2017 cash margins increased nearly 165 percent versus the fourth quarter of 2016. Average sales price per ton rose $25.23 in the first quarter of 2017 when compared with the fourth quarter of 2016, benefiting primarily from the ongoing strength in metallurgical coal markets. Sales volumes declined 12 percent over the same time period, due primarily to two planned longwall moves and to restricted lake season delivery schedules. Notably, Arch shipped 1.5 million tons of coking coal at an average realized price of $105.51, a 40-percent increase over the average realized price achieved in the fourth quarter of 2016. Coking coal realizations benefited from significantly stronger pricing on index-based tons that shipped during the period as well as new sales. Higher per ton cash costs in the segment were driven by higher sales-sensitive costs, lower volume levels, and the impacts of the two longwall

 

3



 

moves. Arch believes its prior cost guidance for the segment is appropriate, and that this cost structure places Arch’s operations firmly at the low end of the U.S. metallurgical coal industry’s cost curve.

 

 

 

Powder River Basin

 

 

 

1Q17

 

 

4Q16

 

 

 

 

 

 

 

 

Tons sold (in millions)

 

21.3

 

 

21.8

 

Average sales price per ton

 

$

12.57

 

 

$

12.41

 

Cash cost per ton

 

$

10.33

 

 

$

9.88

 

Cash margin per ton

 

$

2.24

 

 

$

2.53

 

 

Cash cost per ton is defined and reconciled under “Operational Performance”.

Mining complexes included in this segment are Black Thunder and Coal Creek

 

In the Powder River Basin, first quarter 2017 sales volumes declined modestly compared with the fourth quarter of 2016. Average sales price per ton increased $0.16 in the first quarter when compared to the fourth quarter of 2016, benefiting from a favorable mix of customer shipments. Segment cash costs increased $0.45 per ton over the same time period, driven by the impact of lower volume levels, increased repair and maintenance expense and higher fuel prices. As previously indicated, the segment’s fourth quarter cost performance was exceptionally strong. Arch is maintaining its cost guidance of $10.20 to $10.70 per ton for the full year.

 

 

 

Other Thermal

 

 

 

1Q17

 

 

4Q16

 

 

 

 

 

 

 

 

Tons sold (in millions)

 

2.3

 

 

2.5

 

Average sales price per ton

 

$

35.51

 

 

$

34.01

 

Cash cost per ton

 

$

23.82

 

 

$

21.79

 

Cash margin per ton

 

$

11.69

 

 

$

12.22

 

 

Cash cost per ton is defined and reconciled under “Operational Performance”.

Mining complexes included in this segement are Coal-Mac, Viper and West Elk

 

In the Other Thermal segment, average sales price per ton increased $1.50 versus the fourth quarter, driven by stronger pricing on shipments of West Elk coal destined for the international marketplace. Volumes were modestly lower in the first quarter, due in part to reduced West Elk shipments to eastern U.S. power plants during a mild winter. While still below the guidance range, cash cost per ton increased when compared to the fourth quarter due to the impact of lower volume levels during the period. To reflect recent increased demand for West Elk coal, Arch is reducing the top end of its cost guidance for the segment. The company now anticipates costs to be in the range of $25.00 per ton to $29.00 per ton for 2017.

 

Key Market Developments

 

Metallurgical Coal Markets

 

·                  The lingering impact of Cyclone Debbie, which continues to disrupt the coking coal logistics chain in Queensland, Australia, is buoying global metallurgical markets.  According to the principal Queensland rail carrier an estimated 20 million metric tons of

 

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predominately coking coal supply was impacted due to the storm. The seaborne metallurgical market totals approximately 300 million metric tons.

 

·                  Prior to the storm, metallurgical markets appeared to be in relatively healthy balance.  Steel demand grew robustly in the first quarter; Chinese coking coal imports were up 50 percent year-over-year; and the expected seaborne coking coal supply response was largely confined to U.S. producers, who moved an additional 2.4 million tons of metallurgical coal into seaborne markets during the first quarter.

 

·                  In late March, before Cyclone Debbie made landfall, the Platts price assessment for vessels loaded off the U.S. East Coast was $162.50 per metric ton for High-Vol A, Arch’s primary metallurgical product. After the storm hit, High-Vol A prices peaked mid-month at $295 and have since settled back to $237 per metric ton. Low-Vol and High-Vol B products are currently being assessed at $212 and $185 per ton, respectively.

 

Thermal Coal Markets

 

·                  In thermal markets, still-inflated utility stockpiles continue to dampen domestic demand and pricing, but the situation is improving. Assuming normal summer weather, Arch believes stockpiles should approach target levels by year-end.

 

·                  Moreover, Arch is encouraged by the persistent strength in natural gas prices, which continue to hold up well despite an exceptionally mild winter and significant recent increases in drilling activity. Prompt month NYMEX is currently trading over $3.20 per million Btus and the future strip for the remainder of 2017 averages $3.39 per million Btus.

 

·                  At the natural gas pricing levels noted above, Arch expects the vast majority of Powder River Basin-served coal plants to dispatch in front of natural gas-fueled power plants. In fact, several large customers have re-entered the market in recent weeks to shore up their coal supplies in the face of improving coal consumption.

 

·                  International thermal pricing for prompt delivery in the Asia-Pacific region remains reasonably strong. Arch took advantage of the recent move higher to place additional West Elk tons into export markets.

 

Company Outlook

 

Based on the company’s current expectations regarding the direction of metallurgical coal markets, Arch has raised its coking coal volume guidance for 2017. Arch now expects to sell between 6.7 and 7.1 million tons of coking coal, which excludes PCI coal. At the midpoint of its volume guidance level, Arch is over 85 percent committed on coking coal sales for the full year, with over 30 percent of that committed volume exposed to index-based pricing. At the midpoint of guidance, Arch’s thermal sales are 88 percent committed for the full year.

 

“We are building upon our first-quarter results and expect our company to deliver an exceptional earnings performance in 2017,” said Eaves. “Arch is strategically prepared to respond to

 

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evolving coal market dynamics, and we believe our strategic asset base, low-cost operational profile and strong balance sheet will enable Arch to deliver significant shareholder value.”

 

 

 

2017

 

 

2018

 

 

 

Tons

 

$ per ton

 

 

Tons

 

$ per ton

 

Sales Volume (in millions of tons)

 

 

 

 

 

 

 

 

 

 

Coking

 

6.7

-

7.1

 

 

 

 

 

 

 

 

 

 

PCI

 

0.7

-

0.8

 

 

 

 

 

 

 

 

 

 

Thermal

 

88.0

-

96.0

 

 

 

 

 

 

 

 

 

 

Total

 

95.4

-

103.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metallurgical (in millions of tons)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed, Priced Coking

 

 

 

4.1

 

 

 

$96.06

 

 

 

 

 

Committed, Unpriced Coking

 

 

 

1.9

 

 

 

 

 

 

1.9

 

 

 

Total Committed Coking

 

 

 

6.0

 

 

 

 

 

 

1.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed, Priced PCI

 

 

 

0.7

 

 

 

$65.40

 

 

 

 

 

Committed, Unpriced PCI

 

 

 

 

 

 

 

 

 

 

 

 

Total Committed PCI

 

 

 

0.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed, Priced Thermal

 

 

 

1.3

 

 

 

$40.33

 

 

0.4

 

$30.58

 

Committed, Unpriced Thermal

 

 

 

 

 

 

 

 

 

 

 

 

Total Committed Thermal

 

 

 

1.3

 

 

 

 

 

 

0.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Metallurgical Cash Cost

 

 

 

 

 

$51.00

-

$56.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Powder River Basin (in millions of tons)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed, Priced

 

 

 

70.2

 

 

 

$12.51

 

 

33.8

 

$12.21

 

Committed, Unpriced

 

 

 

2.8

 

 

 

 

 

 

3.0

 

 

 

Total Committed

 

 

 

73.0

 

 

 

 

 

 

36.8

 

 

 

Average Cash Cost

 

 

 

 

 

$10.20

-

$10.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Thermal (in millions of tons)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committed, Priced

 

 

 

6.8

 

 

 

$35.65

 

 

2.9

 

$38.04

 

Committed, Unpriced

 

 

 

 

 

 

 

 

 

 

 

 

Total Committed

 

 

 

6.8

 

 

 

 

 

 

2.9

 

 

 

Average Cash Cost

 

 

 

 

 

$25.00

-

$29.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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%

 

 

 

 

 

 

 

A conference call regarding Arch Coal’s first 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

 

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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.

 

# # #

 

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Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

Successor

 

 

Predecessor

 

 

 

Three Months Ended
March 31, 2017

 

 

Three Months Ended
March 31, 2016

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

 

Revenues

 

$

600,975

 

 

$

428,106

 

 

 

 

 

 

 

 

Costs, expenses and other operating

 

 

 

 

 

 

Cost of sales

 

461,410

 

 

411,010

 

Depreciation, depletion and amortization

 

31,921

 

 

63,699

 

Accretion on asset retirement obligations

 

7,623

 

 

8,306

 

Amortization of sales contracts, net

 

14,690

 

 

(833

)

Change in fair value of coal derivatives and coal trading activities, net

 

854

 

 

1,210

 

Asset impairment and mine closure costs

 

 

 

85,520

 

Selling, general and administrative expenses

 

20,523

 

 

19,826

 

Other operating income, net

 

(2,310

)

 

(2,220

)

 

 

534,711

 

 

586,518

 

 

 

 

 

 

 

 

Income (loss) from operations

 

66,264

 

 

(158,412

)

 

 

 

 

 

 

 

Interest expense, net

 

 

 

 

 

 

Interest expense

 

(9,425

)

 

(44,451

)

Interest and investment income

 

527

 

 

1,138

 

 

 

(8,898

)

 

(43,313

)

 

 

 

 

 

 

 

Income (loss) before nonoperating expenses

 

57,366

 

 

(201,725

)

 

 

 

 

 

 

 

Nonoperating expense

 

 

 

 

 

 

Net loss resulting from early retirement of debt and debt restructuring

 

(2,030

)

 

(2,213

)

Reorganization items, net

 

(2,828

)

 

(3,875

)

 

 

(4,858

)

 

(6,088

)

 

 

 

 

 

 

 

Income (loss) before income taxes

 

52,508

 

 

(207,813

)

Provision for (benefit from) income taxes

 

840

 

 

(1,111

)

 

 

 

 

 

 

 

Net income (loss)

 

$

51,668

 

 

$

(206,702

)

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

Basic EPS (LPS)

 

$

2.07

 

 

$

(9.71

)

 

 

 

 

 

 

 

Diluted EPS (LPS)

 

$

2.03

 

 

$

(9.71

)

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

25,008

 

 

21,293

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

25,408

 

 

21,293

 

 

 

 

 

 

 

 

Adjusted EBITDAR (A) (Unaudited)

 

$

120,498

 

 

$

(1,720

)

Adjusted diluted income (loss) per common share (A)

 

$

2.55

 

 

$

(5.49

)

 


(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)

 

 

 

March 31,

 

December 31,

 

 

 

2017

 

2016

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

347,580

 

$

305,372

 

Short term investments

 

122,505

 

88,072

 

Restricted cash

 

68,984

 

71,050

 

Trade accounts receivable

 

150,399

 

184,483

 

Other receivables

 

22,482

 

19,877

 

Inventories

 

125,194

 

113,462

 

Other current assets

 

74,063

 

96,306

 

Total current assets

 

911,207

 

878,622

 

 

 

 

 

 

 

Property, plant and equipment, net

 

1,027,288

 

1,053,603

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

Equity investments

 

104,144

 

96,074

 

Other noncurrent assets

 

102,277

 

108,298

 

Total other assets

 

206,421

 

204,372

 

Total assets

 

$

2,144,916

 

$

2,136,597

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

103,130

 

$

95,953

 

Accrued expenses and other current liabilities

 

172,898

 

205,240

 

Current maturities of debt

 

7,898

 

11,038

 

Total current liabilities

 

283,926

 

312,231

 

Long-term debt

 

318,030

 

351,841

 

Asset retirement obligations

 

339,865

 

337,227

 

Accrued pension benefits

 

37,510

 

38,884

 

Accrued postretirement benefits other than pension

 

101,786

 

101,445

 

Accrued workers’ compensation

 

184,792

 

184,568

 

Other noncurrent liabilities

 

77,301

 

63,824

 

Total liabilities

 

1,343,210

 

1,390,020

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common Stock

 

250

 

250

 

Paid-in capital

 

692,253

 

688,424

 

Retained earnings

 

85,117

 

33,449

 

Accumulated other comprehensive income

 

24,086

 

24,454

 

Total stockholders’ equity

 

801,706

 

746,577

 

Total liabilities and stockholders’ equity

 

$

2,144,916

 

$

2,136,597

 

 



 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Successor

 

 

Predecessor

 

 

 

Three Months Ended
March 31, 2017

 

 

Three Months Ended
March 31, 2016

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

 

Net income (loss)

 

$

51,668

 

 

$

(206,702

)

Adjustments to reconcile to cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

31,921

 

 

63,699

 

Accretion on asset retirement obligations

 

7,623

 

 

8,306

 

Amortization of sales contracts, net

 

14,690

 

 

(833

)

Prepaid royalties expensed

 

2,281

 

 

1,286

 

Deferred income taxes

 

5,830

 

 

(429

)

Employee stock-based compensation expense

 

2,426

 

 

1,003

 

Gains on disposals and divestitures

 

(347

)

 

1

 

Asset impairment and noncash mine closure costs

 

 

 

77,550

 

Net loss resulting from early retirement of debt and debt restructuring

 

2,030

 

 

2,213

 

Non-cash bankruptcy reorganization items

 

 

 

(13,892

)

Amortization relating to financing activities

 

535

 

 

3,150

 

Changes in:

 

 

 

 

 

 

Receivables

 

37,134

 

 

7,815

 

Inventories

 

(11,732

)

 

734

 

Accounts payable, accrued expenses and other current liabilities

 

(20,529

)

 

39,441

 

Income taxes, net

 

(4,965

)

 

(642

)

Other

 

6,964

 

 

7,202

 

Cash provided by (used in) operating activities

 

125,529

 

 

(10,098

)

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Capital expenditures

 

(5,950

)

 

(5,926

)

Minimum royalty payments

 

(63

)

 

(71

)

Proceeds from disposals and divestitures

 

420

 

 

 

Purchases of short term investments

 

(78,523

)

 

(55,132

)

Proceeds from sales of short term investments

 

45,886

 

 

56,134

 

Investments in and advances to affiliates, net

 

(7,905

)

 

(2,156

)

Withdrawals (deposits) of restricted cash

 

2,066

 

 

(12,108

)

Cash used in investing activities

 

(44,069

)

 

(19,259

)

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

Proceeds from issuance of term loan due 2024

 

298,500

 

 

 

Payments to extinguish term loan due 2021

 

(325,684

)

 

 

Net payments on other debt

 

(2,810

)

 

(5,410

)

Debt financing costs

 

(7,228

)

 

(18,403

)

Net loss resulting from early retirement of debt and debt restructuring

 

(2,030

)

 

(2,213

)

Cash used in financing activities

 

(39,252

)

 

(26,026

)

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

42,208

 

 

(55,383

)

Cash and cash equivalents, beginning of period

 

305,372

 

 

450,781

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

347,580

 

 

$

395,398

 

 



 

Arch Coal, Inc. and Subsidiaries

Schedule of Consolidated Debt

(In thousands)

 

 

 

March 31,

 

December 31,

 

 

 

2017

 

2016

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

Term loan due 2024 ($300.0 million face value)

 

$

298,512

 

$

 

Term loan due 2021 ($325.7 million face value)

 

 

325,684

 

Other

 

34,424

 

37,195

 

Debt issuance costs

 

(7,008

)

 

 

 

325,928

 

362,879

 

Less: current maturities of debt

 

7,898

 

11,038

 

Long-term debt

 

$

318,030

 

$

351,841

 

 

 

 

 

 

 

Calculation of net debt

 

 

 

 

 

Total debt (excluding debt issuance costs)

 

$

332,936

 

$

362,879

 

Less liquid assets:

 

 

 

 

 

Cash and cash equivalents

 

347,580

 

305,372

 

Short term investments

 

122,505

 

88,072

 

 

 

470,085

 

393,444

 

Net debt

 

$

(137,149

)

$

(30,565

)

 



 

Arch Coal, Inc. and Subsidiaries

Operational Performance

(In millions, except per ton data)

 

 

 

Successor

 

 

Predecessor

 

 

 

Three Months Ended March 31,
2017

 

 

Three Months Ended March 31,
2016

 

 

 

(Unaudited)

 

 

 

 

(Unaudited)

 

 

 

Powder River Basin

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

21.3

 

 

 

 

16.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

$

268.1

 

$

12.57

 

 

$

218.5

 

$

13.24

 

Segment Cash Cost of Sales

 

220.4

 

10.33

 

 

205.7

 

12.46

 

Segment Cash Margin

 

47.7

 

2.24

 

 

12.8

 

0.78

 

 

 

 

 

 

 

 

 

 

 

 

Metallurgical

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

2.1

 

 

 

 

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

$

187.1

 

$

90.84

 

 

$

110.6

 

$

51.10

 

Segment Cash Cost of Sales

 

118.8

 

57.67

 

 

104.3

 

48.19

 

Segment Cash Margin

 

68.3

 

33.17

 

 

6.3

 

2.91

 

 

 

 

 

 

 

 

 

 

 

 

Other Thermal

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

2.3

 

 

 

 

1.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

$

81.4

 

$

35.51

 

 

$

50.8

 

$

39.80

 

Segment Cash Cost of Sales

 

54.6

 

23.82

 

 

47.6

 

37.32

 

Segment Cash Margin

 

26.8

 

11.69

 

 

3.2

 

2.48

 

 

 

 

 

 

 

 

 

 

 

 

Total Segment Cash Margin

 

$

142.8

 

 

 

 

$

22.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

(20.5

)

 

 

 

(19.8

)

 

 

Liquidated damages under export logistics contracts

 

 

 

 

 

(1.6

)

 

 

Other

 

(1.8

)

 

 

 

(2.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDAR

 

$

120.5

 

 

 

 

$

(1.7

)

 

 

 

Reconciliation of Non-GAAP Measures

 

 

 

Successor

 

 

Predecessor

 

 

 

Three Months Ended March 31,
2017

 

 

Three Months Ended March 31,
2016

 

 

 

(Unaudited)

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment sales

 

$

536.6

 

 

 

 

$

379.9

 

 

 

Transportation costs billed to customers

 

64.4

 

 

 

 

37.5

 

 

 

Coal risk management derivative settlements

 

 

 

 

 

0.2

 

 

 

Other (1)

 

0.1

 

 

 

 

10.6

 

 

 

Revenues

 

$

601.0

 

 

 

 

$

428.1

 

 

 

 


(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

 

 

 

Three Months Ended March 31,
2017

 

 

Three Months Ended March 31,
2016

 

 

 

(Unaudited)

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment cash cost of sales

 

$

393.7

 

 

 

 

$

357.6

 

 

 

Transportation costs billed to customers

 

64.4

 

 

 

 

37.5

 

 

 

Risk management derivative settlements—diesel fuel

 

(0.6

)

 

 

 

(1.3

)

 

 

Other (1)

 

3.9

 

 

 

 

17.2

 

 

 

Cost of sales

 

$

461.4

 

 

 

 

$

411.0

 

 

 

 


(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

 

 

 

Three Months
Ended March 31,
2017

 

 

Three Months
Ended March 31,
2016

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net income (loss)

 

$

51,668

 

 

$

(206,702

)

Income tax (benefit) expense

 

840

 

 

(1,111

)

Interest expense, net

 

8,898

 

 

43,313

 

Depreciation, depletion and amortization

 

31,921

 

 

63,699

 

Accretion on asset retirement obligations

 

7,623

 

 

8,306

 

Amortization of sales contracts, net

 

14,690

 

 

(833

)

Asset impairment and mine closure costs

 

 

 

85,520

 

Net loss resulting from early retirement of debt and debt restructuring

 

2,030

 

 

2,213

 

Reorganization items, net

 

2,828

 

 

3,875

 

 

 

 

 

 

 

 

Adjusted EBITDAR

 

$

120,498

 

 

$

(1,720

)

 

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

 

 

 

Three Months
Ended March 31,
2017

 

 

Three Months
Ended March 31,
2016

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net income (loss)

 

$

51,668

 

 

$

(206,702

)

 

 

 

 

 

 

 

Amortization of sales contracts, net

 

14,690

 

 

(833

)

Asset impairment and mine closure costs

 

 

 

85,520

 

Net loss resulting from early retirement of debt and debt restructuring

 

2,030

 

 

2,213

 

Reorganization items, net

 

2,828

 

 

3,875

 

Tax impact of adjustment

 

(6,325

)

 

(915

)

 

 

 

 

 

 

 

Adjusted net income (loss)

 

$

64,891

 

 

$

(116,842

)

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

25,408

 

 

21,293

 

 

 

 

 

 

 

 

Diluted income (loss) per share

 

$

2.03

 

 

$

(9.71

)

 

 

 

 

 

 

 

Amortization of sales contracts, net

 

0.58

 

 

(0.04

)

Asset impairment and mine closure costs

 

 

 

4.02

 

Net loss resulting from early retirement of debt and debt restructuring

 

0.08

 

 

0.10

 

Reorganization items, net

 

0.11

 

 

0.18

 

Tax impact of adjustments

 

(0.25

)

 

(0.04

)

Adjusted diluted income (loss) per share

 

$

2.55

 

 

$

(5.49

)