Attached files
| file | filename |
|---|---|
| EX-31.(B) - CERTIFICATION PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT - Alpha Natural Resources, Inc. | anr-12312014x10kaexhibit31b.htm |
| EX-31.(A) - CERTIFICATION PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT - Alpha Natural Resources, Inc. | anr-12312014x10kaexhibit31a.htm |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2014
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 001-32331
ALPHA NATURAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 42-1638663 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
One Alpha Place, P.O. Box 16429, Bristol, Virginia | 24209 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code:
(276) 619-4410
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |||
Common stock, $0.01 par value | New York Stock Exchange | |||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o | Smaller reporting company o | |
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No x
The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 30, 2014, was approximately $448 million based on the closing price of the Company’s common stock as reported that date on the New York Stock Exchange of $3.71 per share. In determining this figure, the registrant has assumed that all of its directors and executive officers are affiliates. Such assumptions should not be deemed to be conclusive for any other purpose.
Common Stock, $0.01 par value, outstanding as of February 20, 2015 — 221,608,152 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2014 annual meeting of stockholders (the “Proxy Statement”), which will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2014.
Explanatory Note
Alpha Natural Resources Inc. (the “Company”) is filing this Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 to correct certain typographical and other errors in the contractual obligation amounts for interest payable, operating leases, postretirement benefit obligation, pension benefit obligation, and black lung obligation set forth in the tables and related footnotes under the heading “Contractual Obligations” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The complete text of Item 7 is set forth herein, including those portions of the text that have not been amended from the original Form 10-K, and replaces Item 7 in the original Form 10-K in its entirety. The required exhibits for this Form 10-K/A have also been included in Item 15 and the exhibits that were filed with the original Form 10-K have been incorporated by reference from that original report. All other Items of the original Form 10-K are unaffected by this Amendment, and those Items have not been included in this Form 10-K/A. Accordingly, this Form 10-K/A should be read in conjunction with the original Form 10-K.
The information contained in this Form 10-K/A does not reflect events that have occurred on or after February 26, 2015, the date of the original Form 10-K, or otherwise modify or update the disclosure presented in the original Form 10-K, except as described above.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes thereto included elsewhere in this Annual Report on Form 10-K.
Overview
We are one of America’s premier coal suppliers, ranked second largest among publicly traded U.S. coal producers as measured by consolidated 2014 revenues of $4.3 billion. We are the nation’s leading supplier and exporter of metallurgical coal for use in the steel-making process and a major supplier of thermal coal to electric utilities and manufacturing industries across the country as well as an exporter of thermal coal. As of December 31, 2014, we operate 60 mines and 22 coal preparation facilities in Northern and Central Appalachia and the Powder River Basin (“PRB”), with approximately 8,900 employees.
We produce, process, and sell steam and metallurgical coal from mines and coal preparation facilities located throughout Virginia, West Virginia, Kentucky, Pennsylvania, and Wyoming. We also sell coal produced by others, the majority of which we process and/or blend with coal produced from our mines prior to resale, providing us with a higher overall margin for the blended product than if we had sold the coals separately. Our sales of steam coal in 2014, 2013 and 2012 accounted for approximately 78%, 77% and 81%, respectively, of our annual coal sales volume, and our sales of metallurgical coal in 2014, 2013 and 2012, which generally sells at a premium over steam coal, accounted for approximately 22%, 23% and 19%, respectively, of our annual coal sales volume.
Our sales of steam coal during 2014, 2013 and 2012 were made primarily to large utilities and industrial customers throughout the United States, and our sales of metallurgical coal during 2014, 2013 and 2012 were made primarily to steel companies in the Northeastern and Midwestern regions of the United States and in several countries in Europe, Asia, South America and Africa. Approximately 39%, 43% and 42% of our total revenues in 2014, 2013 and 2012, respectively, were derived from sales made to customers outside the United States, primarily in the Netherlands, Italy, Turkey, United Kingdom, Brazil, and India.
In addition, we generate other revenues from equipment and parts sales and repair, Dry Systems Technologies equipment and filters, rentals, commissions, terminal and processing fees, coal and environmental analysis fees, royalties and the sale of natural gas. We also record revenue for freight and handling charges incurred in delivering coal to certain customers, for which we are reimbursed by our customers. As such, freight and handling revenues are offset by equivalent freight and handling costs and do not contribute to our profitability.
Our primary expenses are for operating supply costs, repair and maintenance expenditures, cost of purchased coal, royalties, current wages and benefits, post-employment benefits, freight and handling costs, and taxes incurred in selling our coal. Historically, our cost of coal sales per ton is lower for sales of our produced and processed coal than for sales of purchased coal that we do not process prior to resale.
We have two reportable segments, Eastern Coal Operations and Western Coal Operations. Eastern Coal Operations consists of our operations in Northern and Central Appalachia, and our coal brokerage activities. Western Coal Operations consists of two Powder River Basin mines in Wyoming. Our All Other segment includes an idled underground mine in Illinois; expenses associated with certain closed mines; Dry Systems Technologies; revenues and royalties from the sale of natural gas; equipment sales and repair operations; terminal services; the leasing of mineral rights; general corporate overhead and corporate assets and liabilities.
Business Developments
On December 30, 2014, we announced that our subsidiary AMFIRE Mining Company, LLC had completed the divestiture of substantially all of its assets to Rosebud Mining Company. The transaction included total consideration of approximately $87.2 million, including gross cash proceeds of approximately $75.1 million and the assumption of certain liabilities. The assets, which include ten mines and four preparation plants and loadouts, were located in Pennsylvania. We recognized a gain of approximately $9.8 million on the transaction. Total 2014 AMFIRE coal sales volumes were approximately 2.3 million tons, including 1.6 million tons of metallurgical coal.
On July 31, 2014, Worker Adjustment and Retraining Notification (“WARN”) Act notices were delivered to employees of 11 surface mining operations in West Virginia, along with preparation plants and other support operations.The decision to idle these operations was made in response to persistent weakness in U.S. and overseas coal demand, depressed price levels and
government regulations that are causing electric utilities to close and forego new construction of coal-fired power plants. Following an evaluation of cost structures, including wages and benefits, as well as an assessment of forecasts for customer commitments and anticipated pricing, on September 26, 2014, we announced the closing of two mines included in the July 31, 2014 WARN notices. These mines shipped approximately 1.5 million tons of steam and metallurgical coal during the first three quarters of 2014. Additionally, we announced that one of the 11 mines will continue to operate as usual. The WARN notices for the remaining eight mines were extended to the end of November 2014 or within the following two week period and then expired. On January 30, 2015, we announced WARN notices for five operations that were included in the July 31, 2014 WARN notices. We plan to idle three mines and reduce the workforce at two mines and one additional operation in West Virginia. The mine idlings and workforce reduction are expected to be completed by April 2015. The mines being idled pursuant to the January 30, 2014 WARN notices produced approximately 1.5 million tons of steam coal in 2014. Both domestic shipments and shipments to Europe from Central Appalachia are expected to be reduced in connection with the closing of these operations. We will continue to evaluate our operations and cost structure and we will continue to take actions to respond quickly to changing and challenging market conditions, including a reduction of SG&A and overhead costs throughout the organization.
In 2010, we entered into a 50/50 joint venture (the “Alpha Shale JV”) with Rice Drilling C LLC, a wholly owned subsidiary of Rice Drilling B LLC, in order to develop a portion of our Marcellus Shale natural gas holdings in southwest Pennsylvania. On December 6, 2013, we, Rice Drilling C LLC and Rice Energy Inc. (“Rice Energy”) entered into a transaction agreement (the “Transaction Agreement”). Pursuant to the Transaction Agreement, we agreed to transfer our 50% interest in the Alpha Shale JV to Rice Energy in exchange for total consideration of $300.0 million, consisting of $100.0 million of cash and $200.0 million of shares of Rice Energy common stock, based upon the price of Rice Energy’s common stock in its initial public offering. On January 29, 2014, Rice Energy completed its initial public offering, and on the same date, issued approximately 9.5 million shares of common stock, and paid $100.0 million in cash, to us. We recognized a gain of $250.3 million. In 2014, we sold approximately 3.5 million shares of Rice Energy common stock for $90.9 million of cash and recorded a gain of $17.9 million. As of December 31, 2014, the fair value of the remaining approximately 6.0 million shares was $126.8 million, which is included in other long-term assets in the Consolidated Balance Sheet.
In October and December 2013, the parties to the securities class action brought by Massey stockholders in the wake of the explosion at Massey’s Upper Big Branch mine participated in mediation. In December 2013, the parties reached agreement on all material terms of settlement, including a cash payment of $265.0 million. In February 2014, the parties reached agreement on definitive settlement documentation, subject to court approval, and on February 19, 2014, the Court entered an order preliminarily approving the settlement subject to a final determination following a settlement hearing on June 4, 2014. On February 25, 2014, pursuant to the terms of the settlement, we made an initial payment of $30.0 million into an escrow account and on June 3, 2014, we deposited the remaining $235.0 million of the settlement into the escrow account. On June 4, 2014, the Court entered an order approving the settlement and dismissed the class action with prejudice. In May 2014, we received approximately $70.0 million of insurance proceeds in connection with the settlement.
On March 5, 2014, we entered into a consent decree (the “Consent Decree”) with the EPA, the U.S. Department of Justice and three states regarding claims under the Clean Water Act. The Consent Decree resolves a complaint by the EPA and state agencies in Kentucky, Pennsylvania and West Virginia alleging that our mining affiliates in those states and in Tennessee and Virginia exceeded certain water discharge permit limits during the period 2006 to 2013. As part of the Consent Decree, we agreed to implement an integrated environmental management system and an expanded auditing/reporting protocol, install selenium and osmotic pressure treatment facilities at specific locations, and certain other measures. The Consent Decree also stipulates that we will pay $27.5 million in civil penalties, to be divided among the federal government and state agencies. On November 26, 2014, the Consent Decree was approved by the Court and the civil penalties were subsequently paid. We expect to make capital expenditures of approximately $163.4 million over the course of the period from 2015 through 2018 to achieve water quality compliance under certain water discharge permits issued by the state agencies represented in the Consent Decree.
On April 23, 2014, the U.S. Mine Safety and Health Administration (“MSHA”) issued an extensive final rule revising and expanding its regulation of respirable dust in coal mines. The final rule differs in certain respects from MSHA’s October 2010 proposed rule. We are reviewing the final rule and evaluating its potential effects. Although certain provisions of the rule required compliance by August 2014, many provisions will not be effective until 2016.
The Emerald longwall mine located in Pennsylvania will operate only through the second panel in district D. Emerald will be conducting development work with minimal production during the first quarter of 2015, likely resulting in higher overall eastern cost of coal sales per ton during that period. We now expect Emerald to cease production near the end of 2015.
We performed an interim impairment test as of June 1, 2014 for our goodwill due primarily to continued weakness in the global metallurgical coal markets which indicated that the fair value of a reporting unit within our Eastern Coal Operations may have been below its carrying value. As a result, we recorded goodwill impairment expense of $308.7 million to write down the
carrying value of goodwill to its estimated implied value for a reporting unit in our Eastern Coal Operations. See Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
During the twelve months ended December 31, 2013, we tested our long-lived assets and goodwill for impairment due to a longer than expected recovery in the metallurgical coal markets and lower production and shipment levels compared with previous estimates. We recorded $253.1 million in goodwill impairment expense related to a reporting unit in our Eastern Coal Operations. Additionally, during 2013, we curtailed production at certain mines located in West Virginia and announced a plan to further reduce operating and support expenses by approximately $200.0 million annually in response to weak market conditions and recorded asset impairment and restructuring expenses of $37.3 million, of which $15.8 million was for severance and related benefits, $9.6 million for professional fees and other expenses, $1.9 million for other asset impairment expenses and $10.0 million of reserves for assets that may not be recoverable in the future. See Note 10 and Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K relating to asset impairment and restructuring expenses and goodwill impairment, respectively.
In July 2013, production was suspended at our Cumberland mine due to adverse geological conditions in the mine’s headgate area. In August 2013, production resumed. The longwall production outage and a longer than scheduled longwall move at the Cumberland mine is estimated to have reduced 2013 Eastern steam coal shipments by approximately 700,000 tons.
Financing Activities
In September 2014, we entered into an amendment and extension of our fourth amended and restated credit agreement (as amended and restated, the “Credit Agreement” or the “Fifth Amended and Restated Credit Agreement”). Additionally, we entered into a credit and security agreement (the “A/R Facility”) in which we may borrow cash or cause letters of credit to be issued, on a revolving basis, in an amount up to $200.0 million, subject to certain limitations.
In May 2014, we issued an aggregate principal amount of $500.0 million of 7.5% senior secured second lien notes due 2020 (the “New Secured Notes”). The New Secured Notes pay interest semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2015, at a rate of 7.50% per year, and will mature on August 1, 2020.
In May, 2014 we entered into a second amendment to the Fourth Amended and Restated Credit Agreement, which suspended the interest coverage ratio until the first quarter of 2016, replaced the senior secured leverage ratio with a first lien senior secured leverage ratio, reduced the size of the restricted payment basket, extended the minimum liquidity covenant through the end of 2015, increased by $400 million the amount of additional debt permitted to be incurred either pursuant to the “accordion” feature of the Fourth Amended and Restated Credit Agreement or a notes offering, and required the first $800 million of additional debt incurred pursuant to the accordion or a notes offering (including the debt represented by the New Secured Notes) to be unsecured debt or second lien secured debt.
In December 2013, we issued $345.0 million principal amount of convertible senior notes due 2020 (the “4.875% Convertible Notes”). The 4.875% Convertible Notes bear interest at a rate of 4.875% per annum, and will mature on December 15, 2020. The proceeds from the 4.875% Convertible Notes were used to repurchase approximately $177.1 million of our outstanding 3.25% convertible notes due 2015 (the “3.25% Convertible Notes”) and approximately $36.8 million of our outstanding 2.375% convertible notes due 2015 (the “2.375% Convertible Notes”).
In October 2013, we entered into an amendment to the Fourth Amended and Restated Credit Agreement which eliminated the interest coverage ratio through the end of 2014, and modified the interest coverage ratio from 2.00 to 1.25 during 2015 and from 2.00 to 1.50 during the first two quarters of 2016.
In May 2013, we entered into the Fourth Amended and Restated Credit Agreement dated as of May 22, 2013 (as amended, the “Fourth Amended and Restated Credit Agreement”), with the lenders party thereto, the issuing banks party thereto, Citicorp North America, Inc., as administrative agent and as collateral agent, and all other parties thereto from time to time, which amends and restates the Company’s Third Amended and Restated Credit Agreement, dated as of May 19, 2011, as amended June 26, 2012 (the “Third Amended and Restated Credit Agreement”). The Fourth Amended and Restated Credit Agreement included a $625.0 million senior secured term loan B facility (the “Term Loan Facility”), which matures on May 22, 2020. The proceeds of the Term Loan Facility were used to repay the entire $525.0 million aggregate principal amount of our outstanding obligations under our existing term loan A facility under the Third Amended and Restated Credit Agreement, which would have matured on June 30, 2016, with the balance used to pay fees and expenses and for general corporate purposes.
The principal changes to the Third Amended and Restated Credit Agreement effected by the Fourth Amended and Restated Amended and Restated Credit Agreement included increasing the existing senior secured revolving facility (the “Revolving Facility”) from $1.0 billion to $1.1 billion through its maturity date of June 30, 2016 and modifying the financial covenants.
Simultaneously with our entry into the Fourth Amended and Restated Credit Agreement, we terminated the Second Amended and Restated Receivables Purchase Agreement, dated as of October 19, 2011.
In May 2013, we issued $345.0 million principal amount of convertible senior notes due 2017 (the “3.75% Convertible Notes”). The proceeds from the 3.75% Convertible Notes, together with cash on hand, were used to repurchase approximately $225.8 million of our outstanding 3.25% Convertible Notes and approximately $181.4 million of our outstanding 2.375% Convertible Notes.
See Liquidity and Capital Resources and Note 14 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further information regarding the above financing transactions.
Coal Pricing Trends, Uncertainties and Outlook
Metallurgical Coal
The global seaborne metallurgical coal market appears to have stabilized over the last several months, with the mid-volatile segment showing relative strength. The first quarter 2015 Australian mid-volatile benchmark increased by $1.50 per metric tonne to $116.50, while the Australian low volatile hard coking coal benchmark declined $2.00 per metric tonne to $117.00.
As a result of significant production increases during 2013 and 2014, Australian export volume increased significantly in 2014, leading to an oversupplied market amid slower growth in the Chinese steel industry. However, it appears that nearly all production expansion in Australia is completed, with expectation of limited export growth over the next two years. Previously announced global met production cuts and any future production cuts, combined with modest steel production growth, may create more balance to global supply and demand for metallurgical coal.
Alpha recently priced approximately five million tons of domestic metallurgical coal at premiums to average global price levels at the time of pricing. Our 2015 North American metallurgical coal pricing declined approximately $7 per ton compared to average domestic realizations in 2014. AMFIRE assets, which Alpha sold at the end of 2014, accounted for approximately 0.8 million tons of North American met shipments during 2014.
Thermal Coal
Recent price trends suggest that the thermal coal market will remain challenging for 2015. Price trends thereafter will be significantly influenced by the price of natural gas, the pace of economic growth, ongoing regulatory pressures on the domestic coal-fired utility fleet and the weather. Domestic utility inventory levels have approached normal levels from historic lows reached a few months ago. In addition, lower natural gas prices and muted demand for coal, as evidenced by lackluster request for proposal activity, have contributed to a continued weak pricing environment. Rail service in the west has improved meaningfully since October 2014.
After remaining reasonably stable for most of 2014, Northern Appalachia pricing has declined over the last three months, while the Central Appalachia and Powder River Basin regions experienced price declines throughout 2014.
Lastly, the seaborne thermal market declined significantly after the collapse in oil prices, with API2 spot pricing weakening below the break-even point for many suppliers.
Our results of operations are dependent upon the prices we obtain for our coal as well as our ability to improve productivity and control costs. Principal goods and services we use in our operations include maintenance and repair parts and services, electricity, fuel, roof control and support items, explosives, tires, conveyance structure, ventilation supplies, and lubricants.
Our management strives to aggressively control costs and improve operating performance to mitigate external cost pressures. We have experienced volatility in operating costs related to fuel, explosives, steel, tires, contract services, and healthcare, among others, and have taken measures to mitigate the increases in these costs at all operations. We have a centralized sourcing group for major supplier contract negotiation and administration, for the negotiation and purchase of major capital goods, and to support the business units. The supplier base has been relatively stable for many years, but there has been some consolidation. We are not dependent on any one supplier in any region. We promote competition between suppliers and seek to develop relationships with suppliers that focus on lowering our costs. We seek suppliers who identify and concentrate
on implementing continuous improvement opportunities within their area of expertise. To the extent upward pressure on costs exceeds our ability to realize sales increases, or if we experience unanticipated operating or transportation difficulties, our operating margins would be negatively impacted. We may also experience difficult geologic conditions, delays in obtaining permits, labor shortages, unforeseen equipment problems, and unexpected shortages of critical materials such as tires, fuel and explosives that may result in adverse cost increases and limit our ability to produce at forecasted levels.
For additional information regarding some of the risks and uncertainties that affect our business, see Item 1A “Risk Factors.”
Results of Operations
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Summary
Total revenues decreased $666.4 million, or 13%, for the twelve months ended December 31, 2014 compared to the prior year period. The decrease in total revenues was due to decreased coal revenues of $533.5 million, decreased freight and handling revenues of $77.0 million, and decreased other revenues of $55.9 million. The decrease in coal revenues was due primarily to lower western steam and metallurgical coal sales volumes and lower average coal sales realization per ton for eastern and western steam coal and metallurgical coal. The decrease in coal revenues consisted of decreased metallurgical coal revenues of $406.2 million and decreased steam coal revenues of $127.3 million. The decrease in freight and handling revenues was due primarily to decreased freight rates and fewer export shipments. The decrease in other revenues was due primarily to decreased revenues related to contractual settlements.
Net loss decreased $238.5 million for the twelve months ended December 31, 2014 compared to the prior year period. The decrease was largely due to a decline of $784.7 million in certain operating costs and expenses, which is described below, increased other miscellaneous income, net, of $247.6 million, which includes a $250.3 million gain on sale of our 50% interest in the Alpha Shale J.V.; $17.9 million of gains on sales of marketable equity securities for the twelve months ended December 31, 2014, and decreased asset impairment and restructuring expenses of $12.4 million, partially offset by decreased coal and other revenues discussed above, a goodwill impairment expense of $308.6 million for the twelve months ended December 31, 2014, which increased $55.5 million compared to the prior year period, and decreased income tax benefits of $161.3 million.
The decrease in certain operating costs and expenses of $784.7 million consisted of decreased cost of coal sales of $599.7 million, or 15%, decreased depreciation, depletion and amortization expenses of $114.2 million, or 13%, decreased other expenses of $98.1 million, or 59%, and decreased selling, general and administrative expenses of $6.9 million, or 4%, partially offset by increased amortization of acquired intangibles, net of $34.2 million.
Coal sales volumes decreased 2.4 million tons, or 3%, compared to the prior year period. The decrease in coal sales volumes was due to decreases of 1.7 million tons and 1.6 million tons of western steam and metallurgical coal, respectively, partially offset by an increase of 0.9 million tons of eastern stream coal. The decrease in western steam coal was due primarily to rail transportation difficulties, a weather related event at our Eagle Butte mine in the second quarter of 2014 and the impacts of production curtailments. The decrease in metallurgical coal volumes was due primarily to lower export shipments due to weak market conditions and the impacts of production curtailments. The increase in eastern steam coal was primarily due to improved performance at our Cumberland longwall mine, which experienced a temporary shut down in the prior year period due to difficult mining conditions and geological factors, partially offset by production curtailments at other mines in our eastern operations.
The consolidated average coal sales realization per ton for the twelve months ended December 31, 2014 was $44.05 compared to $48.99 in the prior year period, a decrease of $4.94 per ton, or 10%. The decrease was largely attributable to decreases of $13.59 per ton, or 14%, $4.69 per ton, or 8%, and $0.64 per ton, or 5%, in metallurgical, eastern steam and western steam average coal sales realization per ton, respectively. The average coal sales realization per ton for metallurgical coal and eastern steam coal was $85.42 and $57.62, respectively, for the twelve months ended December 31, 2014 compared to $99.01 and $62.31 in the prior year period. The average coal sales realization per ton for western steam coal was $11.98 for the twelve months ended December 31, 2014 compared to $12.62 in the prior year period.
Consolidated coal margin percentage, calculated as consolidated coal revenues less consolidated cost of coal sales (excluding cost of coal sales in our All Other segment), divided by consolidated coal revenues, was 10% for the twelve months ended December 31, 2014 compared to 8% in the prior year period. Coal margin percentage for our Eastern and Western Coal Operations was 11% and 7%, respectively, for the twelve months ended December 31, 2014 compared to 6% and 22%,
respectively, in the prior year period. Consolidated coal margin per ton, calculated as consolidated coal sales realization per ton less consolidated cost of coal sales per ton (excluding cost of coal sales per ton in our All Other segment), was $4.52 for the twelve months ended December 31, 2014 compared to $3.97 in the prior year period. Coal margin per ton for our Eastern and Western Coal Operations was $7.31 and $0.83, respectively, for the twelve months ended December 31, 2014 compared to $4.95 and $2.71 in the prior year period.The increase in coal margin percentage and coal margin per ton in Eastern Coal Operations was primarily due to the impact of production curtailments at higher cost mines, our cost reduction efforts, improved performance at our Cumberland longwall mine, which experienced a temporary shut down in the prior year period due to difficult mining conditions and geological factors and improved performance at our Emerald longwall mine primarily due to decreased mine development costs as mining operations are expected to cease by the end of 2015. The decrease in coal margin percentage and coal margin per ton in Western Coal Operations was primarily due to decreased sales as a result of rail transportation difficulties.
Years Ended December 31, | Increase (Decrease) | |||||||||||||
2014 | 2013 | $ or Tons | % | |||||||||||
(In thousands, except per ton data) | ||||||||||||||
Revenues: | ||||||||||||||
Coal revenues: | ||||||||||||||
Eastern steam | $ | 1,700,295 | $ | 1,782,781 | $ | (82,486 | ) | (5 | )% | |||||
Western steam | 436,930 | 481,747 | (44,817 | ) | (9 | )% | ||||||||
Metallurgical | 1,587,216 | 1,993,453 | (406,237 | ) | (20 | )% | ||||||||
Freight and handling revenues | 480,841 | 557,846 | (77,005 | ) | (14 | )% | ||||||||
Other revenues | 81,796 | 137,681 | (55,885 | ) | (41 | )% | ||||||||
Total revenues | $ | 4,287,078 | $ | 4,953,508 | $ | (666,430 | ) | (13 | )% | |||||
Tons sold: | ||||||||||||||
Eastern steam | 29,510 | 28,613 | 897 | 3 | % | |||||||||
Western steam | 36,464 | 38,164 | (1,700 | ) | (4 | )% | ||||||||
Metallurgical | 18,581 | 20,135 | (1,554 | ) | (8 | )% | ||||||||
Total | 84,555 | 86,912 | (2,357 | ) | (3 | )% | ||||||||
Coal sales realization per ton: | ||||||||||||||
Eastern steam | $ | 57.62 | $ | 62.31 | $ | (4.69 | ) | (8 | )% | |||||
Western steam | $ | 11.98 | $ | 12.62 | $ | (0.64 | ) | (5 | )% | |||||
Metallurgical | $ | 85.42 | $ | 99.01 | $ | (13.59 | ) | (14 | )% | |||||
Average | $ | 44.05 | $ | 48.99 | $ | (4.94 | ) | (10 | )% | |||||
Coal revenues. Coal revenues decreased $533.5 million, or 13%, for the twelve months ended December 31, 2014 compared to the prior year period. The decrease in coal revenues consisted of decreases in eastern steam, western steam and metallurgical coal revenues.
Total eastern steam coal revenues decreased $82.5 million, or 5%, which consisted of decreased domestic coal revenues of $70.8 million, or 5%, and decreased export coal revenues of $11.7 million, or 4%, compared to the prior year period. The decrease in eastern steam coal revenues was largely due to lower coal sales realization per ton for both domestic and export shipments as a result of weak market conditions and lower demand. Coal sales realization per ton for eastern steam domestic sales was $59.06 per ton compared to $62.76 per ton in the prior year period and coal sales realization per ton for eastern steam export sales was $50.81 per ton, compared to $59.91 per ton in the prior year period. Coal sales realization per ton has been negatively impacted by competition from coal sourced from other basins, primarily the Illinois basin, and competition from other energy sources, primarily natural gas. Eastern steam coal shipments increased 0.9 million tons, or 3%, compared to the prior year period due in part to increased performance at our Cumberland longwall mine, which experienced a temporary shut down in the prior year period due to difficult mining conditions and geological factors, partially offset by production curtailments at other mines in eastern operations.
Total metallurgical coal revenues decreased $406.2 million, or 20%, which consisted of decreased export coal revenues of $388.2 million, or 28%, and decreased domestic coal revenues of $18.0 million, or 3%, compared to the prior year period. The decrease in metallurgical coal revenues was largely due to lower average coal sales realization per ton and lower coal sales volumes, which were impacted by weak market conditions as increases to supply have outpaced demand growth, particularly in the seaborne markets. Metallurgical coal shipments decreased 1.6 million tons, or 8%, which consisted of decreased export shipments of 2.5 million tons, or 17%, partially offset by increased domestic shipments of 0.9 million tons, or 17%, compared to the prior year period. Coal sales realization per ton for metallurgical export sales was $79.14 per ton compared to $92.10 per ton in the prior year period and coal sales realization per ton for metallurgical domestic sales was $98.18 per ton, compared to $118.71 per ton in the prior year period.
The decrease in western steam coal revenues was primarily due to decreased coal shipments as a result of the impacts of rail transportation difficulties, a weather related event at our Eagle Butte mine in the second quarter of 2014, and a decrease of $0.64, or 5%, in average coal sales realization per ton due to customer mix and roll off of higher priced contracts year over year. Western coal sales volumes decreased 1.7 million tons, or 4%, compared to the prior year period.
Our sales mix of metallurgical coal and steam coal based on volume was 22% and 78%, respectively, for the twelve months ended December 31, 2014 compared with 23% and 77% in the prior year period. Our sales mix of metallurgical coal and steam coal based on coal revenues was 43% and 57%, respectively, for the twelve months ended December 31, 2014 compared with 47% and 53%, respectively, in the prior year period.
Freight and handling. Freight and handling revenues and costs were $480.8 million for the twelve months ended December 31, 2014, a decrease of $77.0 million, or 14%, compared to the prior year period. The decrease was primarily due to decreased freight rates and fewer metallurgical coal export shipments compared to the prior year period.
Other. Other revenues decreased $55.9 million, or 41%, and other expenses decreased $98.1 million, or 59%, for the twelve months ended December 31, 2014 compared to the prior year period, resulting in a net increase to income from operations of $42.2 million. The net increase was due primarily to decreased revenues and credits related to contractual settlements and loss contingency accruals for litigation recorded in the prior year period, partially offset by increased expenses related to mark-to-market fair value adjustments for our diesel fuel swaps.
Years Ended December 31, | Increase (Decrease) | |||||||||||||
2014 | 2013 | $ | % | |||||||||||
(In thousands, except per ton data) | ||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | $ | 3,381,075 | $ | 3,980,744 | $ | (599,669 | ) | (15 | )% | |||||
Freight and handling costs | 480,841 | 557,846 | (77,005 | ) | (14 | )% | ||||||||
Other expenses | 67,412 | 165,485 | (98,073 | ) | (59 | )% | ||||||||
Depreciation, depletion and amortization | 750,776 | 865,021 | (114,245 | ) | (13 | )% | ||||||||
Amortization of acquired intangibles, net | 39,206 | 5,056 | 34,150 | 675 | % | |||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above) | 152,106 | 158,987 | (6,881 | ) | (4 | )% | ||||||||
Asset impairment and restructuring | 24,872 | 37,273 | (12,401 | ) | (33 | )% | ||||||||
Goodwill impairment | 308,651 | 253,102 | 55,549 | 22 | % | |||||||||
Total costs and expenses | $ | 5,204,939 | $ | 6,023,514 | $ | (818,575 | ) | (14 | )% | |||||
Cost of coal sales per ton(1): | ||||||||||||||
Eastern coal operations | $ | 61.05 | $ | 72.51 | $ | (11.46 | ) | (16 | )% | |||||
Western coal operations | $ | 11.15 | $ | 9.91 | $ | 1.24 | 13 | % | ||||||
Average | $ | 39.53 | $ | 45.02 | $ | (5.49 | ) | (12 | )% | |||||
EBITDA: | ||||||||||||||
Eastern Coal Operations | $ | 188,337 | $ | (44,223 | ) | $ | 232,560 | 526 | % | |||||
Western Coal Operations | $ | 16,053 | $ | 90,879 | $ | (74,826 | ) | (82 | )% | |||||
(1) | Cost of coal sales per ton includes only costs associated with our Eastern and Western Coal Operations. |
Cost of coal sales. Cost of coal sales decreased $599.7 million, or 15%, for the twelve months ended December 31, 2014 compared to the prior year period. The decrease in cost of coal sales was due primarily to decreased labor and benefit expenses and decreased supplies and maintenance expenses primarily related to our cost reduction measures, credit adjustments related to changes in estimates for our asset retirement obligations, decreased sales-related variable costs associated with decreased metallurgical and steam coal revenues, and decreased expenses related to production curtailments at certain higher cost mines. Additionally, for the twelve months ended December 31, 2014, cost of coal sales were reduced by $30.0 million related to the correction of a prior period error related to asset retirement obligations. See Note 15 to the Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.
Depreciation, depletion and amortization. Depreciation, depletion, and amortization decreased $114.2 million, or 13%, for the twelve months ended December 31, 2014 compared to the prior year period. The decrease was primarily due to decreased depreciation expense related to continued constrained capital spending and the impact of production curtailments.
Amortization of acquired intangibles, net. Amortization expense of acquired intangibles, net increased $34.2 million for the twelve months ended December 31, 2014 compared to the prior year period. The increase in expense for amortization of acquired intangibles, net, was primarily due to decreased amortization of below-market contracts assumed in prior acquisitions due to the completion of shipments under many of the contracts assumed.
Selling, general and administrative. Selling, general and administrative expenses decreased $6.9 million, or 4%, for the twelve months ended December 31, 2014 compared to the prior year period. The decrease in selling, general and administrative expenses was due primarily to decreased employee-related expenses as a result of lower headcount and our cost reduction measures, partially offset by legal fees related to a case that was tried during the second quarter of 2014 and increased stock compensation expense.
Asset impairment and restructuring. Asset impairment and restructuring expenses were $24.9 million for the twelve months ended December 31, 2014 and consisted of severance related expenses of $15.2 million and impairment expenses of $9.7 million related to certain other non-current assets. See Note 10 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Goodwill impairment. See Overview and Critical Accounting Policies, and Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Interest expense. Interest expense increased $41.9 million, or 17%, during the twelve months ended December 31, 2014 compared to the prior year period due primarily to the issuance of 3.75% Convertible Notes in May 2013, 4.875% Convertible Notes in December 2013 and 7.50% senior secured second lien notes in May 2014, partially offset by repurchases of a portion of outstanding 2.375% and 3.25% Convertible Notes, respectively, in the first half of 2014.
Income taxes. Income tax benefit of $55.3 million was recorded for the twelve months ended December 31, 2014 on a loss
before income taxes of $930.3 million. The benefit rate is lower than the federal statutory rate of 35% primarily due to the impact of an increase in the valuation allowance and the impact of the non-deductible goodwill impairment, partially offset by the impact of the percentage depletion allowance and state income taxes, net of federal tax impact. The change in valuation allowance results from an increase in net operating losses and other deferred tax assets for which we are unable to support realization. See Note 19 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Income tax benefit of $216.6 million was recorded for the twelve months ended December 31, 2013 on a loss before income taxes of $1,330.0 million. The benefit rate is lower than the federal statutory rate of 35% primarily due to the impact of an increase in the valuation allowance against deferred tax assets related to operating loss carryforwards and the non-deductible goodwill impairment, partially offset by the impact of the percentage depletion allowance and state income taxes, net of federal tax impact.
Segment EBITDA
The price of coal is influenced by many factors that vary by region. Such factors include, but are not limited to: (1) coal quality, which includes energy (heat content), sulfur, ash, volatile matter and moisture content; (2) transportation costs; (3) regional supply and demand; (4) available competitive fuel sources such as natural gas, nuclear or hydro; and (5) production costs, which vary by mine type, available technology and equipment utilization, productivity and geological conditions.
The energy content or heat value of coal is a significant factor influencing coal prices as higher energy coal is more desirable to consumers and typically commands a higher price in the market. The heat value of coal is commonly measured in
British thermal units or the amount of heat needed to raise the temperature of one pound of water by one degree Fahrenheit. Coal from the Eastern and Midwest regions of the United States tends to have a higher heat value than coal found in the Western United States.
Powder River Basin coal, with its lower energy content, lower production cost and often greater distance to travel to the consumer, typically sells at a lower price than Northern and Central Appalachian coal that has higher energy content and is often located closer to the end user.
Eastern Coal Operations - EBITDA increased $232.6 million for the twelve months ended December 31, 2014 compared to the prior year period. The increase in EBITDA was largely due to a gain of $250.3 million from the sale of our 50% interest in the Alpha Shale J.V. and gains of approximately $17.9 million from the sales of marketable equity securities, decreased selling, general and administrative expenses of $20.1 million, or 12%, and increased coal margin per ton of $2.36, or 48%, partially offset by increased goodwill impairment expenses of $55.5 million, or 22%, increased other expenses of $43.6 million, or 103%, and increased asset impairment and restructuring expenses of $0.7 million, or 5%. The increase in coal margin per ton was due to decreased cost of coal sales primarily due to cost reduction measures and improved performance at our Cumberland longwall mine, which experienced a temporary shut down in the prior year period due to difficult mining conditions and geological factors and improved performance at our Emerald longwall mine primarily due to cost reduction measures and decreased mine development costs as mining operations are expected to cease by the end of 2015. The increase in coal margin per ton consisted of decreased cost of coal sales per ton of $11.46, or 16%, partially offset by decreased average coal sales realization per ton of $9.10, or 12%. Additionally, for the twelve months ended December 31, 2014, EBITDA includes $30.0 million for the correction of an error related to asset retirement obligations. See Note 15 to the Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.
Western Coal Operations - EBITDA decreased $74.8 million, or 82%, for the twelve months ended December 31, 2014 compared to the prior year period. The decrease in EBITDA was primarily due to decreased coal margin per ton of $1.88, or 69%. The decrease in coal margin per ton consisted of decreased average coal sales realization per ton of $0.64, or 5%, due primarily to customer mix and roll off of higher priced contracts year over year, and increased cost of coal sales per ton of $1.24, or 13%, due primarily to lower volumes related to poor rail service and a weather related event at our Eagle Butte mine in the second quarter of 2014.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Summary
Total revenues decreased $2.0 billion, or 29%, for the twelve months ended December 31, 2013 compared to the prior year period. The decrease in total revenues was due to decreased coal revenues of $1.8 billion, decreased freight and handling revenues of $204 million, and decreased other revenues of $60 million. The decrease in coal revenues was due primarily to lower coal sales volumes and lower average coal sales realization per ton for metallurgical and steam coal. The decrease in coal revenues consisted of decreased steam coal revenues of $1.1 billion, or 33%, and decreased metallurgical coal revenues of $661.9 million, or 25%. The decrease in freight and handling revenues was due primarily to decreased export shipments and decreased freight rates. The decrease in other revenues was due primarily to changes in fair value adjustments for derivatives and decreased terminal revenues.
Net loss decreased $1.3 billion for the twelve months ended December 31, 2013 compared to the prior year period. The decrease was largely due to lower goodwill impairment and asset impairment and restructuring expenses of $1.5 billion and $1.0 billion, respectively, decreases in certain operating costs and expenses, which are described below, of $1.1 billion, partially offset by the decreased total revenues discussed above, increased other expense, net of $69.3 million, and decreased income tax benefits of $333.4 million.
The decrease in certain operating costs and expenses of $1.1 billion consisted of decreased cost of coal sales of $1.0 billion, or 20%, decreased depreciation, depletion and amortization expenses of $172.6 million, or 17%, and decreased selling, general and administrative expenses of $50.8 million, or 24%, partially offset by increased expenses for amortization of acquired intangibles, net of $75.4 million, and increased other expenses of $120.1 million.
Coal sales volumes decreased 21.9 million tons, or 20%, compared to the prior year period. The decrease in coal sales volumes was due primarily to a decrease of 13.3 million tons of eastern steam coal and a decrease of 8.6 million tons of western steam coal. The decreases in eastern and western steam coal volumes were due primarily to decreased demand and the impacts of production curtailments and mine idlings implemented during 2012 and 2013.
The consolidated average coal sales realization per ton for the twelve months ended December 31, 2013 was $48.99 compared to $55.29 in the prior year period, a decrease of $6.30 per ton, or 11%. The decrease was largely attributable to decreases of $32.01 per ton, or 24%, $3.61 per ton, or 5%, and $0.32 per ton, or 2%, in metallurgical, eastern steam and western steam average coal sales realization per ton, respectively. The average coal sales realization per ton for metallurgical coal and eastern steam coal was $99.01 and $62.31, respectively, for the twelve months ended December 31, 2013 compared to $131.02 and $65.92 in the prior year period. The average coal sales realization per ton for western steam coal was $12.62 for the twelve months ended December 31, 2013 compared to $12.94 in the prior year period.
Consolidated coal margin percentage, calculated as consolidated coal revenues less consolidated cost of coal sales (excluding cost of coal sales in our All Other segment), divided by consolidated coal revenues, was 8% for the twelve months ended December 31, 2013 compared to 18% in the prior year period. Coal margin percentage for our Eastern and Western Coal Operations was 6% and 22%, respectively, for the twelve months ended December 31, 2013 compared to 18% and 22% in the prior year period. Consolidated coal margin per ton, calculated as consolidated coal sales realization per ton less consolidated cost of coal sales per ton (excluding cost of coal sales per ton in our All Other segment), was $3.97 for the twelve months ended December 31, 2013 compared to $10.01 in the prior year period. Coal margin per ton for our Eastern and Western Coal Operations was $4.95 and $2.71, respectively, for the twelve months ended December 31, 2013 compared to $15.42 and $2.84 in the prior year period.
Years Ended December 31, | Increase (Decrease) | |||||||||||||
2013 | 2012 | $ or Tons | % | |||||||||||
(In thousands, except per ton data) | ||||||||||||||
Revenues: | ||||||||||||||
Coal revenues: | ||||||||||||||
Eastern steam | $ | 1,782,781 | $ | 2,755,474 | $ | (972,693 | ) | (35 | )% | |||||
Western steam | 481,747 | 604,880 | (123,133 | ) | (20 | )% | ||||||||
Metallurgical | 1,993,453 | 2,655,342 | (661,889 | ) | (25 | )% | ||||||||
Freight and handling revenues | 557,846 | 761,928 | (204,082 | ) | (27 | )% | ||||||||
Other revenues | 137,681 | 197,260 | (59,579 | ) | (30 | )% | ||||||||
Total revenues | $ | 4,953,508 | $ | 6,974,884 | $ | (2,021,376 | ) | (29 | )% | |||||
Tons sold: | ||||||||||||||
Eastern steam | 28,613 | 41,797 | (13,184 | ) | (32 | )% | ||||||||
Western steam | 38,164 | 46,732 | (8,568 | ) | (18 | )% | ||||||||
Metallurgical | 20,135 | 20,267 | (132 | ) | (1 | )% | ||||||||
Total | 86,912 | 108,796 | (21,884 | ) | (20 | )% | ||||||||
Coal sales realization per ton: | ||||||||||||||
Eastern steam | $ | 62.31 | $ | 65.92 | $ | (3.61 | ) | (5 | )% | |||||
Western steam | $ | 12.62 | $ | 12.94 | $ | (0.32 | ) | (2 | )% | |||||
Metallurgical | $ | 99.01 | $ | 131.02 | $ | (32.01 | ) | (24 | )% | |||||
Average | $ | 48.99 | $ | 55.29 | $ | (6.30 | ) | (11 | )% | |||||
Coal revenues. Coal revenues decreased $1.8 billion, or 29%, for the twelve months ended December 31, 2013 compared to the prior year period. The decrease in coal revenues consisted of decreases in eastern steam, western steam and metallurgical coal revenues.
Total eastern steam coal revenues decreased $972.7 million, or 35%, which consisted of decreased domestic coal revenues of $887.5 million, or 37%, and decreased export coal revenues of $85.2 million, or 24%, compared to the prior year period. The decrease in eastern steam coal revenues was largely due to fewer coal shipments as a result of decreased demand and the impacts of production curtailments and mine idlings implemented during 2012 and 2013, the impact of a temporary shut down of our Cumberland longwall mine due to difficult mining conditions and geological factors and a longer than expected longwall move, and lower coal sales realization per ton. Eastern steam coal shipments decreased 13.2 million tons, or 32%, which
consisted of decreased domestic shipments of 11.9 million tons, or 33%, and decreased export shipments of 1.3 million tons, or 22%, compared to the prior year period. Coal sales realization per ton for eastern steam domestic sales was $62.76 per ton compared to $66.65 per ton in the prior year period and coal sales realization per ton for eastern steam export sales was $59.91 per ton compared to $61.44 per ton in the prior year period.
Total metallurgical coal revenues decreased $661.9 million, or 25%, which consisted of decreased export coal revenues of $504.3 million, or 27%, and decreased domestic coal revenues of $157.6 million, or 20%, compared to the prior year period. The decrease in metallurgical coal revenues was largely due to lower average coal sales realization per ton, which was impacted by weaker market conditions and lower demand, as well as the mix of coal qualities sold as a larger portion of lower quality metallurgical tons were sold in the twelve months ended December 31, 2013 compared to the prior year period. Metallurgical coal shipments decreased 0.1 million tons from the prior year period, which consisted primarily of decreased export shipments of 0.5 million tons, partially offset by increased domestic shipments of 0.4 million tons. Coal sales realization per ton for metallurgical export sales was $92.10 per ton compared to $122.18 per ton in the prior year period and coal sales realization per ton for metallurgical domestic sales was $118.71 per ton compared to $158.78 per ton in the prior year period.
The decrease in western steam coal revenues was primarily due to decreased coal shipments as a result of the impacts of production curtailments and a decrease of $0.32 in average coal sales realization per ton due to decreased demand and weak market conditions. Western coal sales volumes decreased 8.6 million tons, or 18%, compared to the prior year period.
Our sales mix of metallurgical coal and steam coal based on volume was 23% and 77%, respectively, for the twelve months ended December 31, 2013 compared with 19% and 81% in the prior year period. Our sales mix of metallurgical coal and steam coal based on coal revenues was 47% and 53%, respectively, for the twelve months ended December 31, 2013 compared with 44% and 56%, respectively, in the prior year period.
Freight and handling. Freight and handling revenues and costs were $557.8 million for the twelve months ended December 31, 2013, a decrease of $204.1 million, or 27%, compared to the prior year period. The decrease was primarily due to decreased export shipments and decreased freight rates compared to the prior year period.
Other. Other revenues decreased $59.6 million, or 30%, and other expenses increased $120.1 million, or 264%, for the twelve months ended December 31, 2013 compared to the prior year period, resulting in a net decrease to income from operations of $179.7 million. The net decrease was due primarily to changes in fair value adjustments for derivatives and an increase in loss contingency accruals for litigation (See Note 23 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K regarding litigation).
Years Ended December 31, | Increase (Decrease) | |||||||||||||
2013 | 2012 | $ | % | |||||||||||
(In thousands, except per ton data) | ||||||||||||||
Cost of coal sales (exclusive of items shown separately below) | $ | 3,980,744 | $ | 5,004,516 | $ | (1,023,772 | ) | (20 | )% | |||||
Freight and handling costs | 557,846 | 761,928 | (204,082 | ) | (27 | )% | ||||||||
Other expenses | 165,485 | 45,432 | 120,053 | 264 | % | |||||||||
Depreciation, depletion and amortization | 865,021 | 1,037,575 | (172,554 | ) | (17 | )% | ||||||||
Amortization of acquired intangibles, net | 5,056 | (70,338 | ) | 75,394 | 107 | % | ||||||||
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately above) | 158,987 | 209,788 | (50,801 | ) | (24 | )% | ||||||||
Asset impairment and restructuring | 37,273 | 1,068,906 | (1,031,633 | ) | (97 | )% | ||||||||
Goodwill impairment | 253,102 | 1,713,526 | (1,460,424 | ) | (85 | )% | ||||||||
Total costs and expenses | $ | 6,023,514 | $ | 9,771,333 | $ | (3,747,819 | ) | (38 | )% | |||||
Cost of coal sales per ton(1): | ||||||||||||||
Eastern coal operations | $ | 72.51 | $ | 71.76 | $ | 0.75 | 1 | % | ||||||
Western coal operations | $ | 9.91 | $ | 10.10 | $ | (0.19 | ) | (2 | )% | |||||
Average | $ | 45.02 | $ | 45.28 | $ | (0.26 | ) | (1 | )% | |||||
EBITDA: | ||||||||||||||
Eastern Coal Operations | $ | (44,223 | ) | $ | (1,807,515 | ) | $ | 1,763,292 | 98 | % | ||||
Western Coal Operations | $ | 90,879 | $ | 65,153 | $ | 25,726 | 39 | % | ||||||
(1) | Cost of coal sales per ton includes only costs associated with our Eastern and Western Coal Operations. |
Cost of coal sales. Cost of coal sales decreased $1,023.8 million, or 20%, for the twelve months ended December 31, 2013 compared to the prior year period. The decrease in cost of coal sales was due primarily to decreased supplies and maintenance expenses, including diesel fuel and explosives, decreased merger-related expenses, decreased purchased coal expenses and decreased labor and benefit expenses primarily related to production curtailments and mine idlings implemented during 2012 and the first half of 2013, decreased credit adjustments related to changes in estimates for asset retirement obligations, and other cost control measures, and decreased sales-related and other variable costs associated with decreased metallurgical and steam coal revenues and decreased steam coal production, partially offset by increased expenses for regulatory matters.
Depreciation, depletion and amortization. Depreciation, depletion, and amortization decreased $172.6 million, or 17%, for the twelve months ended December 31, 2013 compared to the prior year period. The decrease was primarily due to decreased depletion and amortization expense due to lower thermal coal production and lower depletion rates at certain mines that recorded asset impairment charges during 2012 and decreased depreciation expense related to lower capital expenditures over the last twelve months compared to the same time period in the prior year.
Amortization of acquired intangibles, net. Amortization expense of acquired intangibles, net increased $75.4 million, or 107%, for the twelve months ended December 31, 2013 compared to the prior year period. The increase in expense for amortization of acquired intangibles, net, was primarily due to decreased amortization of below-market contracts assumed in the Massey Acquisition due to the completion of shipments under many of the contracts assumed. Amortization of acquired intangibles, net for the next five years is estimated to be $38.3 million, $30.2 million, $24.0 million, $5.6 million, and $1.0 million.
Selling, general and administrative. Selling, general and administrative expenses decreased $50.8 million, or 24%, for the twelve months ended December 31, 2013 compared to the prior year period. The decrease in selling, general and administrative expenses was due primarily to decreased wage and benefits expenses as a result of lower headcount, and decreased merger-related expenses, partially offset by increased stock compensation expenses due to the reversal of stock compensation expenses in 2012 related to performance-based awards.
Asset impairment and restructuring. Asset impairment and restructuring expenses were $37.3 million for the twelve months ended December 31, 2013 and consisted primarily of severance and related benefits, professional fees for consulting, and reserves for other assets that may not be recoverable. Asset impairment and restructuring expenses were $1,068.9 million for the twelve months ended December 31, 2012 and consisted primarily of $1,000.5 million of long-lived asset impairment
expenses and $68.4 million for severance and related benefits, professional fees and other expenses, lease termination costs and reserves for other assets that may not be recoverable. See Critical Accounting Policies and Note 10 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Goodwill impairment. See Critical Accounting Policies and Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Interest expense. Interest expense increased $48.4 million, or 24%, during the twelve months ended December 31, 2013 compared to the prior year period due primarily to the issuance of 9.75% senior notes in October 2012 and the issuance of 3.75% convertible senior notes in May 2013, partially offset by repurchases of a portion of outstanding 2.375% Convertible Notes and 3.25% Convertible Notes in May 2013.
Income taxes. Income tax benefit of $216.6 million was recorded for the twelve months ended December 31, 2013 on a loss before income taxes of $1,330.0 million. The benefit rate is lower than the federal statutory rate of 35% primarily due to the impact of an increase in the valuation allowance against deferred tax assets related to operating loss carryforwards and the non-deductible goodwill impairment, partially offset by the impact of the percentage depletion allowance and state income taxes, net of federal tax impact.
Income tax benefit of $550.0 million was recorded for the twelve months ended December 31, 2012 on a loss before income taxes of $2,987.1 million. The benefit rate is lower than the federal statutory rate of 35% primarily due to the impact of the non-deductible goodwill impairment and changes in valuation allowances, partially offset by the impact of the percentage depletion allowance, state taxes and state apportionment change, net of federal tax impacts.
Segment EBITDA
Eastern Coal Operations. EBITDA increased $1.8 billion for the twelve months ended December 31, 2013 compared to the prior year period. The increase in EBITDA was largely due to decreased goodwill impairment and asset impairment and restructuring expenses of $1.5 billion and $1.0 billion, respectively, decreased selling, general and administrative expenses of $40.8 million, and decreased other expenses of $33.5 million, partially offset by decreased coal margin per ton of $10.46, or 68%, and decreased other revenues of $42.9 million. The decrease in coal margin per ton was due primarily to the decreased steam coal sales volumes and decreased steam and metallurgical coal revenues discussed above. The decrease in coal margin per ton consisted of decreased average coal sales realization per ton of $9.71, or 11%, and increased cost of coal sales per ton of $0.75. During the twelve months ended December 31, 2013, cost of coal sales per ton was negatively impacted by reduced shipments and increased costs per ton as a result of a temporary shut down of our Cumberland longwall mine due to difficult mining conditions and geological factors and a longer than expected longwall move.
Western Coal Operations. EBITDA increased $25.7 million, or 39%, for the twelve months ended December 31, 2013 compared to the prior year period. The increase in EBITDA was due primarily to goodwill impairment expense recorded in 2012, partially offset by decreased coal margin per ton of $0.13, or 5%. The decrease in coal margin per ton consisted of decreased average coal sales realization per ton of $0.32, or 2%, partially offset by decreased cost of coal sales per ton of $0.19, or 2%.
Liquidity and Capital Resources
Our primary liquidity and capital resource requirements stem from the cost of our coal production and purchases, our capital expenditures, our debt service, our reclamation obligations, our litigation and regulatory costs and settlements and associated costs, and from time to time, our securities repurchases. Our primary sources of liquidity have been from sales of coal, our credit facility and debt arrangements and to a lesser extent, cash from sales of non-core assets and miscellaneous revenues.
In 2010, we entered into a 50/50 joint venture (the “Alpha Shale JV”) with Rice Drilling C LLC, a wholly owned subsidiary of Rice Drilling B LLC, in order to develop a portion of our Marcellus Shale natural gas holdings in southwest Pennsylvania. On December 6, 2013, we, Rice Drilling C LLC and Rice Energy Inc. (“Rice Energy”) entered into a transaction agreement (the “Transaction Agreement”). Pursuant to the Transaction Agreement, we agreed to transfer our 50% interest in the Alpha Shale JV to Rice Energy in exchange for total consideration of $300.0 million, consisting of $100.0 million of cash and $200.0 million of shares of Rice Energy common stock, based upon Rice Energy’s initial public offering. On January 29, 2014, Rice Energy completed its initial public offering, and on the same date, issued approximately 9.5 million shares of common stock and paid us $100.0 million in cash. We recognized a gain of $250.3 million. In 2014, we sold approximately 3.5 million shares of Rice Energy common stock for $90.9 million of cash and recorded a gain of $17.9 million. As of December 31, 2014,
the fair value of these shares was $126.8 million, which is included in other long-term assets in the Consolidated Balance Sheet.
We believe that cash on hand, short-term and long-term marketable securities, cash generated from our operations and borrowing capacity available under our revolving credit facility and accounts receivable securitization facility, will be sufficient to meet our working capital requirements, anticipated capital expenditures, debt service requirements including $153.7 million of convertible senior notes due 2015, reclamation obligations, potential securities repurchases, and expected settlements and costs related to outstanding litigation for at least the next twelve months.
At December 31, 2014, we had total liquidity of $2,155.0 million, including cash and cash equivalents of $741.2 million, marketable securities of $532.0 million which include the Rice Energy common stock, and $881.8 million of unused commitments available under the revolving credit facility portion of our Credit Agreement and our A/R Facility, after giving effect to $212.2 million of letters of credit outstanding as of December 31, 2014, subject to limitations described in our Credit Agreement and A/R Facility.
Weak market conditions and depressed coal prices have resulted in operating losses and cash outflows from operations. If market conditions do not improve, we expect to continue to experience operating losses and cash outflows in the coming quarters, which would adversely affect our liquidity. In particular, we expect a decrease in cash and cash equivalents to the extent that capital expenditures and other cash obligations, including our debt service obligations, exceed cash generated from our operations.
During 2014, we continued to take steps to enhance our capital structure and financial flexibility and reduce cash outflows from operations in the near term, including through, among other things, a realignment of our cost structure and anticipated reductions in production volumes and capital expenditures, amendment and extension of our credit facility, extension of the terms of other debt and reduction in interest expense. We expect to engage in similar efforts in the future as opportunities arise through refinancing, repayment or repurchase of outstanding debt, amendment of our credit facilities, and other methods, and may consider the sale of other assets or businesses, further restructurings and such other measures as circumstances warrant. We may decide to pursue or not pursue these opportunities at any time. As part of this strategy, we may repurchase some of our outstanding notes through open market purchases, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. To facilitate repurchases, we may make purchases pursuant to one or more trading plans under Rule 10b5-1 of the Exchange Act, which allow us to repurchase securities during periods when we otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. Any such plans may be discontinued at any time. Access to additional funds from liquidity-generating transactions or other sources of external financing is subject to market conditions and certain limitations, including our credit rating and covenant restrictions in our credit facility and indentures (as discussed further below).
With respect to global economic events, there continues to be uncertainty in the financial markets and weakness in the coal industry. We constantly monitor the creditworthiness of our customers. We believe that the creditworthiness of our current group of customers is sound and represents no abnormal business risk. On January 30, 2015, Moody's Investors Service downgraded our ratings, including the Corporate Family Rating (CFR) to Caa1 from B3, probability of default rating (PDR) to Caa1-PD from B3-PD, senior unsecured ratings to Caa2 from Caa1, rating on second lien notes to B3 from B2, and the secured term loan rating to B2 from B1. At the same time, Moody's downgraded the Speculative Grade Liquidity (SGL) rating to SGL-3 from SGL-2. The outlook is negative. On May 13, 2014, Moody’s Investors Service downgraded our ratings, including our CFR to B3 from B2, the probability of default rating to B3-PD from B2-PD, and the ratings on the first lien senior secured credit facility to B1 from Ba2, and senior unsecured debt to Caa1 from B3. The SGL rating remained unchanged at SGL-2. These issues bring potential liquidity risks for us, including the risks of declines in our stock value, declines in our cash and cash equivalents, less availability and higher costs of additional credit, restrictions to or the loss of our self-bonding capability and requests for additional collateral by surety providers, and potential counterparty defaults and failures.
We sponsor pension plans in the United States for salaried and non-union hourly employees. Benefits under these plans are frozen. For these plans, the Pension Protection Act of 2006 (“PPA”) requires a funding target of 100% of the present value of accrued benefits. Generally, any such plan with a funding ratio of less than 80% will be deemed at risk and will be subject to additional funding requirements under the PPA. Annual funding contributions to the plans are made as recommended by consulting actuaries based upon the ERISA funding standards. Plan assets consist of cash and cash equivalents, an investment in a group annuity contract, equity and fixed income funds, and private equity funds. We are required to measure plan assets and benefit obligations as of the date of our fiscal year-end balance sheet, or sooner under certain circumstances, and recognize the overfunded or underfunded status of our defined benefit pension and other postretirement plans (other than a multi-employer plan) as an asset or liability in our balance sheet and recognize changes in that funded status in the year in which the
changes occur through other comprehensive income (loss). We may be required to increase the amount of cash contributions into the pension trust in order to comply with the funding requirements of the PPA. Our plans are not currently deemed to be at risk and subject to additional funding requirements under the PPA. We made pension plan contributions of $5.5 million during 2014 and do not anticipate making any significant contributions in 2015.
In October and December 2013, the parties to the securities class action brought by Massey stockholders in the wake of the explosion at Massey’s Upper Big Branch mine participated in mediation. In December 2013, the parties reached agreement on all material terms of settlement, including a cash payment of $265.0 million. In February 2014, the parties reached agreement on definitive settlement documentation, subject to court approval, and on February 19, 2014, the Court entered an order preliminarily approving the settlement subject to a final determination following a settlement hearing on June 4, 2014. On February 25, 2014, pursuant to the terms of the settlement, we made an initial payment of $30.0 million into an escrow account and on June 3, 2014, we deposited the remaining $235.0 million of the settlement into the escrow account. On June 4, 2014, the Court entered an order approving the settlement and dismissed the class action with prejudice. In May 2014, we received approximately $70.0 million of insurance proceeds in connection with the settlement.
On March 5, 2014, we entered into a consent decree (the “Consent Decree”) with the EPA, the U.S. Department of Justice and three states regarding claims under the Clean Water Act. The Consent Decree resolves a complaint by the EPA and state agencies in Kentucky, Pennsylvania and West Virginia alleging that our mining affiliates in those states and in Tennessee and Virginia exceeded certain water discharge permit limits during the period 2006 to 2013. As part of the Consent Decree, we agreed to implement an integrated environmental management system and an expanded auditing/reporting protocol, install selenium and osmotic pressure treatment facilities at specific locations, and certain other measures. The Consent Decree also stipulates that we will pay $27.5 million in civil penalties, to be divided among the federal government and state agencies. On November 26, 2014, the Consent Decree was approved by the Court and the civil penalties were subsequently paid. We expect to make capital expenditures of approximately $163.4 million over the course of the period from 2015 through 2018 to achieve water quality compliance under certain water discharge permits issued by the state agencies represented in the Consent Decree.
On December 30, 2014, we announced that our subsidiary AMFIRE Mining Company, LLC had completed the divestiture of substantially all of its assets to Rosebud Mining Company. The transaction included total consideration of approximately $87.2 million, including gross cash proceeds of approximately $75.1 million and the assumption of certain liabilities. The assets, which include ten mines and four preparation plants and loadouts, were located in Pennsylvania. We recognized a gain of approximately $9.8 million. Total 2014 AMFIRE coal sales volumes were approximately 2.3 million tons, including 1.6 million tons of metallurgical coal.
Additionally, see Note 23 in the Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K regarding our commitment for lease by application payment due in 2015.
Cash Flows
Cash and cash equivalents increased by $121.5 million, decreased by $111.1 million, and increased by $144.8 million for the years ended December 31, 2014, 2013 and 2012, respectively. The net change in cash and cash equivalents was attributable to the following:
Cash Flows | Years Ended December 31, | |||||||||||
(in thousands) | 2014 | 2013 | 2012 | |||||||||
Net cash (used in) provided by operating activities | $ | (283,859 | ) | $ | 109,018 | $ | 518,419 | |||||
Net cash used in investing activities | (1,651 | ) | (290,657 | ) | (672,976 | ) | ||||||
Net cash provided by financing activities | 407,052 | 70,560 | 299,398 | |||||||||
Net change in cash and cash equivalents | $ | 121,542 | $ | (111,079 | ) | $ | 144,841 | |||||
Net cash used in operating activities for the year ended December 31, 2014 was $283.9 million, a decrease of $392.9 million from the $109.0 million of net cash provided by operating activities for the year ended December 31, 2013. The decrease in cash provided by operating activities in 2014 as compared to 2013 is primarily due to the previously mentioned $195.0 million in net payments related to the securities class action settlement, a $27.5 million payment for the Consent Decree, increased interest payments and changes in working capital.
Net cash used in investing activities for the year ended December 31, 2014 was $1.7 million, compared to $290.7 million of net cash used in investing activities for the year ended December 31, 2013. Capital expenditures decreased to $185.0 million in 2014 from $215.7 million in 2013. Cash paid for acquisition of mineral rights was $42.1 million during 2014 and 2013. Net
sales of marketable securities were $18.5 million in 2014 compared to net purchases of $43.5 million in 2013. Proceeds from disposition of property, plant and equipment were $93.0 million in 2014, which included included approximately $74.1 million in net proceeds from the sale of substantially all of the assets of our AMFIRE subsidiary and $15.5 million from the sale of our joint venture interest in coal handling facilities, compared to $10.6 million in 2013.
Net cash provided by financing activities for the year ended December 31, 2014 was $407.1 million, compared to $70.6 million for the year ended December 31, 2013. The primary source of cash from financing activities in 2014 included $500.0 million of proceeds from borrowings of long-term debt, partially offset by principal repayments and repurchases of long-term debt and capital lease obligations of $37.6 million and $19.5 million, respectively.The primary source of cash for financing activities in 2013 included $1,306.7 million of proceeds from borrowings of long-term debt, partially offset by principal repayments and repurchases of long-term debt and capital lease obligations of $1,176.3 million and $16.1 million, respectively. Debt issuance costs were $28.9 million for the year ended December 31, 2014 compared to $36.7 million in 2013. Common stock repurchases consist of shares repurchased from employees to satisfy the employees’ minimum statutory tax withholdings upon the vesting of restricted stock and performance shares and used cash of $1.5 million in 2014 compared to $1.4 million in 2013. Other debt repayments were $5.5 million in 2014 and 2013.
Net cash provided by operating activities for the year ended December 31, 2013 was $109.0 million, a decrease of $409.4 million from the $518.4 million of net cash provided by operating activities for the year ended December 31, 2012. In addition to reduced cash earnings, the decrease in operating cash flows is partially due to cash payments, net of insurance recoveries, to settle litigation matters acquired from Massey, cash payments to a trust pursuant to our obligations under a non-prosecution agreement, and cash payments for severance and benefits related to restructuring activities.
Net cash used in investing activities for the year ended December 31, 2013 was $290.7 million, a decrease of $382.3 million from the $673.0 million of net cash used in investing activities for the year ended December 31, 2012. Capital expenditures decreased to $215.7 million in 2013 from $402.4 million in 2012. Cash paid for acquisition of mineral rights decreased to $42.1 million in 2013 from $95.8 million in 2012. Net sales of marketable securities were $43.5 million in 2013 compared to net sales of $203.0 million in 2012. Proceeds from disposition of property, plant and equipment decreased to $10.6 million in 2013 from $38.3 million in 2012.
Net cash provided by financing activities for the year ended December 31, 2013 was $70.6 million, a decrease of $228.8 million from the $299.4 million of net cash provided by financing activities for the year ended December 31, 2012. The primary source of cash for financing activities in 2013 included $1,306.7 million of proceeds from borrowings of long-term debt, offset by principal repayments and repurchases of long-term debt of $1,176.3 million. Debt issuance costs were $36.7 million for the year ended December 31, 2013 compared to $16.4 million in 2012. Common stock repurchases consist of shares repurchased from employees to satisfy the employees’ minimum statutory tax withholdings upon the vesting of restricted stock and performance shares and used cash of $1.4 million in 2013 compared to $7.5 million in 2012.
Credit Agreement and Long-term Debt
As of December 31, 2014 and 2013, our total long-term indebtedness consisted of the following (in thousands):
December 31, 2014 | December 31, 2013 | ||||||
2.375% convertible senior notes due 2015 | $ | 44,458 | $ | 65,889 | |||
3.25% convertible senior notes due 2015 | 109,201 | 128,182 | |||||
3.75% convertible senior notes due 2017 | 345,000 | 345,000 | |||||
9.75% senior notes due 2018 | 500,000 | 500,000 | |||||
6.00% senior notes due 2019 | 800,000 | 800,000 | |||||
4.875% convertible senior notes due 2020 | 345,000 | 345,000 | |||||
7.50% senior secured second lien notes due 2020 | 500,000 | — | |||||
Term loan due 2020 | 614,062 | 620,313 | |||||
6.25% senior notes due 2021 | 700,000 | 700,000 | |||||
Other | 61,344 | 73,305 | |||||
Debt discount, net | (121,295 | ) | (150,086 | ) | |||
Total long-term debt | 3,897,770 | 3,427,603 | |||||
Less current portion | (178,251 | ) | (29,169 | ) | |||
Long-term debt, net of current portion | $ | 3,719,519 | $ | 3,398,434 | |||
Fifth Amended and Restated Credit Agreement
On September 24, 2014, we entered into an amendment and restatement of the Fourth Amended and Restated Credit Agreement (as amended and restated, the “Fifth Amended and Restated Credit Agreement” or the “Credit Agreement”). The amendment, among other things:
• | extends the maturity of approximately 75% of previous revolving credit facility commitments (the “Extended Maturity Revolver Facility Commitments”) from June 30, 2016 to September 30, 2017, with the remaining approximately 25%, or $276.0 million, of revolving credit facility (the “Revolving Facility”) commitments expiring, as previously, on June 30, 2016; |
• | reduces the amount of the Extended Maturity Revolver Facility Commitments by 25% to $618.0 million and provides for an increase in the interest rate payable to holders of the Extended Maturity Revolver Facility Commitments on borrowings under the revolving credit facility, effective as of the date of the amendment; and |
• | makes other changes to the Fourth Amended and Restated Credit Agreement, including eliminating the interest coverage financial covenant previously scheduled to apply starting in the first quarter of 2016, extending the minimum liquidity covenant through September 30, 2017, accelerating the date by which certain real property is added as collateral and adding provisions to facilitate future extensions and refinancings under the Fifth Amended and Restated Credit Agreement. |
Mandatory Prepayments. The Credit Agreement requires us to prepay outstanding loans, subject to certain exceptions, with (i) 100% of the net cash proceeds (including the fair market value of noncash proceeds) from certain asset sales and condemnation events in excess of the greater of $1.5 billion and 15% of consolidated tangible assets as of the end of each fiscal year, (ii) 100% of the aggregate gross proceeds (including the fair market value of noncash proceeds) from certain Intracompany Disposals (as defined in the Credit Agreement) exceeding $500.0 million during the term of the Credit Agreement and (iii) 100% of the net cash proceeds from any incurrence or issuance of certain debt, other than debt permitted under the Credit Agreement. Mandatory prepayments will be applied first to the Term Loan Facility and thereafter to reductions of the commitments under the Revolving Facility. If at any time the aggregate amount of outstanding revolving loans, swingline loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Revolving Facility exceeds the commitment amount, we will be required to repay outstanding loans or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.
Voluntary Prepayments; Reductions in Commitments. We may prepay, in whole or in part, amounts outstanding under the Credit Agreement, with prior notice but without premium or penalty (other than customary “breakage” costs with respect to LIBO rate loans) and in certain minimum amounts. We may also repurchase loans outstanding under the Term Loan Facility pursuant to standard reverse Dutch auction and open market purchase provisions, subject to certain limitations and exceptions. We may make voluntary reductions to the unutilized commitments of the Revolving Facility from time to time without premium or penalty.
Guarantees and Collateral. All obligations under the Credit Agreement are unconditionally guaranteed by certain of our existing wholly owned domestic subsidiaries, and are required to be guaranteed by certain of our future wholly owned domestic subsidiaries. All obligations under the Credit Agreement and certain hedging and cash management obligations with lenders and affiliates of lenders thereunder are secured, subject to certain exceptions, by substantially all of our assets and the assets of our subsidiary guarantors, in each case subject to exceptions, thresholds and limitations.
Certain Covenants and Events of Default. The Credit Agreement contains a number of negative covenants that, among other things and subject to certain exceptions, restrict our ability and the ability of our subsidiaries to:
• | make investments, loans and acquisitions; |
• | incur additional indebtedness; |
• | incur liens; |
• | consolidate or merge; |
• | sell assets, including capital stock of its subsidiaries; |
• | pay dividends on its capital stock or redeem, repurchase or retire its capital stock or certain of its other indebtedness; |
• | engage in transactions with its affiliates; |
• | materially alter the business it conducts; and |
• | create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries. |
The Credit Agreement also contains customary representations and warranties, affirmative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $25.0 million.
Fees. In addition to paying interest on outstanding principal under the Credit Agreement, we are required to pay a commitment fee to the lenders under the Revolving Facility in respect of the unutilized commitments thereunder. The initial commitment fee is 0.50% per annum and is subject to adjustment each fiscal quarter based on our consolidated leverage ratio for the preceding fiscal quarter. We must also pay customary letter of credit fees and agency fees.
As of December 31, 2014, the carrying value of the Term Loan Facility was $611.7 million, net of debt discount of $2.4 million, with $6.3 million classified as current portion of long-term debt. As of December 31, 2013, the carrying value of the Term Loan Facility was $617.5 million, net of debt discount of $2.9 million, with $6.3 million classified as current portion of long-term debt. There were no borrowings outstanding under the Revolving Facility as of December 31, 2014 or 2013. Letters of credit outstanding at December 31, 2014 and 2013 under the Revolving Facility were $177.2 million and $134.0 million, respectively.
Fourth Amended and Restated Credit Agreement
On May 22, 2013, we entered into the Fourth Amended and Restated Credit Agreement, which was subsequently amended in October 2013 and May 2014, with the lenders party thereto, the issuing banks party thereto, Citicorp North America, Inc., as administrative agent and as collateral agent, and all other parties thereto from time to time. The Fourth Amended and Restated Credit Agreement amended and restated the Third Amended and Restated Credit Agreement.
The Fourth Amended and Restated Credit Agreement included a $625.0 million senior secured Term Loan Facility, which matures on May 22, 2020, amortizes in quarterly installments at a rate of 1.0% per year and bears an interest rate at the Company’s option of either LIBOR plus a margin of 2.75% (subject to a LIBOR floor of 0.75%) or an Alternate Base Rate (“ABR”) plus a margin of 1.75% (subject to an ABR floor of 1.75%). The proceeds of the Term Loan Facility were used to repay the entire $525.0 million aggregate principal amount of our outstanding obligations under our existing term loan A facility under the Third Amended and Restated Credit Agreement, which would have matured on June 30, 2016, with the balance used to pay fees and expenses and for general corporate purposes.
The principal changes to the Third Amended and Restated Credit Agreement effected by the Fourth Amended and Restated Credit Agreement included increasing the previous revolving facility from $1.0 billion to $1.1 billion through its maturity date of June 30, 2016 and modifying the financial covenants by:
• | modifying the interest coverage ratio covenant from 2.25 to 1.50 through 2013, from 2.50 to 1.50 during 2014 and from 2.50 to 2.00 from 2015 through the maturity date of the revolving credit facility (June 30, 2016); |
• | eliminating the leverage ratio covenant; |
• | extending the applicability of the senior secured leverage ratio of 2.50 through the maturity date of the revolving credit facility; and |
• | reducing the minimum liquidity covenant, which applied until December 31, 2014, from $500.0 million to $300.0 million; |
Additionally, the terms of the Fourth Amended and Restated Credit Agreement (i) further restricted our ability and that of our subsidiaries to make investments, loans and acquisitions, incur additional indebtedness, and pay dividends on our capital stock or redeem, repurchase or retire our capital stock; and (ii) require us to provide additional collateral to secure the obligations under the Fourth Amended and Restated Credit Agreement, consisting of receivables previously securing the former accounts receivable facility.
On October 2, 2013, we entered into an amendment (“Amendment No. 1”) to the Fourth Amended and Restated Credit Agreement which eliminated the interest coverage ratio through the end of 2014, and modified the interest coverage ratio from 2.00 to 1.25 during 2015 and from 2.00 to 1.50 during the first two quarters of 2016.
On May 7, 2014, we entered into an amendment (“Amendment No. 2”) to the Fourth Amended and Restated Credit Agreement. The principal changes to the Fourth Amended and Restated Credit Agreement effected by Amendment No. 2 include the following: suspending the interest coverage ratio until the first quarter of 2016, replacing the senior secured leverage ratio with a first lien senior secured leverage ratio, reducing the size of the restricted payment basket, extending the minimum liquidity covenant through the end of 2015, increasing by $400 million the amount of additional debt permitted to be incurred either pursuant to the “accordion” feature of the Fourth Amended and Restated Credit Agreement or a notes offering, and requiring the first $800 million of additional debt incurred pursuant to the accordion or a notes offering (including the debt represented by the 7.50% senior secured second lien notes due 2020 issued in May 2014) to be unsecured debt or second lien secured debt.
Indenture and New Senior Secured Second Lien Notes
On May 20, 2014, Alpha, certain of Alpha’s wholly owned domestic subsidiaries, as guarantors (collectively, the “Guarantors”), and Wilmington Trust, National Association (“Wilmington Trust”), as trustee, entered into an indenture (the “Indenture”) governing Alpha’s newly issued 7.5% senior secured second lien notes due 2020 (the “New Secured Notes”). The New Secured Notes pay interest semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2015, at a rate of 7.50% per year, and will mature on August 1, 2020.
The New Secured Notes are guaranteed by each of Alpha’s current and future wholly owned domestic subsidiaries that guarantee Alpha’s obligations under the Credit Agreement. The New Secured Notes are Alpha’s senior secured obligations, ranking equal in right of payment with all of Alpha’s existing and future indebtedness that is not subordinated in right of payment to the New Secured Notes; secured by a second priority lien on Alpha’s assets that secure Alpha’s indebtedness under the Credit Agreement, and thus effectively junior to Alpha’s indebtedness that is permitted to be secured by first priority liens on the collateral securing the New Secured Notes, including indebtedness under the Credit Agreement, and to indebtedness secured by assets that are not part of the collateral securing the New Secured Notes, in each case to the extent of the value of the assets securing such indebtedness; senior in right of payment to all of Alpha’s future debt that is subordinated in right of payment to the New Secured Notes; and structurally subordinated to any existing and future indebtedness and other liabilities of any non-guarantor subsidiary.
Alpha may redeem the New Secured Notes, in whole or in part, at any time prior to August 1, 2016, at a price equal to 100% of the aggregate principal amount of the New Secured Notes plus a “make-whole” premium, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, Alpha may redeem up to 35% of the aggregate principal amount of the New Secured Notes with the net cash proceeds from certain equity offerings, at any time prior to August 1, 2016 at a redemption price equal to 107.5% of the aggregate principal amount of the New Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date if at least 65% of the aggregate principal amount of New Secured Notes issued under the Indenture remains outstanding after the redemption. Alpha may also redeem the New Secured Notes, in whole or in part, at any time on or after August 1, 2016, at the redemption prices specified in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date.
Upon the occurrence of a change of control repurchase event with respect to the New Secured Notes, unless Alpha has exercised its right to redeem the New Secured Notes, Alpha will be required to offer to repurchase each holder’s New Secured Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
The Indenture contains covenants that limit, among other things, Alpha’s ability to:
• | incur, or permit its subsidiaries to incur, additional debt; |
• | issue, or permit its subsidiaries to issue, certain types of stock; |
• | pay dividends on its or its subsidiaries’ capital stock or repurchase its capital stock; |
• | make certain investments; |
• | enter into certain types of transactions with affiliates; |
• | incur liens on certain assets to secure debt; |
• | limit dividends or other payments by its restricted subsidiaries to it and its other restricted subsidiaries; |
• | consolidate, merge or sell all or substantially all of its assets; and |
• | make certain payments on its or its subsidiaries’ subordinated debt. |
These covenants are subject to a number of important qualifications and exceptions. These covenants may not apply at any time after the New Secured Notes are assigned a credit grade rating of at least BB+ (stable) from Standard & Poor’s Ratings Services and of at least Ba1 (stable) from Moody’s Investors Service, Inc.
Accounts Receivable Securitization Facility
On September 19, 2014, ANR Second Receivables Funding, LLC (“ANR Second Receivables Funding”), our special purpose, indirect subsidiary, entered into a Credit and Security Agreement (the “A/R Facility”) with General Electric Capital Corporation, as a lender, a swing line lender, an LC Lender (as defined therein) and the administrative agent, and Webster Business Credit Corporation, as an LC Lender and as a Lender, and certain financial institutions from time to time parties thereto, as Lenders (as defined therein). Under the A/R Facility, ANR Second Receivables Funding may borrow cash from the Lenders or cause the LC Lenders to issue letters of credit, on a revolving basis, in an amount up to $200.0 million, subject to certain limitations set forth therein. The funding pursuant to the A/R Facility is available through the earlier of September 19, 2018 and 90 days prior to the earliest scheduled maturity date of: (1) our Fourth Amended and Restated Credit Agreement with Citicorp North America, Inc. and all other parties thereto from time to time, as such maturity date may be amended from time to time in a manner that meets the requirements set forth in the A/R Facility (which requirements were met by the amendment described above under the caption “Fifth Amended and Restated Credit Agreement”), (2) any successor to, or replacement of, the Fourth Amended and Restated Credit Agreement meeting the requirements set forth in the A/R Facility, or (3) the earliest scheduled maturity date of any obligations for Indebtedness (as defined therein) (a) maturing after December 31, 2015, and (b) having an outstanding principal balance in excess of $100.0 million on such 90th day.
The obligations of the Lenders to make cash advances and of the LC Lenders to issue letters of credit pursuant to the A/R Facility are secured by certain trade receivables owned by ANR Second Receivables Funding. The receivables are originated by Alpha Coal Sales Co., LLC (“Alpha Coal Sales”), our indirect subsidiary and the sole member of ANR Second Receivables Funding, as sales agent on behalf of certain of our operating subsidiaries, and arise from the fulfillment of customer contracts entered into by Alpha Coal Sales. The A/R Facility provides that a specified percentage of billed and unbilled receivables meeting certain criteria are eligible to be counted for purposes of determining the amount of financing available to ANR Second Receivables Funding, subject to customary limits and reserves, including limits and reserves based on a dilution rate (calculated using factors including whether any portion of the receivable was reduced, canceled or written-off or is subject to dispute, offset, counterclaim or other defense), a loss rate and certain obligor and payment characteristics of the receivables. On each transfer date during the term of the A/R Facility, Alpha Coal Sales will sell and/or contribute receivables to ANR Second Receivables Funding. Alpha Coal Sales will service those receivables on behalf of ANR Second Receivables Funding and may be required to repurchase receivables in the event of a breach of certain representations or warranties made pursuant to the A/R Facility.
The Lenders and the LC Lenders will be entitled to receive interest payments with respect to the outstanding amount of each advance (including letter of credit participations) made or maintained under the A/R Facility by each Lender or LC Lender during each applicable settlement period. In addition, ANR Second Receivables Funding will pay General Electric Capital Corporation a fee as administrative agent. Certain other fees and expenses are payable to the participating financial institutions. Collections on the receivables, as well as amounts required to remain on deposit in certain accounts under the A/R Facility, will be available to pay the interest, fees and expenses, as well as to collateralize the letters of credit, if required under the A/R Facility, and repay principal on cash advances.
The A/R Facility and related documents contain affirmative, negative and financial covenants customary for financings of this type, including restrictions related to, among other things, liens, payments, merger or consolidation and amendments to the contracts pursuant to which the receivables were originated. The A/R Facility includes termination events customary for facilities of this type (with typical grace periods, where applicable), including, among other things, breaches of covenants,
inaccuracies of representations and warranties, bankruptcy and insolvency events, changes in the rate of default, delinquency or dilution of the receivables above specified levels, failure to comply with a springing fixed charge coverage ratio, occurrence of a change of control and existence of material judgments. A termination event would permit the administrative agent to terminate the program and enforce any and all rights under the A/R Facility and certain agreements related thereto. Additionally, the A/R Facility contains cross-default provisions, which would allow the administrative agent to terminate the program in the event of non-payment of other material indebtedness when due, and any other event which results in the acceleration of the maturity of material indebtedness.
Although the Lenders and the LC Lenders bear the risk of non-payment by any obligor of the receivables, we have agreed to guarantee the performance of our subsidiaries, other than ANR Second Receivables Funding, under the A/R Facility and agreements related to the A/R Facility for the benefit of the Lenders and the LC Lenders.
As of December 31, 2014, letters of credit outstanding were $35.0 million, no cash borrowing transactions had taken place and $165.0 million was available under the A/R Facility.
Convertible Senior Notes due 2017 and 2020
In May 2013, we issued $345.0 million principal amount of 3.75% Convertible Notes and in December 2013, we issued $345.0 million principal amount of 4.875% Convertible Notes (the 4.875% Convertible Notes together with the 3.75% Convertible Notes, the “Convertible Notes”). The 3.75% Convertible Notes bear interest at a rate of 3.75% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, and will mature on December 15, 2017. The proceeds from the 3.75% Convertible Notes, together with cash on hand, were used to repurchase approximately $225.8 million of our outstanding 3.25% Convertible Notes and approximately $181.4 million of our outstanding 2.375% Convertible Notes. The 4.875% Convertible Notes bear interest at a rate of 4.875% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, and will mature on December 15, 2020. The proceeds from the 4.875% Convertible Notes were used to repurchase approximately $177.1 million of our outstanding 3.25% Convertible Notes and approximately $36.8 million of our outstanding 2.375% Convertible Notes. The Company recorded a loss on early extinguishment of debt of $7.4 million, primarily related to the write off of outstanding debt discounts.
We separately account for the liability and equity components of the Convertible Notes under Accounting Standards Codification (“ASC”) 470-20, which requires issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion to separately account for the liability and equity components in a manner reflective of the issuers’ nonconvertible debt borrowing rate. The related deferred loan costs and discount are being amortized and accreted, respectively, over the respective terms of the Convertible Notes, and provide for effective interest rates of 8.49% in the case of the 3.75% Convertible Notes and 9.48% in the case of the 4.875% Convertible Notes. As of December 31, 2014, the carrying amounts of the debt components were $302.4 million in the case of the 3.75% Convertible Notes and $272.9 million in the case of the 4.875% Convertible Notes, and the unamortized debt discounts were $42.6 million in the case of the 3.75% Convertible Notes and $72.1 million in the case of the 4.875% Convertible Notes. As of December 31, 2013, the carrying amounts of the debt components were $290.2 million in the case of the 3.75% Convertible Notes and $264.3 million in the case of the 4.875% Convertible Notes, and the unamortized debt discounts were $54.8 million in the case of the 3.75% Convertible Notes and $80.7 million in the case of the 4.875% Convertible Notes.
The Convertible Notes are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured indebtedness. The Convertible Notes are guaranteed on a senior unsecured basis by each of our current and future wholly owned domestic subsidiaries that guarantee our obligations under our 9.75% senior notes due 2018. The Convertible Notes are effectively subordinated to all of our existing and future secured indebtedness and all existing and future liabilities of our non-guarantor subsidiaries, including trade payables.
The Convertible Notes are convertible in certain circumstances and in specified periods at initial conversion rates of 99.0589 shares of common stock per $1,000 of principal amount of notes in the case of the 3.75% Convertible Notes and 107.0893 shares of common stock per $1,000 of principal amount of notes in the case of the 4.875% Convertible Notes, subject to adjustment upon the occurrence of certain events set forth in the fourth and fifth supplemental indentures (the “Supplemental Indentures”) to the indenture dated June 1, 2011 (the “Base Indenture” and, together with the Supplemental Indentures, the “Convertible Notes Indentures”) governing the Convertible Notes, equivalent to an initial conversion price of approximately $10.10 per share of common stock in the case of the 3.75% Convertible Notes and $9.34 per share of common stock in the case of the 4.875% Convertible Notes. Upon conversion, the Convertible Notes may be settled, at our election, in cash, shares of our common stock or a combination thereof. Our intention is to settle all conversions using a combination of cash and shares.
The Convertible Notes Indentures contain customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee, Union Bank of California, or the holders of not less than 25% in aggregate principal amount of the Convertible Notes then outstanding may declare the principal of the Convertible Notes and any accrued and unpaid interest thereon immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to us, the principal amount of the Convertible Notes together with any accrued and unpaid interest thereon will automatically become due and be immediately payable.
The Convertible Notes were not convertible as of December 31, 2014 or 2013 and, as a result, have been classified as long-term debt as of December 31, 2014.
Notes Indenture and the Senior Notes
On June 1, 2011, we and certain of our wholly owned domestic subsidiaries (collectively, the “Alpha Guarantors”) and Union Bank, N.A., as trustee, entered into an indenture (the “Base Indenture”) and a first supplemental indenture (the “First Supplemental Indenture” and, together with the Base Indenture, the “Notes Indenture”) governing our newly issued 6.00% senior notes due 2019 (the “2019 Notes”) and 6.25% senior notes due 2021 (the “2021 Notes”).
On June 1, 2011, in connection with the Massey Acquisition, we, the Alpha Guarantors, Massey, and certain wholly owned subsidiaries of Massey (the “Massey Guarantors” and together with the Alpha Guarantors the “Guarantors”), and Union Bank, N.A., as trustee, entered into a supplemental indenture (the “Second Supplemental Indenture”) to the Notes Indenture pursuant to which Massey and certain wholly owned subsidiaries of Massey agreed to become additional guarantors for the 2019 Notes and 2021 Notes.
On October 11, 2012, we, the Alpha Guarantors and Union Bank, N.A., as trustee, entered into a supplemental indenture (the “Third Supplemental Indenture”) to the Notes Indenture governing our newly issued 9.75% senior notes due 2018 (the “2018 Notes” and, together with the 2019 Notes and the 2021 Notes, the “Senior Notes”).
The 2018 Notes bear interest at a rate of 9.75% per annum, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2013, and will mature on April 15, 2018. The 2019 Notes bear interest at a rate of 6.00% per annum, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2011, and will mature on June 1, 2019. The 2021 Notes bear interest at a rate of 6.25% per annum, payable semi-annually on June 1 and December 1 of each year, beginning on December 1, 2011, and will mature on June 1, 2021.
As of December 31, 2014, the carrying values of the 2018 Notes, 2019 Notes and 2021 Notes were $497.8 million, net of discount of $2.2 million, $800.0 million and $700.0 million, respectively. As of December 31, 2013, the carrying values of the 2018 Notes, 2019 Notes and 2021 Notes were $496.5 million, net of discount of $3.5 million, $800.0 million and $700.0 million, respectively.
We may redeem the 2018 Notes, in whole or in part, at any time prior to maturity, at a price equal to 100.000% of the aggregate principal amount of the 2018 Notes plus a “make-whole” premium, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the 2018 Notes with the net cash proceeds from certain equity offerings, at any time prior to October 15, 2015, at a redemption price equal to 109.75% of the aggregate principal amount of the 2018 Notes, plus accrued and unpaid interest, if any, to, but not including the applicable redemption date, if at least 65% of the aggregate principal amount of the 2018 Notes originally issued under the Notes Indenture remains outstanding immediately after the redemption and the redemption occurs within 180 days of the date of the closing of such equity offering.
We may redeem the 2019 Notes, in whole or in part, at any time during the twelve months commencing June 1, 2014, at 103.000% of the aggregate principal amount of the 2019 Notes, at any time during the twelve months commencing June 1, 2015, at 101.500% of the aggregate principal amount of the 2019 Notes, and at any time after June 1, 2016 at 100.000% of the aggregate principal amount of the 2019 Notes, in each case plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date.
We may redeem the 2021 Notes, in whole or in part, at any time prior to June 1, 2016, at a price equal to 100.000% of the aggregate principal amount of the 2021 Notes plus a “make-whole” premium, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. We may redeem the 2021 Notes, in whole or in part, at any time during the twelve months commencing June 1, 2016, at 103.125% of the aggregate principal amount of the 2021 Notes, at any time during the twelve months commencing June 1, 2017, at 102.083% of the aggregate principal amount of the 2021 Notes, at any time during the twelve months commencing June 1, 2018, at 101.042% of the aggregate principal amount of the 2021 Notes, and at
any time after June 1, 2019, at 100.000% of the aggregate principal amount of the 2021 Notes, in each case plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, we may redeem up to 35% of the aggregate principal amount of the 2021 Notes with the net cash proceeds from certain equity offerings, at any time prior to June 1, 2016, at a redemption price equal to 106.250% of the aggregate principal amount of the 2021 Notes, plus accrued and unpaid interest, if any, to, but not including the applicable redemption date, provided that at least 65% of the aggregate principal amount of the 2021 Notes originally issued under the Notes Indenture remains outstanding after the redemption and the redemption occurs within 180 days of the date of the closing of such equity offering.
Upon the occurrence of a change in control repurchase event with respect to any of the series of the Senior Notes, unless we have exercised our right to redeem those Senior Notes, we will be required to offer to repurchase each holder’s Senior Notes of such series at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of repurchase.
The Notes Indenture contains covenants that limit, among other things, our ability to:
•incur, or permit its subsidiaries to incur, additional debt;
•issue, or permit its subsidiaries to issue, certain types of stock;
•pay dividends on our or our subsidiaries’ capital stock or repurchase our common stock;
•make certain investments;
•enter into certain types of transactions with affiliates;
•incur liens on certain assets to secure debt;
•limit dividends or other payments by its restricted subsidiaries to us and our other restricted subsidiaries;
•consolidate, merge or sell all or substantially all of our assets; and
•make certain payments on our or our subsidiaries’ subordinated debt.
These covenants are subject to a number of important qualifications and exceptions. These covenants may not apply at any time after the Senior Notes are assigned a credit grade rating of at least BB+ (stable) from Standard & Poor’s Ratings Services and of at least Ba1 (stable) from Moody’s Investor Service, Inc.
3.25% Convertible Senior Notes due 2015
As a result of the Massey Acquisition, we became a guarantor of Massey’s 3.25% Convertible Notes, with aggregate principal outstanding at June 1, 2011 of $659.1 million. The 3.25% Convertible Notes bear interest at a rate of 3.25% per annum, payable semi-annually in arrears on August 1 and February 1 of each year. The 3.25% Convertible Notes will mature on August 1, 2015, unless earlier repurchased by us or converted. The 3.25% Convertible Notes had a fair value of $730.9 million at the acquisition date. We account for the 3.25% Convertible Notes under ASC 470-20 as described above. As of December 31, 2014, the carrying amount of the debt was $108.2 million, net of debt discount of $1.0 million. As of December 31, 2013, the carrying amount of the debt was $125.1 million, net of debt discount of $3.0 million. As of December 31, 2014 and 2013, the carrying amount of the equity component totaled $110.4 million. The debt discount is being accreted over the four-year term of the 3.25% Convertible Notes, and provides for an effective interest rate of 4.21%.
The 3.25% Convertible Notes are senior unsecured obligations and rank equally with all of our existing and future senior unsecured indebtedness. The 3.25% Convertible Notes are guaranteed on a senior unsecured basis by Massey’s subsidiaries (which are among our subsidiaries), other than certain minor subsidiaries of Massey. The 3.25% Convertible Notes are effectively subordinated to all our existing and future secured indebtedness and all existing and future liabilities of our non-guarantor subsidiaries, including trade payables. The 3.25% Convertible Notes are convertible in certain circumstances and beginning on February 1, 2015 at a conversion rate, subject to adjustment, of the value of 11.4560 shares of common stock per $1,000 principal amount of 3.25% Convertible Notes. From and after the effective date of the Massey Acquisition, the consideration deliverable upon conversion of the 3.25% Convertible Notes ceased to be based upon Massey common stock and instead became based upon Reference Property (as defined in the indenture governing the 3.25% Convertible Notes, (the “3.25% Convertible Notes Indenture”)) consisting of 1.025 shares of our common stock (subject to adjustment upon the occurrence of certain events set forth in the 3.25% Convertible Notes Indenture) plus $10.00 in cash per share of Massey common stock. Upon conversion of the 3.25% Convertible Notes, holders will receive cash up to the principal amount of the notes being converted, and any excess conversion value will be delivered in cash, Reference Property, or a combination thereof, at our election.
The 3.25% Convertible Notes Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the 3.25% Convertible Notes then outstanding may declare the principal of the 3.25% Convertible Notes and any accrued and unpaid
interest immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to the Company, the principal amount of the 3.25% Convertible Notes together with any accrued and unpaid interest thereon will automatically become due and immediately payable.
The 3.25% Convertible Notes were not convertible as of December 31, 2014 or 2013 and are classified as short-term debt as of December 31, 2014. The 3.25% Convertible Notes became convertible on February 1, 2015 and no conversions have taken place.
2.375% Convertible Senior Notes due 2015
As of December 31, 2014 and 2013, we had $44.5 million and $65.9 million aggregate principal amount of 2.375% convertible senior notes due April 15, 2015 (the “2.375% Convertible Notes”). The 2.375% Convertible Notes bear interest at a rate of 2.375% per annum, payable semi-annually in arrears on April 15 and October 15 of each year, and will mature on April 15, 2015, unless previously repurchased by us or converted. We separately account for the liability and equity components of its 2.375% Convertible Notes under ASC 470-20 as described above. The related deferred loan costs and discount are being amortized and accreted, respectively, over the seven-year term of the 2.375% Convertible Notes, and provide for an effective interest rate of 8.64%. As of December 31, 2014 and 2013, the carrying amounts of the debt component were $43.5 million and $60.6 million, respectively. As of December 31, 2014 and 2013, the unamortized debt discount was $1.0 million and $5.2 million, respectively. As of December 31, 2014 and 2013, the carrying amount of the equity component was $69.9 million.
The 2.375% Convertible Notes are our senior unsecured obligations and rank equally with all of our existing and future senior unsecured indebtedness. The 2.375% Convertible Notes are effectively subordinated to all of our existing and future secured indebtedness and all existing and future liabilities of our subsidiaries, including trade payables. The 2.375% Convertible Notes are convertible in certain circumstances and beginning on January 15, 2015 at an initial conversion rate of 18.2962 shares of common stock per $1,000 principal amount of 2.375% Convertible Notes, subject to adjustment upon the occurrence of certain events set forth in the indenture governing the 2.375% Convertible Notes (the “2.375% Convertible Notes Indenture”). Upon conversion of the 2.375% Convertible Notes, holders will receive cash up to the principal amount of the notes to be converted, and any excess conversion value will be delivered in cash, shares of common stock or a combination thereof, at our election.
The 2.375% Convertible Notes Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee, Union Bank of California, or the holders of not less than 25% in aggregate principal amount of the 2.375% Convertible Notes then outstanding may declare the principal of 2.375% Convertible Notes and any accrued and unpaid interest thereon immediately due and payable. In the case of certain events of bankruptcy, insolvency or reorganization relating to us, the principal amount of the 2.375% Convertible Notes together with any accrued and unpaid interest thereon will automatically become due and be immediately payable.
The 2.375% Convertible Notes were not convertible as of December 31, 2014 and 2013 and are classified as short-term debt as of December 31, 2014. The 2.375% Convertible Notes became convertible on January 15, 2015 and no conversions have taken place.
Repurchases of 2.375% and 3.25% Convertible Senior Notes due 2015
During the year ended December 31, 2014, we completed the repurchase of approximately $21.4 million of our outstanding 2.375% Convertible Notes and approximately $19.0 million of our outstanding 3.25% Convertible Notes, each of which are due in 2015, and recorded a loss on early extinguishment of debt of approximately $2.0 million. During the year ended 2013, we repurchased approximately $3.4 million of our outstanding 2.375% Convertible Notes and approximately $5.1 million of our outstanding 3.25% Convertible Notes and recorded a gain on early extinguishment of debt of approximately $0.2 million. On October 25, 2012, we completed a cash tender offer for a portion of the outstanding 3.25% Convertible Notes. We paid $115.9 million to redeem $122.5 million of the 3.25% Convertible Notes and recognized a gain on early extinguishment of debt of $0.8 million.
Capital Leases
Alpha’s liability for capital leases as of December 31, 2014 totaled $51.4 million, with $15.7 million reported as current portion of long-term debt compared to $58.9 million, with $17.5 million reported as current portion of long-term debt as of December 31, 2013.
Analysis of Material Debt Covenants
We were in compliance with all covenants under the Fifth Amended and Restated Credit Agreement and the indentures governing our notes as of December 31, 2014. Operating results below current levels, or at current levels for an extended period of time, or other adverse factors could result in our being unable to comply with these covenants. A breach of the covenants in the Fifth Amended and Restated Credit Agreement or the indentures governing our notes, including the financial covenants under the Fifth Amended and Restated Credit Agreement that measure ratios based on Adjusted EBITDA, could result in a default under the Fifth Amended and Restated Credit Agreement or the indentures governing our notes and the respective lenders and note holders could elect to declare all amounts borrowed due and payable. Any acceleration under either the Fifth Amended and Restated Credit Agreement or one of the indentures governing our notes would also result in a default under the other indentures governing our notes. Additionally, under the Fifth Amended and Restated Credit Agreement and the indentures governing our notes our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is also tied to ratios based on Adjusted EBITDA.
Actual covenant levels and required levels set forth in our Fifth Amended and Restated Credit Agreement are:
Actual Covenant Levels; Period Ended December 31, 2014 | Required Covenant Levels | ||||||
Maximum total senior secured debt less unrestricted cash to Adjusted EBITDA ratio (1) | (0.15 | ) | 2.5x | ||||
Minimum consolidated liquidity (in thousands) | $ | 2,028,106 | $ | 300,000 | |||
(1) Unrestricted cash is limited to a maximum of $700.0 million of cash, cash equivalents and marketable securities that qualify as permitted investments under the terms of our Fifth Amended and Restated Credit Agreement. The Company's shares of Rice Energy do not qualify as permitted investments.
Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash items, non-recurring items, and other adjustments permitted in calculating covenant compliance under the Fifth Amended and Restated Credit Agreement. EBITDA, a measure used by management to evaluate its ongoing operations for internal planning and forecasting purposes, is defined as net income (loss) from operations plus interest expense, income tax expense, amortization of acquired intangibles, net and depreciation, depletion and amortization, less interest income and income tax benefit. EBITDA is a non-GAAP financial measure and does not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. The amounts shown for EBITDA as presented may differ from amounts calculated and may not be comparable to other similarly titled measures used by other companies.
Certain non-cash items that may adjust EBITDA in the compliance calculation are: (a) accretion on asset retirement obligations; (b) amortization of intangibles; (c) any long-term incentive plan accruals or any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options or other rights to officers, directors and employees; and (d) gains or losses associated with the change in fair value of derivative instruments. Certain non-recurring items that may adjust EBITDA in the compliance calculation are: (a) business optimization expenses or other restructuring charges; (b) non-cash impairment charges; (c) certain non-cash expenses or charges arising as a result of the application of acquisition accounting; (d) non-cash charges associated with loss on early extinguishment of debt; and (e) charges associated with litigation, arbitration, or contract settlements. Certain other items that may adjust EBITDA in the compliance calculation are: (a) after-tax gains or losses from discontinued operations; (b) losses from certain dispositions; (c) franchise taxes; and (d) other non-cash expenses that do not represent an accrual or reserve for future cash expense.
The calculation of Adjusted EBITDA shown below is based on our results of operations in accordance with the Fifth Amended and Restated Credit Agreement and therefore, is different from EBITDA presented elsewhere in this Annual Report on Form 10-K.
Three Months Ended | Twelve Months Ended December 31, 2014 | ||||||||||||||||||
March 31, 2014 | June 30, 2014 | September 30, 2014 | December 31, 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||||
Net loss | $ | (55,698 | ) | $ | (512,627 | ) | $ | (184,975 | ) | $ | (121,661 | ) | $ | (874,961 | ) | ||||
Interest expense | 64,962 | 71,012 | 75,688 | 76,804 | 288,466 | ||||||||||||||
Interest income | (616 | ) | (540 | ) | (574 | ) | (535 | ) | (2,265 | ) | |||||||||
Income tax expense (benefit) | 46,558 | (9,518 | ) | (43,938 | ) | (48,393 | ) | (55,291 | ) | ||||||||||
Amortization of acquired intangibles, net | 9,279 | 9,464 | 9,166 | 11,297 | 39,206 | ||||||||||||||
Depreciation, depletion and amortization | 200,295 | 191,072 | 170,895 | 188,514 | 750,776 | ||||||||||||||
EBITDA | 264,780 | (251,137 | ) | 26,262 | 106,026 | 145,931 | |||||||||||||
Non-cash charges (1) (2) (4) | 29,450 | 322,611 | 29,745 | 31,144 | 412,950 | ||||||||||||||
Other adjustments (1) (3) | 10,070 | 3,477 | 12,057 | 1,749 | 27,353 | ||||||||||||||
Adjusted EBITDA | $ | 304,300 | $ | 74,951 | $ | 68,064 | $ | 138,919 | $ | 586,234 | |||||||||
(1) | Calculated in accordance with the Fifth Amended and Restated Credit Agreement. |
(2) | Includes $308.7 million for the three months ended June 30, 2014 of goodwill impairment described elsewhere in this Annual Report of Form 10-K. |
(3) | Includes $1.2 million for the three months ended December 31, 2014, $11.5 million for the three months ended September 30, 2014, $1.7 million for the three months ended June 30, 2014, and $0.7 million for the three months ended March 31, 2014 of business optimization expenses and other restructuring charges, which corresponds to asset impairment and restructuring charges described elsewhere in this Annual Report of Form 10-K. |
(4) | The three months ended June 30, 2014 have been adjusted from amounts previously reported due to the inadvertent inclusion of certain amounts during those periods. Our covenant compliance was not impacted as a result of these adjustments. |
Consolidated liquidity calculated in accordance with our Fifth Amended and Restated Credit Agreement and is equal to the sum of all unrestricted cash and cash equivalents, certain marketable securities and unused revolving credit facility commitments available under our Fifth Amended and Restated Credit Agreement. At December 31, 2014, we had available liquidity of $2,028.2 million, including cash and cash equivalents of $741.2 million, marketable securities of $405.2 million and $881.8 million of unused revolving credit facility commitments available under our Fifth Amended and Restated Credit Agreement and A/R Facility.
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to certain off-balance sheet arrangements. These arrangements include guarantees, operating leases, indemnifications and financial instruments with off-balance sheet risk, such as bank letters of credit and performance of surety bonds. Liabilities related to these arrangements are not reflected in our Consolidated Balance Sheets. However, the underlying obligations that they secure, such as asset retirement obligations, self-insured workers’ compensation liabilities, royalty obligations and certain retiree medical obligations, are reflected in our Consolidated Balance Sheets.
We are required to provide financial assurance in order to perform the post-mining reclamation required by our mining permits, pay our federal production royalties, pay workers’ compensation claims under self-insured workers’ compensation laws in various states, pay federal black lung benefits, pay retiree health care benefits to certain retired UMWA employees and perform certain other obligations. In order to provide the required financial assurance, we generally use surety bonds and self-bonding for post-mining reclamation and bank letters of credit for self-insured workers’ compensation obligations and UMWA retiree health care obligations. Federal black lung benefits are paid from a dedicated trust fund to which future contributions will be required. Bank letters of credit are also used to collateralize a portion of the surety bonds.
As of December 31, 2014, we had outstanding surety bonds with a total face amount of $399.0 million to secure various obligations and commitments and we had self bonding guarantees in the amount of $676.1 million. In addition, as collateral for various obligations and commitments, we had $177.2 million of letters of credit in place under our Fifth Amended and Restated Credit Agreement and $35.0 million of letters of credit in place under our accounts receivable securitization facility. These
outstanding letters of credit served as collateral for workers’ compensation bonds, reclamation surety bonds, secured UMWA retiree health care obligations, secured workers’ compensation obligations and other miscellaneous obligations. We meet frequently with our surety providers and have discussions with certain providers regarding the extent of and the terms of their participation in the program. These discussions may cause us to shift surety bonds between providers or to alter the terms of their participation in our program. In the event that our self-bonding capacity or additional surety bonds become unavailable or our surety bond providers require additional collateral, we would seek to secure our obligations with letters of credit, cash deposits or other suitable forms of collateral, which would likely require greater use of our Fifth Amended and Restated Credit Agreement and A/R Facility for this purpose. A failure to maintain our self-bonding status, an inability to acquire surety bonds or additional collateral requirements could result from a variety of factors, including a significant decline in our financial position (including as a result of non-cash impairments) or creditworthiness, and restrictions on the availability of collateral under our credit agreements and indentures.
Other
As a regular part of our business, we review opportunities for, and engage in discussions and negotiations concerning, the acquisition or disposition of coal mining and related infrastructure assets and interests in coal mining companies, and acquisitions or dispositions of, or combinations or other strategic transactions involving companies with coal mining or other energy assets. When we believe that these opportunities are consistent with our strategic plans and our acquisition or disposition criteria, we will make bids or proposals and/or enter into letters of intent and other similar agreements. These bids or proposals, which may be binding or nonbinding, are customarily subject to a variety of conditions and usually permit us to terminate the discussions and any related agreement if, among other things, we are not satisfied with the results of due diligence. Any acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both. There can be no assurance that additional financing will be available on terms acceptable to us, or at all.
Contractual Obligations
The following is a summary of our significant contractual obligations as of December 31, 2014 (in thousands):
2015 | 2016-2017 | 2018-2019 | After 2019 | Total | |||||||||||||||
Long-term debt (1) | $ | 159,909 | $ | 357,500 | $ | 1,312,500 | $ | 2,127,813 | $ | 3,957,722 | |||||||||
Capital lease obligations (2) | 15,665 | 16,127 | 696 | 18,874 | 51,362 | ||||||||||||||
Other debt (3) | 4,603 | 5,325 | 53 | — | 9,981 | ||||||||||||||
Equipment purchase commitments | 22,381 | — | — | — | 22,381 | ||||||||||||||
Transportation commitments | 16,478 | 82,501 | 79,050 | 213,056 | 391,085 | ||||||||||||||
Operating leases | 5,282 | 943 | — | — | 6,225 | ||||||||||||||
Minimum royalties | 38,494 | 68,861 | 38,995 | 65,215 | 211,565 | ||||||||||||||
Federal coal lease | 46,076 | — | — | — | 46,076 | ||||||||||||||
Coal purchase commitments | 11,624 | — | — | — | 11,624 | ||||||||||||||
Total | $ | 320,512 | $ | 531,257 | $ | 1,431,294 | $ | 2,424,958 | $ | 4,708,021 | |||||||||
(1) | Long-term debt includes principal amounts due in the years shown. Cash interest payable on these obligations, with interest rates ranging between 2.375% and 9.75% on our loans, would be approximately $232.1 million in 2015, $470.9 million in 2016 to 2017, $347.1 million in 2018 to 2019 and $130.7 million after 2019. |
(2) | Capital lease obligations include principal amounts due in the years shown. Cash interest payable on these obligations with interest rates ranging between 0.15% and 13.86%, would be approximately $3.6 million in 2015, $5.9 million in 2016 to 2017, $5.3 million in 2018 to 2019 and $29.6 million after 2019. |
(3) | Other debt includes principal amounts due in the years shown. Cash interest payable on these obligations, with interest rates ranging between 4.00% and 6.132%, would be approximately $0.7 million in 2015 and $0.3 million from 2016 to 2018. |
Additionally, we have long-term liabilities relating to asset retirement obligations, postretirement, pension, workers’ compensation and black lung benefits. The table below reflects the estimated undiscounted cash flows for these obligations (in thousands):
2015 | 2016-2017 | 2018-2019 | After 2019 | Total | |||||||||||||||
Asset retirement obligation | $ | 102,493 | $ | 143,030 | $ | 199,984 | $ | 1,162,843 | $ | 1,608,350 | |||||||||
Postretirement benefit obligation | 46,678 | 104,981 | 111,955 | 2,121,846 | 2,385,460 | ||||||||||||||
Pension benefit obligation (1) | 29,530 | 62,257 | 67,093 | 1,615,915 | 1,774,795 | ||||||||||||||
Black lung benefit obligation | 13,716 | 17,602 | 18,158 | 339,096 | 388,572 | ||||||||||||||
Workers’ compensation benefit obligation | 11,640 | 18,354 | 15,076 | 104,932 | 150,002 | ||||||||||||||
Total | $ | 204,057 | $ | 346,224 | $ | 412,266 | $ | 5,344,632 | $ | 6,307,179 | |||||||||
(1) | The estimated undiscounted cash flows will be paid from the defined benefit pension plan assets held within the defined benefit pension plan trust. In addition, the estimated undiscounted cash flows disclosed above include cash flows related to our supplemental executive retirement plans, which are paid directly by us, and are $1.6 million in 2015, $3.1 million in 2016 and 2017, $3.1 million in 2018 and 2019 and $30.4 million thereafter. |
We expect to spend between $225 million and $275 million on capital expenditures during 2015.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition, results of operations, liquidity and capital resources is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. GAAP requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other factors and assumptions, including the current economic environment that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis and adjust such estimates and assumptions as facts and circumstances require. Illiquid credit markets, foreign currency and energy markets, and declines in demand for steel products have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results may differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
Reclamation. Our asset retirement obligations arise from the federal Surface Mining Control and Reclamation Act of 1977 and similar state statutes, which require that mine property be restored in accordance with specified standards and an approved reclamation plan. Significant reclamation activities include reclaiming refuse and slurry ponds, reclaiming the pit and support acreage at surface mines, sealing portals at deep mines and the treatment of water. We determine the future cash flows necessary to satisfy our reclamation obligations on a permit-by-permit basis based upon current permit requirements and various estimates and assumptions, including estimates of disturbed acreage, cost estimates, and assumptions regarding productivity. We are also faced with increasingly stringent environmental regulation, much of which is beyond our control, which could increase our costs and materially increase our asset retirement obligations. Estimates of disturbed acreage are determined based on approved mining plans and related engineering data. Cost estimates are based upon third-party costs. Productivity assumptions are based on historical experience with the equipment that is expected to be utilized in the reclamation activities. Our asset retirement obligations are initially recorded at fair value. In order to determine fair value, we use assumptions including a discount rate and third-party margin. Each is discussed further below:
• | Discount Rate. Asset retirement obligations are initially recorded at fair value. We utilize discounted cash flow techniques to estimate the fair value of our obligations. We base our discount rate on the rates of treasury bonds with maturities similar to expected mine lives, adjusted for our credit standing. Our credit standing has deteriorated recently and as a result, the discount rate used to value changes to our asset retirement obligations has increased substantially, resulting in large reductions to our asset retirement obligations. Further downgrades to our credit standing could have a material impact on our asset retirement obligations. |
• | Third-Party Margin. The measurement of an obligation at fair value is based upon the amount a third party would demand to perform the obligation. Because we plan to perform a significant amount of the reclamation activities with internal resources, a third-party margin was added to the estimated costs of these activities. This margin was estimated based upon our historical experience with contractors performing similar types of reclamation activities. The inclusion of this margin will result in a recorded obligation that is greater than our estimates of our cost to perform the reclamation activities. If our cost estimates are accurate, the excess of the recorded obligation over the cost incurred to perform the work will be recorded as a gain at the time that reclamation work is completed. |
30
On at least an annual basis, we review our reclamation liabilities and make necessary adjustments for permit changes as granted by state authorities, additional costs resulting from accelerated mine closures, and revisions to cost estimates and productivity assumptions, to reflect current experience and updated plans. At December 31, 2014, we had recorded asset retirement obligation liabilities of $640.5 million, including amounts reported as current. While the precise amount of these future costs cannot be determined with certainty, as of December 31, 2014, we estimate that the aggregate undiscounted cost of final mine closures is approximately $1.2 billion.
Coal Reserves. There are numerous uncertainties inherent in estimating quantities of economically recoverable coal reserves, many of which are beyond our control. As a result, estimates of economically recoverable coal reserves are by their nature uncertain. Information about our reserves consists of estimates based on engineering, economic and geological data assembled by our internal engineers and geologists and reviewed by a third party consultant. Some of the factors and assumptions that impact economically recoverable reserve estimates include:
• | geological conditions; |
• | historical production from the area compared with production from other producing areas; |
• | the assumed effects of regulations and taxes by governmental agencies; |
• | assumptions governing future prices |
• | current mine plans; and |
• | future operating costs. |
Each of these factors may vary considerably from the assumptions used in estimating reserves. For these reasons, estimates of the economically recoverable quantities of coal attributable to a particular group of properties, and classifications of these reserves based on risk of recovery and estimates of future net cash flows, may vary substantially. Actual production, revenues and expenditures with respect to reserves will likely vary from estimates, and these variances may be material. Variances could affect our projected future revenues and expenditures, as well as the valuation of coal reserves and depletion rates. At December 31, 2014, we had 4.0 billion tons of proven and probable coal reserves, of which 1.9 billion tons were assigned to our active operations and 2.1 billion tons were unassigned.
Postretirement Medical Benefits. We have long-term liabilities for postretirement medical benefit cost obligations. Detailed information related to these liabilities is included in Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Liabilities for postretirement medical benefit costs are not funded. The liability is actuarially determined, and we use various actuarial assumptions, including a discount rate and future health care cost trends, to estimate the costs and obligations for postretirement medical benefit costs. The weighted average discount rate used to determine the net periodic benefit cost for postretirement medical benefits was 4.56% for the year ended December 31, 2014. At December 31, 2014, we had total postretirement medical benefit obligations of $1,064.0 million, including amounts reported as current.
The estimated impact of changes to the healthcare cost trend rate and discount rate is as follows:
Health care cost trend rate | One-Percentage Point Increase | One-Percentage Point Decrease | ||||||
(In thousands) | ||||||||
Effect on total service and interest cost components | $ | 8,250 | $ | (6,646 | ) | |||
Effect on accumulated postretirement benefit obligation | $ | 157,163 | $ | (126,240 | ) | |||
Discount rate | One-Half Percentage Point Increase | One-Half Percentage Point Decrease | ||||||
(In thousands) | ||||||||
Effect on total service and interest cost components | $ | 380 | $ | (683 | ) | |||
Effect on accumulated postretirement benefit obligation | $ | (72,540 | ) | $ | 77,848 | |||
Retirement Plans. We have three non-contributory defined benefit retirement plans (the “Pension Plans”) covering certain of our salaried and non-union hourly employees, all of which are frozen. We also have two unfunded non-qualified Supplemental Executive Retirement Plans (“SERPs” and, together with our Pension Plans, our “Defined Benefit Retirement Plans”) covering certain eligible employees. Benefits are based on either the employee’s compensation prior to retirement or stated amounts for each year of service with us. Funding of the Pension Plans is in accordance with the requirements of ERISA, and our contributions can be deducted for federal income tax purposes. We contributed $6.8 million to our Defined Benefit
Retirement Plans for the year ended December 31, 2014. For the year ended December 31, 2014, we recorded a net periodic benefit credit of $1.8 million for our Defined Benefit Retirement Plans and have recorded net obligations of $219.7 million.
The calculation of the net periodic benefit expense/credit and projected benefit obligation associated with our Defined Benefit Retirement Plans requires the use of a number of assumptions that we deem to be “critical accounting estimates.” These assumptions are used by our independent actuaries to make the underlying calculations. Changes in these assumptions can result in different net periodic benefit expense and liability amounts, and actual experience can differ from the assumptions.
• | The expected long-term rate of return on plan assets is an assumption of the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. We establish the expected long-term rate of return at the beginning of each fiscal year based upon historical returns and projected returns on the underlying mix of invested assets. The Pension Plans investment targets are 38% equity funds, 60% fixed income funds and 2% guarantee insurance contract. Investments are rebalanced on a periodic basis to stay within these targeted guidelines. The long-term rate of return assumption used to determine net periodic benefit expense was 6.75% for the year ended December 31, 2014. The long-term rate of return assumption to be used in 2015 is expected to be 6.50%. Any difference between the actual experience and the assumed experience is deferred as an unrecognized actuarial gain or loss and amortized into expense in future periods. |
• | The discount rate represents our estimate of the interest rate at which pension benefits could be effectively settled. Assumed discount rates are used in the measurement of the projected and accumulated benefit obligations and the service and interest cost components of the net periodic benefit expense. In estimating that rate, we use rates of return on high quality, fixed income investments. The weighted average discount rate used to determine pension expense was 4.93% for the year ended December 31, 2014. The differences resulting from actual versus assumed discount rates are amortized into pension expense/credit over the remaining average life of the active plan participants. A one half percentage-point increase in the discount rate would increase the net periodic pension cost for the year ended December 31, 2014 by approximately $1.0 million and decrease the projected benefit obligation as of December 31, 2014 by approximately $64.9 million. The corresponding effects of a one half percentage-point decrease in the discount rate would decrease the net periodic pension cost for the year ended December 31, 2014 by approximately $0.8 million and increase the projected benefit obligation as of December 31, 2014 by approximately $71.0 million. |
Workers’ Compensation. Individuals who sustain personal injuries due to job-related accidents may be compensated for their disabilities, medical costs, and on some occasions, for the costs of their rehabilitation, and the survivors of workers who suffer fatal injuries may receive compensation for lost financial support. The workers’ compensation laws are administered by state agencies with each state having its own set of rules and regulations regarding compensation that is owed to an employee who is injured in the course of employment. Our obligations are covered through a combination of a self-insurance program and third party insurance policies. We accrue for any self-insured liability by recognizing costs when it is probable that a covered liability has been incurred and the cost can be reasonably estimated. Our estimates of these costs are adjusted based upon actuarial studies. Actual losses may differ from these estimates, which could increase or decrease our costs. At December 31, 2014, we had workers’ compensation obligations of $149.5 million.
Coal Workers’ Pneumoconiosis. We are required by federal and state statutes to provide benefits to employees for awards related to coal workers’ pneumoconiosis disease (black lung). Certain of our subsidiaries are insured for black lung obligations by a third-party insurance provider. Certain subsidiaries in West Virginia are self-insured for state black lung obligations. Certain other subsidiaries are self-insured for black lung benefits and may fund benefit payments through a Section 501(c)(21) tax-exempt trust fund. Provisions are made for estimated benefits based on annual evaluations prepared by independent actuaries. In addition, for our subsidiaries in Wyoming, we participate in a compulsory state-run fund.
Charges are made to operations for self-insured black lung claims, as determined by an independent actuary at the present value of the actuarially computed liability for such benefits over the employee’s applicable term of service. As of December 31, 2014, we had black lung obligations of $158.6 million, which are net of assets of $12.1 million that are held in a tax exempt trust fund.
Income Taxes. We recognize deferred tax assets and liabilities using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating our ability to recover our deferred tax assets within the jurisdiction in which they arise, we consider all available positive and negative evidence, including the scheduled reversals of deferred tax liabilities, projected future taxable income, taxable income available via carryback to prior years, tax planning strategies, and results of recent operations. Due to the significant negative evidence of cumulative losses in recent years, the Company is unable to utilize estimates of future earnings to support the
realization of its deferred tax assets. Therefore, the company is currently relying primarily on income resulting from expected future deferred tax liability reversals, along with carryback opportunities and prudent tax strategies to support the realization of deferred tax assets. We assess the realizability of our deferred tax assets including scheduling the reversal of our deferred tax assets and liabilities to determine the amount of valuation allowance needed. Scheduling the reversal of deferred tax asset and liability balances requires judgment and estimation. We believe the deferred tax liabilities relied upon as future taxable income in our assessment will reverse in the same period and jurisdiction and are of the same character as the temporary differences giving rise to the deferred tax assets that will be realized. If our conclusions change in the future regarding the realization of a portion or all of our net deferred tax assets, we may record a change to the valuation allowance through income tax expense in the period the determination is made, which may have a material impact on our results. As of December 31, 2014, we were in a net deferred tax liability position with tax computed at regular tax rates on the gross temporary differences. Deferred tax liabilities that did not reverse in the same period as deferred tax assets were not used as a future source of taxable income. During the period, valuation allowances were recorded for the portion of deferred tax assets that, in our estimation, are more likely than not to not be realized. If deferred tax assets increase relative to our deferred tax liabilities or circumstances change regarding the reversal patterns of existing deferred balances, we may be required to establish additional valuation allowances. We recorded an increase of $269.1 million to our deferred tax asset valuation allowance during the year ended December 31, 2014, a portion of which was recorded to other comprehensive income. At December 31, 2014, a valuation allowance of $563.1 million has been provided on federal and state net operating loss carryforwards and gross deferred tax assets not expected to provide future tax benefits.
Asset Impairment. U.S. GAAP requires that a long-lived asset group that is held and used should be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. During the year ended December 31, 2014, we determined that indicators of impairment were present for our coal related long-lived asset groups and performed impairment tests as of December 31, September 30, June 1, and February 28, 2014. Testing long-lived assets for impairment after indicators of impairment have been identified is a two-step process. Step one compares the net undiscounted cash flows of an asset group to its carrying value. If the carrying value of an asset group exceeds the net undiscounted cash flows of that asset group, step two is performed whereby the fair value of the asset group is estimated and compared to its carrying amount. The amount of impairment, if any, is equal to the excess of the carrying value of an asset group over its estimated fair value. The amount of impairment, if any, is allocated to the long-lived assets on a pro-rata basis, except that the carrying value of the individual long-lived assets are not reduced below their estimated fair value. Long-lived assets located in a close geographic area are grouped together for purposes of impairment testing when, after considering revenue and cost interdependencies, circumstances indicate the assets are used together to produce future cash flows. Our asset groups generally consist of the assets and applicable liabilities of one or more mines and preparation plants and associated coal reserves for which cash flows are largely independent of cash flows of other mines, preparation plants and associated reserves.
During the year ended December 31, 2014, we determined that the undiscounted cash flows exceeded, by a substantial margin, the carrying values of our long-lived asset groups within our Eastern and Western Coal Operations. For the one coal related long-lived asset group contained in our All Other category, the long-lived assets had previously been written down to their estimated fair value of $1.7 million during the third quarter of 2013. Our estimates of undiscounted cash flows are dependent upon a number of significant management estimates about future performance including sales volumes and prices, costs to produce, income taxes, and capital spending, among others. Changes in any of these assumptions could materially impact the estimated undiscounted cash flows of our asset groups.
Goodwill. Goodwill represents the excess of purchase price over the fair value of the identifiable net assets of acquired companies. Goodwill is not amortized; instead, it is tested for impairment annually as of October 31 of each year, or more frequently if indicators of impairment exist.
We test goodwill for impairment using a fair value approach at the reporting unit level. We perform our goodwill impairment test in two steps. Step one compares the fair value of each reporting unit to its carrying value, including goodwill. If the fair value of a reporting unit determined in step one is lower than its carrying value, we proceed to step two, which compares the carrying value of goodwill to its implied fair value. In estimating the implied fair value of goodwill at a reporting unit, we assign the fair value of the reporting unit to all of the assets and liabilities associated with the reporting unit as if the reporting unit had been acquired in a business combination. Any excess of carrying value of goodwill over its implied fair value at a reporting unit is recorded as impairment.
The valuation methodology utilized in step one to estimate the fair value of the reporting units is based on both a market and income approach and is within the range of fair values yielded under each approach. The income approach is based on a discounted cash flow methodology in which expected future net cash flows are discounted to present value, using an appropriate after-tax weighted average cost of capital (discount rate). The market approach is based on a guideline company
and similar transaction methodology. Under the guideline company approach, certain operating metrics from a selected group of publicly traded guideline companies that have similar operations to the Company’s reporting units are used to estimate the fair value of the reporting units. Under the similar transaction approach, recent merger and acquisition transactions for companies that have similar operations to the Company’s reporting units are used to estimate the fair value of the Company’s reporting units.
The income approach is dependent upon a number of significant management estimates about future performance including sales volumes and prices, costs to produce, income taxes, capital spending, working capital changes and the after-tax weighted average cost of capital. Changes in any of these assumptions could materially impact the estimated fair value of our reporting units. Our forecasts of coal prices generally reflect a long-term outlook of market prices expected to be received for our coal. However, coal prices are influenced by global market conditions beyond our control. If actual coal prices are less than our expectations, it could have a material impact on the fair value of our reporting units. Our forecasts of costs to produce coal are based on our operating forecasts and an assumed inflation rate for materials and supplies such as steel, diesel fuel and explosives. However, the costs of the materials and supplies used in our production process such as steel, diesel fuel and explosives are influenced by global market conditions beyond our control. If actual costs are higher or if inflation increases above our expectations, it could have a material impact on the fair value of our reporting units. We also are faced with increasingly stringent safety standards and governmental regulation, much of which is beyond our control, which could increase our costs and materially decrease the fair value of our reporting units. For a further discussion of the factors that could result in a change in our assumptions, see “Risk Factors” in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission.
We performed interim goodwill impairment tests as of June 1, and February 28, 2014 due primarily to continued weakness in the global metallurgical coal markets which indicated that the fair value of a reporting unit within our eastern coal operations may have been below its carrying value. As a result of our step two evaluation of the implied fair value of goodwill as of June 1, 2014, we recorded goodwill impairment expense of $308.7 million to write down the carrying value of our remaining goodwill in a reporting unit within our eastern coal operations to $0. See Note 11 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Contingencies. We are parties to a number of legal proceedings. These matters include personal injury claims, environmental issues and other matters more fully described in Note 23 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Legal proceedings, as well as governmental examinations, involve various business units and a variety of claims including, but not limited to, contract disputes, personal injury claims, property damage claims (including those resulting from blasting, trucking and flooding), environmental and safety issues, and employment matters. While some matters pending against us or our subsidiaries specify the damages claimed by the plaintiffs, many seek an unquantified amount of damages or are at very early stages of the legal process. Even when the amount of damages claimed against us or our subsidiaries is stated, (i) the claimed amount may be exaggerated or unsupported; (ii) the claim may be based on a novel legal theory or involve a large number of parties; (iii) there may be uncertainty as to the likelihood of a class being certified or the ultimate size of the class; (iv) there may be uncertainty as to the outcome of pending appeals or motions; and/or (v) there may be significant factual issues to be resolved. As a result, we may be unable to estimate a range of possible loss for matters that have not yet progressed sufficiently through discovery and development of important factual information and legal issues.We record accruals based on an estimate of the ultimate outcome of these matters, however these matters are difficult to predict and involve significant judgment.
New accounting pronouncements. See Note 2 in the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for disclosures related to new accounting policies adopted.
Item 15. Exhibits and Financial Statement Schedules
See Exhibit Index following the signature page of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALPHA NATURAL RESOURCES, INC. | ||
By: | /s/ Frank J. Wood | |
Name: | Frank J. Wood | |
Title: | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | |
Date: February 27, 2015
Signature | Date | Title | |||
* | February 27, 2015 | Chief Executive Officer (Principal Executive Officer), Chairman of the Board of Directors and Director | |||
Kevin S. Crutchfield | |||||
/s/ Frank J. Wood | February 27, 2015 | Executive Vice President and Chief Financial Officer, (Principal Financial and Accounting Officer) | |||
Frank J. Wood | |||||
* | February 27, 2015 | Director | |||
Angelo C. Brisimitzakis | |||||
* | February 27, 2015 | Director | |||
William J. Crowley, Jr. | |||||
* | February 27, 2015 | Director | |||
E. Linn Draper, Jr. | |||||
* | February 27, 2015 | Director | |||
Glenn A. Eisenberg | |||||
* | February 27, 2015 | Director | |||
Deborah M. Fretz | |||||
* | February 27, 2015 | Director | |||
P. Michael Giftos | |||||
* | February 27, 2015 | Director | |||
L. Patrick Hassey | |||||
* | February 27, 2015 | Director | |||
Joel Richards, III | |||||
*By: | /s/ Frank J. Wood | ||||
Frank J. Wood | |||||
Attorney-in-Fact | |||||
10-K EXHIBIT INDEX
Exhibit No. | Description of Exhibit | |
2.1 | Agreement and Plan of Merger, dated as of January 28, 2011, among Mountain Merger Sub, Inc., Alpha Natural Resources, Inc. and Massey Energy Company (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on January 31, 2011.) | |
2.2 | Agreement and Plan of Merger, dated as of May 11, 2009, by and between Alpha Natural Resources, Inc. and Foundation Coal Holdings, Inc. (Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K of Alpha Natural Resources Inc., (File No. 1-32331) filed on May 12, 2009.) | |
2.3 | Acquisition Agreement dated as of September 23, 2005 among Alpha Natural Resources, LLC, Mate Creek Energy of W. Va., Inc., Virginia Energy Company, the unit holders of Powers Shop, LLC, and the shareholders of White Flame Energy, Inc., Twin Star Mining, Inc. and Nicewonder Contracting, Inc. (the “Acquisition Agreement”) (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on September 26, 2005.) | |
2.4 | Membership Unit Purchase Agreement dated as of September 23, 2005 among Premium Energy, LLC and the unit holders of Buchanan Energy Company, LLC (the “Membership Unit Purchase Agreement”) (Incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on September 26, 2005.) | |
2.5 | Agreement and Plan of Merger dated as of September 23, 2005 among Alpha Natural Resources, Inc., Alpha Natural Resources, LLC, Premium Energy, LLC, Premium Energy, Inc. and the shareholders of Premium Energy, Inc. (the “Premium Energy Shareholders”) (the “Merger Agreement”) (Incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on September 26, 2005.) | |
2.6 | Indemnification Agreement dated as of September 23, 2005 among Alpha Natural Resources, Inc., Alpha Natural Resources, LLC, Premium Energy, LLC, the other parties to the Acquisition Agreement, the Premium Energy Shareholders, and certain of the unit holders of Buchanan Energy Company, LLC (Incorporated by reference to Exhibit 2.4 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on September 26, 2005.) | |
2.7 | Letter Agreement dated of as September 23, 2005 among Alpha Natural Resources, Inc., Alpha Natural Resources, LLC, Premium Energy, LLC and the other parties to the Acquisition Agreement, the Membership Unit Purchase Agreement and the Merger Agreement (Incorporated by reference to Exhibit 2.5 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on September 26, 2005.) | |
2.8 | Letter Agreement dated October 26, 2005 (the “Letter Agreement”) among Alpha Natural Resources, Inc., Alpha Natural Resources, LLC, Premium Energy, LLC, Premium Energy, Inc. and the Sellers Representative named therein amending certain provisions of (i) the Acquisition Agreement dated September 23, 2005, among certain parties to the Letter Agreement and certain other parties named therein, (ii) the Agreement and Plan of Merger dated September 23, 2005, among the parties to the Letter Agreement and certain other parties named therein and (iii) the Indemnification Agreement dated September 23, 2005, among the parties to the Letter Agreement and certain other parties named therein. (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. /Old (File No. 1-32423) filed on October 31, 2005.) | |
2.9 | Assignment of Rights Under Certain Agreements executed as of October 26, 2005 among Alpha Natural Resources, LLC, Mate Creek Energy, LLC, Callaway Natural Resources, Inc., Premium Energy, LLC and Virginia Energy Company, LLC (Incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on October 31, 2005.) | |
3.1 | Amended and Restated Certificate of Incorporation of Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on August 5, 2009.) | |
3.2 | Certificate of Amendment of the Restated Certificate of Incorporation of Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
3.3 | Amended and Restated Bylaws of Alpha Natural Resources, Inc. (Incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on August 26, 2014.) | |
36
4.1 | Form of certificate of Alpha Natural Resources, Inc. common stock (Incorporated by reference to Amendment No. 3 to the Registration Statement on Form S-1 of Alpha Natural Resources, Inc./Old (File No. 333-121002) filed on February 10, 2005.) | |
4.2 | Indenture, dated as of April 7, 2008, between Alpha Natural Resources, Inc. (File No. 1-32423) and Union Bank of California, N.A., as Trustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on April 9, 2008.) | |
4.3 | Supplemental Indenture No. 1 dated as of April 7, 2008, between Alpha Natural Resources, Inc. (File No. 1-32423) and Union Bank of California, N.A., as Trustee (Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. /Old (File No. 1-32423) filed on April 9, 2008.) | |
4.4 | Supplemental Indenture No. 2, dated as of July 31, 2009, between Alpha Natural Resources, Inc. and Union Bank of California, N.A., as Trustee (Incorporated by reference to Exhibit 4.4 of the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on August 5, 2009.) | |
4.5 | Form of 2.375% Convertible Senior Note due 2015 (Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old/ (File No. 1-32423) filed on April 9, 2008.) | |
4.6 | Subordinated Indenture, dated as of April 7, 2008, between Alpha Natural Resources, Inc. and Union Bank of California, N.A. as Trustee (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc./Old (File No. 1-32423) filed on April 9, 2008.) | |
4.7 | Supplemental Indenture No. 1 to the Subordinated Indenture, dated as of July 31, 2009, between Alpha Natural Resources, Inc. and Union Bank, N.A., as Trustee (Incorporated by reference to Exhibit 4.6 the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on August 7, 2009.) | |
4.8 | Indenture, dated as of June 1, 2011, among Alpha Natural Resources, Inc., the Guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.9 | First Supplemental Indenture, dated as of June 1, 2011, among Alpha Natural Resources, Inc., the Guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.10 | Second Supplemental Indenture, dated as of June 1, 2011, among Alpha Natural Resources, Inc., the Guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.11 | Form of 6.00% Senior Note due 2019 (included in Exhibit 4.9) (Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.12 | Form of 6.25% Senior Note due 2021 (included in Exhibit 4.9) (Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.13 | Third Supplemental Indenture, dated as of October 11, 2012, among Alpha Natural Resources, Inc., the Guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on October 11, 2012.) | |
4.14 | Form of 9.75% Senior Note due 2018 (included in Exhibit 4.13) (Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on October 11, 2012.) | |
4.15 | Fourth Supplemental Indenture, dated as of May 13, 2013, among Alpha Natural Resources, Inc., the Guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 13, 2013.) | |
4.16 | Form of 3.75% Convertible Senior Note due 2017 (Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 13, 2013.) | |
4.17 | Fifth Supplemental Indenture, dated as of December 18, 2013, among Alpha Natural Resources, Inc., the Guarantors named therein and Union Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on December 18, 2013.) | |
37
4.18 | Form of 4.875% Convertible Senior Note due 2020 (Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on December 18, 2013.) | |
4.19 | Senior Indenture, dated as of August 12, 2008, by and among Massey Energy Company, subsidiaries of Massey Energy Company, as Guarantors, and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.20 | First Supplemental Indenture, dated as of August 12, 2008, by and among Massey Energy Company, subsidiaries of Massey Energy Company, as Guarantors, and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.21 | Second Supplemental Indenture, dated as of July 20, 2009, by and among Massey Energy Company, subsidiaries of Massey Energy Company, as Guarantors, and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.8 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.22 | Third Supplemental Indenture, dated as of August 28, 2009, by and among Massey Energy Company, subsidiaries of Massey Energy Company, as Guarantors, and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.9 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.23 | Fourth Supplemental Indenture, dated as of April 30, 2010, by and among Massey Energy Company, subsidiaries of Massey Energy Company, as Guarantors, and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.10 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.24 | Fifth Supplemental Indenture, dated as of June 29, 2010, by and among Massey Energy Company, subsidiaries of Massey Energy Company, as Guarantors, and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.11 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
4.25 | Sixth Supplemental Indenture dated as of June 1, 2011, among Alpha Natural Resources, Inc., Massey Energy Company, the Guarantors named therein and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.12 to the Amendment No. 1 to Current Report to Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 3, 2011.) | |
4.26 | Seventh Supplemental Indenture dated as of December 31, 2012, among Alpha Natural Resources, Inc., Alpha Appalachia Holdings, Inc. (fka Massey Energy Company), Mill Branch Coal Corporation, the Guarantors named therein and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.22 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2013.) | |
4.27 | Eighth Supplemental Indenture dated as of December 31, 2012, among Alpha Natural Resources, Inc., Alpha Appalachia Holdings, Inc. (fka Massey Energy Company), North Fork Coal Corporation, the Guarantors named therein and Wilmington Trust Company, as Trustee (Incorporated by reference to Exhibit 4.23 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2013.) | |
4.28 | Indenture, dated as of May 20, 2014, among Alpha Natural Resources, Inc., the guarantors named therein and Wilmington Trust, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 21, 2014.) | |
4.29 | Security Agreement, dated as of May 20, 2014, among Alpha Natural Resources, Inc., certain subsidiaries of Alpha Natural Resources, Inc. identified therein, and Wilmington Trust, National Association, as notes collateral agent (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 21, 2014.) | |
4.30 | Form of 7½% Senior Secured Second Lien Notes due 2020 (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 21, 2014.) | |
38
10.1 | Second Amended and Restated Receivables Purchase Agreement, dated as of October 19, 2011, by and among ANR Receivables Funding, LLC, Alpha Natural Resources, LLC, the various financial institutions party thereto and PNC Bank, National Association (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on October 21, 2011.) | |
10.2 | First Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated as of December 21, 2011, by and among ANR Receivables Funding, LLC, Alpha Natural Resources, LLC, the various financial institutions party thereto and PNC Bank, National Association (Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on February 29, 2012.) | |
10.3 | Limited Waiver, dated as of February 14, 2012, pursuant to the Second Amended and Restated Receivables Purchase Agreement, dated as of October 19, 2011 (Incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 10, 2012.) | |
10.4 | Second Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated as of May 1, 2012, among ANR Receivables Funding, LLC, Alpha Natural Resources, LLC, the various financial institutions party thereto and PNC Bank, National Association (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on August 9, 2012.) | |
10.5 | Third Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated as of June 26, 2012, among ANR Receivables Funding, LLC, Alpha Natural Resources, LLC, the various financial institutions party thereto and PNC Bank, National Association (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 27, 2012.) | |
10.6 | Fourth Amendment to the Second Amended and Restated Receivables Purchase Agreement, dated as of November 14, 2012, among ANR Receivables Funding, LLC, Alpha Natural Resources, LLC, the various financial institutions party thereto and PNC Bank, National Association (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on November 20, 2012.) | |
10.7 | Fifth Amended and Restated Credit Agreement, dated as of September 24, 2014, by and among Alpha Natural Resources, Inc., the lenders party thereto and Citicorp North America, Inc., as administrative agent and collateral agent (including as an exhibit the Fifth Amended and Restated Credit Agreement, dated as of September 24, 2014, among Alpha Natural Resources, Inc., the lenders party thereto and Citicorp North America, Inc., as administrative agent and collateral agent) (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on September 25, 2014.) | |
10.8 | Amended and Restated Guarantee and Collateral Agreement, dated as of June 1, 2011, made by each of the Guarantors as defined therein, in favor of Citicorp North America, Inc., as administrative agent and as collateral agent for the banks and other financial institutions or entities from time to time parties to the Credit Agreement (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on June 1, 2011.) | |
10.9 | Security Agreement, dated as of May 20, 2014, among Alpha Natural Resources, Inc., certain subsidiaries of Alpha Natural Resources, Inc. identified therein, and Wilmington Trust, National Association, as notes collateral agent (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 21, 2014.) | |
10.10 | Credit and Security Agreement dated as of September 19, 2014, by and among ANR Second Receivables Funding, LLC, General Electric Capital Corporation, as a lender, a swing line lender, an LC Lender and the administrative agent, and Webster Business Credit Corporation, as an LC Lender and as a Lender, and certain financial institutions from time to time parties thereto, as Lenders (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on September 25, 2014.) | |
10.11 | Non-Prosecution Agreement, dated as of December 6, 2011, between Alpha and Alpha Appalachia Holdings, Inc. (fka Massey Energy Company) and the United States Attorney’s Office for the Southern District of West Virginia and the United States Department of Justice, and settlement with MSHA (Incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on December 6, 2011.) | |
39
10.12 | Stipulation and Agreement of Settlement, dated as of February 5, 2014, by and among Alpha, Alpha Appalachia Holdings, Inc. (fka Massey Energy Company) and the various Massey Energy Company officers and directors named as defendants, and the plaintiffs in the matter In re Massey Energy Co. Securities Litigation, Case No. 5:10-cv-00689-ICB (S.D. W. Va.) (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 24, 2014.) | |
10.13 | Distribution Agreement between Fluor Corporation and Massey Energy Company dated as of November 30, 2000 (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Massey Energy Company (File No. 1-7775) filed on December 15, 2000.) | |
10.14 | Tax Sharing Agreement between Fluor Corporation, Massey Energy Company and A.T. Massey Coal Company, Inc. dated as of November 30, 2000 (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Massey Energy Company (File No. 1-7775) filed on December 15, 2000.) | |
10.15 | Transaction Agreement, dated as of December 6, 2013, among Foundation PA Coal Company, LLC, Rice Drilling C LLC and Rice Energy Inc. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on December 9, 2013.) | |
10.16 | Registration Rights Agreement, dated as of January 29, 2014, among Foundation PA Coal Company, LLC, Rice Energy Inc., NGP Rice Holdings, LLC, Rice Energy Holdings LLC, and Rice Energy Family Holdings, LP (Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Rice Energy Inc. (File No. 001-36273) filed with the Commission on February 4, 2014.) | |
10.17 | Stockholders’ Agreement, dated as of January 29, 2014, among Alpha Natural Resources, Inc., Rice Energy Inc., NGP Rice Holdings, LLC, Rice Energy Holdings LLC, and Rice Energy Family Holdings, LP (Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Rice Energy Inc. (File No. 001-36273) filed with the Commission on February 4, 2014.) | |
10.18‡ | Alpha Natural Resources, Inc. Amended and Restated 2004 Stock Incentive Plan (as amended and restated July 31, 2009 and further amended on November 18, 2009) (Incorporated by reference to Exhibit 10.50 to the Annual Report on Form 10-K filed by Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2010.) | |
10.19‡ | Non-Employee Director Compensatory Arrangements (Incorporated by reference to Exhibit 10.27 of the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on February 25, 2011.) | |
10.20*‡ | Alpha Natural Resources, Inc. Key Employee Separation Plan, As Amended and Restated Effective January 22, 2015. | |
10.21‡ | Alpha Natural Resources, Inc. and Subsidiaries Deferred Compensation Plan, As Amended and Restated Effective August 1, 2012 (Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on November 8, 2012.) | |
10.22‡ | Alpha Natural Resources, Inc. Non-Employee Directors Deferred Compensation Plan (effective January 1, 2010.) (Incorporated by reference to Exhibit 10.33 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2010.) | |
10.23‡ | Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Restated as of May 14, 2008 and as further amended on November 18, 2009.) (Incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2010.) | |
10.24‡ | Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.11 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on November 10, 2009.) | |
10.25‡ | Form of Director Deferred Compensation Agreement under the Alpha Natural Resources, Inc. 2005 Long-Term Incentive Plan (Amended and Restated on December 12, 2008) (Incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc./Old (File No. 001-32423) filed on February 27, 2009.) | |
10.26‡ | Form of Amendment to Director Deferred Compensation Agreement (Incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc./Old (File No. 001-32423) filed on February 27, 2009.) | |
40
10.27‡ | Alpha Natural Resources, Inc. 2006 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit 99.1 of the Post-Effective Amendment No. 1 on Form S-8 of Alpha Natural Resources, Inc. (File No. 333-172888) filed on June 1, 2011.) | |
10.28‡ | Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the Alpha Natural Resources, Inc. 2006 Stock and Incentive Compensation Plan (Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (Filed No. 1-32331) filed on May 10, 2012.) | |
10.29‡ | Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-8 (File No. 333-166959) filed on May 19, 2010.) | |
10.30‡ | Form of Restricted Stock Unit Award Agreement for Employees (Grades 22-30) under the Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on February 29, 2012.) | |
10.31‡ | Form of Restricted Stock Unit Award Agreement for Employees (Alternative) (Grades 22-30) under the Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 10, 2012.) | |
10.32‡ | Form of Performance Share Unit Award Agreement for Employees (Grades 22-30) under the Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on February 29, 2012.) | |
10.33‡ | Form of Performance Share Unit Award Agreement for Employees (Alternative) (Grades 22-30) under the Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 10, 2012.) | |
10.34‡ | Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on February 29, 2012.) | |
10.35‡ | Form of Performance-Based Incentive Compensation Award Agreement for Employees (Grades 22-30) under the Alpha Natural Resources, Inc. 2010 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 10, 2012.) | |
10.36‡ | Third Amended and Restated Employment Agreement by and between Alpha Natural Resources Services, LLC and Kevin S. Crutchfield, dated as of July 31, 2009 (Incorporated by reference to Exhibit 10.29 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on November 10, 2009.) | |
10.37‡ | Form of Indemnification Agreement by and between Alpha Natural Resources, Inc. and each of its current and future directors and officers (Incorporated by reference to Exhibit 10.37 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on November 10, 2009.) | |
10.38‡ | Alpha Natural Resources, Inc. Amended and Restated 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 22, 2014.) | |
10.39‡ | Form of Alpha Natural Resources, Inc. Performance Share Unit Award Agreement for Employees (Grades 22-30) under the 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-8 of Alpha Natural Resources, Inc. (File No. 333-181478) filed on May 17, 2012.) | |
10.40‡ | Form of Alpha Natural Resources, Inc. Performance Share Unit Award Agreement for Employees under the 2012 Long-Term Incentive Plan (Alternative) (Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 17, 2012.) | |
10.41‡ | Form of Alpha Natural Resources, Inc. Restricted Stock Unit Award Agreement for Employees (Grades 22-30) under the 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 99.3 to the Registration Statement on Form S-8 of Alpha Natural Resources, Inc. (File No. 333-181478) filed on May 17, 2012.) | |
41
10.42‡ | Form of Alpha Natural Resources, Inc. Restricted Stock Unit Award Agreement for Non-Employee Directors under the 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 99.4 to the Registration Statement on Form S-8 of Alpha Natural Resources, Inc. (File No. 333-181478) filed on May 17, 2012.) | |
10.43‡ | Form of Alpha Natural Resources, Inc. Restricted Stock Unit Award Agreement for Non-Employee Directors under the Alpha Natural Resources, Inc. 2012 Long-Term Incentive Plan (for grants after January 1, 2013) (Incorporated by reference to Exhibit 10.69 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2013.) | |
10.44‡ | Form of Alpha Natural Resources, Inc. Non-Employee Director Deferral Elections (effective January 1, 2013) (Incorporated by reference to Exhibit 10.70 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 1-32331) filed on March 1, 2013.) | |
10.45‡ | Form of Retention Restricted Stock Unit Award Agreement for Employees under the Alpha Natural Resources, Inc. 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on November 8, 2012.) | |
10.46‡ | Form of Performance-Based Incentive Compensation Award Agreement for Employees under the Alpha Natural Resources, Inc. 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 7, 2013.) | |
10.47‡ | Form of Restricted Stock Unit Award Agreement for Employees under the Alpha Natural Resources, Inc. 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.2 Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 7, 2013.) | |
10.48‡ | Form of Performance Share Unit Award Agreement for Employees under the Alpha Natural Resources, Inc. 2012 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 1-32331) filed on May 7, 2013.) | |
10.49‡ | Form of Alpha Natural Resources, Inc. Performance Share Unit Award Agreement for Employees under the Amended and Restated 2012 Long-Term Incentive Plan (TSR) (Incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 8, 2014.) | |
10.50‡ | Form of Alpha Natural Resources, Inc. Performance Share Unit Award Agreement for Employees under the Amended and Restated 2012 Long-Term Incentive Plan (Cash Flow from Operations) (Incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 8, 2014.) | |
10.51‡ | Foundation Coal Supplemental Executive Retirement Plan, dated as of July 30, 2004 (Incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 28, 2014.) | |
10.52‡ | Amendment No. 1 to the Foundation Coal Supplemental Executive Retirement Plan, dated as of March 16, 2007 (Incorporated by reference to Exhibit 10.56 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 28, 2014.) | |
10.53‡ | Amendment No. 2 to the Foundation Coal Supplemental Executive Retirement Plan, dated as of December 11, 2008 (Incorporated by reference to Exhibit 10.57 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 28, 2014.) | |
10.54‡ | Amendment No. 3 to the Foundation Coal Supplemental Executive Retirement Plan, dated as of July 27, 2009 (Incorporated by reference to Exhibit 10.58 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 28, 2014.) | |
10.55‡ | Amendment No. 4 to the Foundation Coal Supplemental Executive Retirement Plan, dated as of January 28, 2014 (Incorporated by reference to Exhibit 10.59 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 28, 2014.) | |
10.56‡ | Alpha Natural Resources, Inc. Amended and Restated Annual Incentive Bonus Plan (Incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K of Alpha Natural Resources, Inc. (File No. 001-32331) filed on February 28, 2014.) | |
42
10.57‡ | Retention Agreement by and between Alpha Natural Resources, Inc. and Kevin S. Crutchfield, dated as of February 28, 2014 (Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 8, 2014.) | |
10.58‡ | Retention Agreement by and between Alpha Natural Resources, Inc. and Paul H. Vining, dated as of February 28, 2014 (Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on May 8, 2014.) | |
10.59*‡ | Retention Agreement by and between Alpha Natural Resources, Inc. and Philip J. Cavatoni, dated as of January 6, 2015. | |
10.60*‡ | Retention Agreement by and between Alpha Natural Resources, Inc. and Brian D. Sullivan, dated as of January 24, 2014. | |
10.61*‡ | Equity Retention Agreement by and between Alpha Natural Resources, Inc. and Brian D. Sullivan, dated as of June 15, 2012. | |
10.62*‡ | Form of Alpha Natural Resources, Inc. Retention Restricted Stock Unit Award Agreement for Employees under the 2012 Long-Term Incentive Plan. | |
10.63‡ | General Release and Non-Disparagement, dated July 18, 2014, by and between Alpha Natural Resources Services, LLC and Vaughn R. Groves (Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on November 6, 2014.) | |
10.64‡ | General Release, dated September 1, 2014, by and between Alpha Natural Resources Services, LLC and Vaughn R. Groves (Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on November 6, 2014.) | |
10.65‡ | Consulting Agreement, dated September 1, 2014, by and between Alpha Natural Resources Services, LLC and Vaughn R. Groves (Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Alpha Natural Resources, Inc. (File No. 001-32331) filed on November 6, 2014.) | |
12.1* | Computation of Ratio of Earnings to Fixed Charges | |
12.2* | Computation of Other Ratios | |
21* | List of Subsidiaries | |
23* | Consent of KPMG LLP | |
31(a)** | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002 | |
31(b)** | Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002 | |
32(a)* | Certification Pursuant to 18 U.S.C. §1350, As Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002 | |
32(b)* | Certification Pursuant to 18 U.S.C. §1350, As Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002 | |
95* | Mine Safety Disclosure Exhibit | |
101.INS* | XBRL instance document | |
101.SCH* | XBRL taxonomy extension schema | |
101.CAL* | XBRL taxonomy extension calculation linkbase | |
101.LAB* | XBRL taxonomy extension label linkbase | |
43
101.PRE* | XBRL taxonomy extension presentation linkbase | |
___________________________
* Filed with Annual Report on Form 10-K filed on February 26, 2015
** Filed herewith
‡ Management contract of compensatory plan or arrangement
44