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8-K - 8-K - ARCH RESOURCES, INC.a17-3798_18k.htm

Exhibit 99.1

 

News from

Arch Coal, Inc.

 

FOR FURTHER INFORMATION:

Logan Bonacorsi
Investor Relations

314/994-2766

 

FOR IMMEDIATE RELEASE

 

Arch Coal, Inc. Reports Fourth Quarter 2016 Results

Delivers strong cost performance in each operating segment

Simplified capital structure with solid cash position

Initiates 2017 full-year guidance

 

ST. LOUIS, Feb. 8, 2017 — Arch Coal, Inc. (NYSE: ARCH) today reported fourth quarter 2016 net income of $33.4 million or $1.31 per diluted share. Revenues for the period totaled $575.7 million on 26.8 million tons of coal sales. The company reported adjusted earnings before interest, taxes, depreciation, depletion, amortization and reorganization items (“adjusted EBITDAR”) of $94.5 million(1).

 

Notably, less than nine months after filing for Chapter 11, Arch Coal successfully completed its financial restructuring and emerged from bankruptcy as a reorganized company on October 5, 2016. As a result, Arch applied fresh start accounting as of October 1, 2016; therefore, its financial statements after September 30 are not comparable to the financial statements prior to that date. Certain non-GAAP comparative analysis is available in the operational results section of this release and in the investor section of archcoal.com.

 

“Arch achieved a strong financial and operational performance in the fourth quarter — our first earnings period following the completion of our successful restructuring,” said John W. Eaves, Arch’s chief executive officer. “These results demonstrate the positive momentum in our business and the potential we have to elevate our performance still further as the industry continues to evolve. We are confident in our ability to leverage our strong operating portfolio, commercial and logistical expertise and enhanced financial foundation to deliver long-term value for our shareholders.”

 

Arch’s Financial Position

 

As a result of its financial restructuring, the company greatly reduced its total indebtedness and interest expense, creating a strong financial platform fortified to support its operations in every

 


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

 

1



 

phase of the coal market cycle. In total, the company eliminated nearly $4.8 billion of debt obligations and $330 million of annual cash interest expense. Currently, Arch’s debt level totals $363 million, with approximately $38 million of annual interest expense. Taking into account reorganization payments made at the time of emergence, Arch’s cash and short-term investment balance grew from $309 million at September 30 to over $393 million at December 31.

 

“Our successful financial restructuring has dramatically transformed our capital structure, enhanced our balance sheet and provided the kind of financial flexibility that will enable us to compete successfully in today’s marketplace,” said John T. Drexler, Arch’s senior vice president and chief financial officer. “Our fourth quarter performance illustrates the overall strength of the new Arch Coal, and our liquidity position will enable us to execute our strategy, capitalize fully on our low-cost operating portfolio, and generate long-term shareholder value.”

 

Arch’s Fundamental Foundation

 

Arch remains a leader in surface and underground mine safety, with a total incident rate more than two times better than the industry average. During 2016, Arch operations were honored with the top state safety awards in West Virginia, Wyoming and Colorado. Arch was also honored with a national Sentinels of Safety award and its Leer operation was recognized by the National Institute for Occupational Safety and Health (NIOSH) with the Technology Innovation Award.

 

Arch once again excelled in environmental stewardship, recording a company-best performance, with nine complexes completing 2016 with a perfect environmental record as measured by the Surface Mining Control and Reclamation Act (SMCRA). In the past year, dedication to environmental management has earned Arch and its subsidiaries 11 significant state awards, including top reclamation accolades in West Virginia, Wyoming and Colorado.

 

“Through the unwavering commitment of our entire workforce, Arch continues to stand out among its peers in safety and environmental performance,” said Paul A. Lang, Arch’s president and chief operating officer. “We have long believed that safe and responsible operations are the most efficient operations, and we will continue to focus diligently on the core values that serve as the foundation of our company.”

 

Arch’s Operational Results

 

“Our operations turned in a solid cost performance during the fourth quarter of 2016 — with the metallurgical portfolio reinforcing our low-cost position among U.S. metallurgical suppliers,” said Lang.  “Looking ahead we will continue to focus on maintaining our disciplined approach to cost control, maximizing the value of our diverse product slate and expanding margins in each of our operating segments.”

 

2



 

 

 

Metallurgical

 

 

 

Successor

 

 

Predecessor

 

 

 

4Q16

 

 

3Q16

 

Tons sold (in millions)

 

2.4

 

 

2.2

 

Coking

 

1.7

 

 

1.6

 

PCI

 

0.2

 

 

0.1

 

Thermal

 

0.5

 

 

0.4

 

Average sales price per ton

 

$

65.61

 

 

$

55.37

 

Coking

 

$

75.36

 

 

$

57.80

 

PCI

 

$

54.78

 

 

$

51.33

 

Thermal

 

$

36.86

 

 

$

47.59

 

Cash cost per ton

 

$

52.98

 

 

$

51.29

 

Cash margin per ton

 

$

12.63

 

 

$

4.08

 

 

Cash cost per ton is defined and reconciled under “Reconciliation of non-GAAP measures”.

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

 

In the Metallurgical segment, the company shipped 1.7 million tons of coking coal at an average realized price of $75.36 per ton, a 30-percent increase over the average realized price in the prior quarter, with the remaining volume consisting of a mix of pulverized coal injection (PCI), thermal and lower quality thermal byproduct coal. Realizations benefited from higher pricing on new coking coal sales and stronger pricing on index-based contracts that shipped during the quarter. During the fourth quarter, segment cash margins expanded more than three-fold compared to the prior quarter, reaching $12.63 per ton, with the average sales price increasing $10.24 per ton. Stronger pricing on coking and PCI sales helped offset the impact of increased shipments of lower-priced thermal and thermal byproduct coal. Two planned longwall moves in the region contributed to the modest increase in cash costs when compared with the third quarter. Arch believes its metallurgical segment costs are at the very low end of the industry cost curve.

 

 

 

Powder River Basin

 

 

 

Successor

 

 

Predecessor

 

 

 

4Q16

 

 

3Q16

 

 

 

 

 

 

 

 

Tons sold (in millions)

 

21.8

 

 

22.7

 

Average sales price per ton

 

$

12.41

 

 

$

12.79

 

Cash cost per ton

 

$

9.88

 

 

$

9.34

 

Cash margin per ton

 

$

2.53

 

 

$

3.45

 

 

Cash cost per ton is defined and reconciled under “Reconciliation of non-GAAP measures”.

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

 

In the Powder River Basin, the company shipped 21.8 million tons as stronger natural gas prices contributed to solid demand from power generators. Average sales price per ton declined 3 percent versus the third quarter, driven by sales mix between mines. While cash costs in the segment rose due to volume decline, Arch still achieved an exceptional cost performance when compared to historical levels. Looking ahead, costs in the Powder River Basin are expected to normalize in the range of $10.20 to $10.70 per ton as Black Thunder settles into its anticipated new level of production of 70 to 80 million tons per year.

 

3



 

 

 

Other Thermal

 

 

 

Successor

 

 

Predecessor

 

 

 

4Q16

 

 

3Q16

 

 

 

 

 

 

 

 

Tons sold (in millions)

 

2.5

 

 

2.5

 

Average sales price per ton

 

$

34.01

 

 

$

34.52

 

Cash cost per ton

 

$

21.79

 

 

$

23.10

 

Cash margin per ton

 

$

12.22

 

 

$

11.42

 

 

Cash cost per ton is defined and reconciled under “Reconciliation of non-GAAP measures”.

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

 

In the Other Thermal segment, which now includes the Coal-Mac operation in West Virginia, cash margins reached $12.22 per ton, an increase of 7 percent versus the third quarter, driven primarily by solid overall cost performance. Improved pricing on international sales due to West Elk’s ability to capitalize on the uptick in Newcastle prices helped offset weaker shipments from the Viper mine, which was hampered by an extended operating outage at its largest customer.

 

Key Market Developments

 

Metallurgical Coal Markets

 

·                  Global metallurgical markets rebounded significantly in the latter part of 2016, with average pricing assessments off the East Coast of the United States increasing by 130 percent year-over-year for High-Vol A coking coal.

 

·                  Arch attributes the increase in metallurgical pricing to several developments, including production restrictions in China and the impact of a multi-year period of reduced global investment and supply rationalization.

 

·                  Looking ahead, the company expects the market to address the undersupplied conditions of 2016, with new supply coming online in response to stronger price signals. With this supply response, we expect the market to return to a healthy balance, with prices stabilizing at levels needed to keep the market in relative equilibrium.

 

·                  The World Steel Association expects global demand for steel to increase by 0.5 percent in 2017, with more robust growth projected for key Atlantic Basin markets, including the United States, Europe and Brazil.

 

·                  Moreover, Arch is projecting additional strengthening in the seaborne market, with sizeable increases in demand for high-quality, imported coking coal in India, and a continuation of the conditions that bolstered China’s participation in seaborne markets in the year’s second half.

 

4



 

Thermal Coal Markets

 

·                  Despite a relatively mild winter thus far, natural gas is trading in a higher range than a year ago. Assuming this trend continues, it should spur higher utilization rates at coal-based power plants and stronger thermal coal consumption levels throughout 2017.

 

·                  Although still elevated, stockpiles at U.S. coal-based power plants declined by more than 35 million tons, or 17 percent, during the course of 2016, according to company estimates. Arch expects this stockpile liquidation to continue at least through the first half of 2017.

 

·                  Given current production rates and assuming normal weather, Arch anticipates utility stockpiles to reach target levels sometime in the third quarter of 2017.  Once that occurs, thermal coal demand and shipments should increase and market conditions should improve.

 

·                  Additionally, the new Administration should prove to be positive for Arch’s metallurgical and thermal franchises. Arch anticipates that the new Administration will constructively address the regulatory burden that has pressured the industry in recent years, resulting in stabilization in domestic thermal coal demand in the intermediate term. Further, Arch anticipates a sharp focus on maintaining a competitive domestic steel sector.

 

Company Outlook

 

Arch has established sales targets for 2017 of between 7.2 million and 7.8 million tons of metallurgical coal, which includes PCI coal, and between 88 million and 96 million tons of thermal coal. At the midpoint of its guidance level, Arch is nearly 75 percent committed on coking coal sales for the full year, with nearly 35 percent of that committed volume exposed to index and other pricing mechanisms. At the midpoint of guidance, Arch’s thermal sales are nearly 85 percent committed for the full year.

 

“As we progress through 2017, we expect metallurgical prices to remain well above the levels that prevailed during the first half of 2016,” said Eaves. “Moreover, we anticipate improving conditions in U.S. thermal markets, particularly later in the year. Given the highly competitive cost structures of our metallurgical, Powder River Basin and complementary thermal operations, we believe we are advantageously positioned to capitalize on the still-strong metallurgical markets and continuing recovery in U.S. thermal markets.”

 

5



 

 

 

2017

 

 

 

Tons

 

$ per ton

 

Sales Volume (in millions of tons)

 

 

 

 

 

 

 

Coking

 

6.5 

-

7.0

 

 

 

PCI

 

0.7 

-

0.8

 

 

 

Thermal

 

88.0 

-

96.0

 

 

 

Total

 

95.2

-

103.8

 

 

 

 

 

 

 

 

 

Metallurgical (in millions of tons)

 

 

 

 

 

Committed, Priced Coking

 

3.3

 

$89.70

 

Committed, Unpriced Coking

 

1.7

 

 

 

Total Committed Coking

 

5.0

 

 

 

 

 

 

 

 

 

Committed, Priced PCI

 

0.7

 

$64.82

 

Committed, Unpriced PCI

 

 

 

 

Total Committed PCI

 

0.7

 

 

 

 

 

 

 

 

 

Committed, Priced Thermal

 

1.0

 

$34.52

 

Committed, Unpriced Thermal

 

 

 

 

Total Committed Thermal

 

1.0

 

 

 

 

 

 

 

 

 

 

Average Metallurgical Cash Cost

 

 

 

$51.00

-

$56.00

 

 

 

 

 

 

 

 

Powder River Basin (in millions of tons)

 

 

 

 

 

Committed, Priced

 

66.1

 

$12.51

 

Committed, Unpriced

 

3.3

 

 

 

Total Committed

 

69.4

 

 

 

 

Average Cash Cost

 

 

 

$10.20

-

$10.70

 

 

 

 

 

 

 

Other Thermal (in millions of tons)

 

 

 

 

 

Committed, Priced

 

6.6

 

$35.76

 

Committed, Unpriced

 

 

 

 

Total Committed

 

6.6

 

 

 

 

Average Cash Cost

 

 

 

$25.00

-

$30.00

 

 

 

 

 

 

 

 

Corporate (in $ millions)

 

 

 

 

 

 

D,D&A excluding Sales Contract Amortization

 

 

 

$124

-

$132

 

Sales Contract Amortization

 

 

 

$50

-

$58

 

ARO Accretion

 

 

 

$30

-

$32

 

S,G&A

 

 

 

$85

-

$89

 

Interest Expense

 

 

 

$36

-

$40

 

Capital Expenditures

 

 

 

$52

-

$60

 

Tax Provision

 

 

 

5%

-

10%

 

 

“We are enthusiastic about Arch’s future and the opportunities that lie before us. We are intently focused on solidifying our position as a premier U.S. coal supplier — maintaining our disciplined operating approach, enhancing our customer service and delivering significant returns for our shareholders.”

 

A conference call regarding Arch Coal’s fourth quarter 2016 financial results will be webcast live today at 11 a.m. Eastern time. The conference call can be accessed via the “investor” section of the Arch Coal website (http://investor.archcoal.com).

 

Forward-Looking Statements: This press release contains “forward-looking statements” — that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from changes in the demand for our coal by the domestic electric generation industry; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from operational, geological, permit, labor and weather-related factors; from fluctuations in the amount of cash we generate from operations; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a description of some of the risks and uncertainties that may affect our future results, you should see the risk factors described from time to time in the reports we file with the Securities and Exchange Commission.

 

# # #

 

6



 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016
through December
31, 2016

 

 

January 1, 2016
through October 1,
2016

 

Year ended
December 31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

575,688

 

 

$

1,398,709

 

$

2,573,260

 

 

 

 

 

 

 

 

 

 

Costs, expenses and other operating

 

 

 

 

 

 

 

 

Cost of sales

 

470,644

 

 

1,264,464

 

2,172,753

 

Depreciation, depletion and amortization

 

32,604

 

 

191,581

 

379,345

 

Accretion on asset retirement obligations

 

7,634

 

 

24,321

 

33,680

 

Amortization of sales contracts, net

 

796

 

 

(728

)

(8,811

)

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

 

396

 

 

2,856

 

(1,583

)

Asset impairment and mine closure costs

 

 

 

129,267

 

2,628,303

 

Losses from disposed operations resulting from Patriot Coal bankruptcy

 

 

 

 

116,343

 

Selling, general and administrative expenses

 

22,836

 

 

59,343

 

98,783

 

Other operating (income) expense, net

 

(5,340

)

 

(15,257

)

19,510

 

 

 

529,570

 

 

1,655,847

 

5,438,323

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

46,118

 

 

(257,138

)

(2,865,063

)

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

 

 

 

 

 

Interest expense

 

(11,241

)

 

(135,888

)

(397,979

)

Interest and investment income

 

487

 

 

2,653

 

4,430

 

 

 

(10,754

)

 

(133,235

)

(393,549

)

 

 

 

 

 

 

 

 

 

Income (loss) before nonoperating expenses

 

35,364

 

 

(390,373

)

(3,258,612

)

 

 

 

 

 

 

 

 

 

Nonoperating income (expense)

 

 

 

 

 

 

 

 

Net loss resulting from early retirement of debt and debt restructuring

 

 

 

(2,213

)

(27,910

)

Reorganization items, net

 

(759

)

 

1,630,041

 

 

 

 

(759

)

 

1,627,828

 

(27,910

)

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

34,605

 

 

1,237,455

 

(3,286,522

)

Provision for (benefit from) income taxes

 

1,156

 

 

(4,626

)

(373,380

)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

33,449

 

 

$

1,242,081

 

$

(2,913,142

)

 

 

 

 

 

 

 

 

 

Net income per common share

 

 

 

 

 

 

 

 

Basic EPS

 

$

1.34

 

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

$

1.31

 

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares outstanding

 

25,002

 

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

25,469

 

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDAR (A) (Unaudited)

 

$

94,497

 

 

$

87,303

 

$

283,797

 

Adjusted diluted income per common share (A)

 

$

1.65

 

 

N/A

 

N/A

 

 


(A) Adjusted EBITDAR and Adjusted diluted income per common share are defined and reconciled under “Reconciliation of Non-GAAP Measures” later in this release.

 



 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

Successor

 

 

Predecessor

 

 

 

December 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

305,372

 

 

$

450,781

 

Short term investments

 

88,072

 

 

200,192

 

Restricted cash

 

71,050

 

 

97,542

 

Trade accounts receivable

 

184,483

 

 

117,405

 

Other receivables

 

19,877

 

 

18,362

 

Inventories

 

113,462

 

 

196,720

 

Prepaid royalties

 

2,281

 

 

10,022

 

Coal derivative assets

 

262

 

 

8,035

 

Other current assets

 

93,763

 

 

39,866

 

Total current assets

 

878,622

 

 

1,138,925

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

1,053,603

 

 

3,619,029

 

 

 

 

 

 

 

 

Other assets

 

 

 

 

 

 

Prepaid royalties

 

 

 

23,671

 

Equity investments

 

96,074

 

 

201,877

 

Other noncurrent assets

 

108,298

 

 

58,379

 

Total other assets

 

204,372

 

 

283,927

 

Total assets

 

$

2,136,597

 

 

$

5,041,881

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

95,953

 

 

$

128,131

 

Accrued expenses and other current liabilities

 

205,240

 

 

329,450

 

Current maturities of debt

 

11,038

 

 

5,042,353

 

Total current liabilities

 

312,231

 

 

5,499,934

 

Long-term debt

 

351,841

 

 

30,953

 

Asset retirement obligations

 

337,227

 

 

396,659

 

Accrued pension benefits

 

38,884

 

 

27,373

 

Accrued postretirement benefits other than pension

 

101,445

 

 

99,810

 

Accrued workers’ compensation

 

184,568

 

 

112,270

 

Other noncurrent liabilities

 

63,824

 

 

119,171

 

Total liabilities

 

1,390,020

 

 

6,286,170

 

 

 

 

 

 

 

 

Stockholders’ equity (deficit)

 

 

 

 

 

 

Common Stock

 

250

 

 

2,145

 

Paid-in capital

 

688,424

 

 

3,054,211

 

Treasury stock, at cost

 

 

 

(53,863

)

Accumulated earnings (deficit)

 

33,449

 

 

(4,244,967

)

Accumulated other comprehensive income (loss)

 

24,454

 

 

(1,815

)

Total stockholders’ equity (deficit)

 

746,577

 

 

(1,244,289

)

Total liabilities and stockholders’ equity (deficit)

 

$

2,136,597

 

 

$

5,041,881

 

 



 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016
through December 31,
2016

 

 

January 1, 2016
through October 1,
2016

 

Year ended December
31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

 

Operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

33,449

 

 

$

1,242,081

 

$

(2,913,142

)

Adjustments to reconcile to cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

32,604

 

 

191,581

 

379,345

 

Accretion on asset retirement obligations

 

7,634

 

 

24,321

 

33,680

 

Amortization of sales contracts, net

 

796

 

 

(728

)

(8,811

)

Prepaid royalties expensed

 

2,587

 

 

4,791

 

8,109

 

Deferred income taxes

 

3

 

 

(419

)

(367,210

)

Employee stock-based compensation expense

 

1,032

 

 

2,099

 

5,760

 

Gains on disposals and divestitures

 

(485

)

 

(6,628

)

(2,270

)

Asset impairment and noncash mine closure costs

 

 

 

119,194

 

2,613,345

 

Losses from disposed operations resulting from Patriot Coal bankruptcy

 

 

 

 

116,343

 

Net loss resulting from early retirement of debt and debt restructuring

 

 

 

2,213

 

27,910

 

Non-cash bankruptcy reorganization items

 

 

 

(1,775,910

)

 

Amortization relating to financing activities

 

467

 

 

12,800

 

25,241

 

Changes in:

 

 

 

 

 

 

 

 

Receivables

 

(22,196

)

 

(42,786

)

98,212

 

Inventories

 

24,870

 

 

34,440

 

(6,534

)

Coal derivative assets and liabilities

 

1,662

 

 

5,678

 

973

 

Accounts payable, accrued expenses and other current liabilities

 

34,129

 

 

15,316

 

(15,532

)

Asset retirement obligations

 

(4,535

)

 

(12,041

)

(17,040

)

Pension, postretirement and other postemployment benefits

 

(5,625

)

 

(15,692

)

4,800

 

Other

 

(22,200

)

 

(28,528

)

(27,546

)

Cash provided by (used in) operating activities

 

84,192

 

 

(228,218

)

(44,367

)

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

(15,214

)

 

(82,434

)

(119,024

)

Minimum royalty payments

 

(63

)

 

(305

)

(5,871

)

Proceeds from (consideration paid for) disposals and divestitures

 

572

 

 

(2,921

)

2,191

 

Purchases of short term investments

 

 

 

(98,750

)

(246,735

)

Proceeds from sales of short term investments

 

23,000

 

 

185,859

 

290,205

 

Proceeds from sale of investments in equity investments and securities

 

 

 

1,147

 

2,259

 

Investments in and advances to affiliates, net

 

(823

)

 

(3,441

)

(11,502

)

Withdrawals (deposits) of restricted cash

 

10,512

 

 

15,979

 

(91,864

)

Cash provided by (used in) investing activities

 

17,984

 

 

15,134

 

(180,341

)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Payments on term loan

 

(816

)

 

 

(19,500

)

Net payments on other debt

 

3,374

 

 

(11,986

)

(11,332

)

Debt financing costs

 

 

 

(23,011

)

 

Expenses related to debt restructuring

 

 

 

(2,213

)

(27,910

)

Other

 

151

 

 

 

 

Cash provided by (used in) financing activities

 

2,709

 

 

(37,210

)

(58,742

)

 

 

 

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

104,885

 

 

(250,294

)

(283,450

)

Cash and cash equivalents, beginning of period

 

200,487

 

 

450,781

 

734,231

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

305,372

 

 

$

200,487

 

$

450,781

 

 



 

Arch Coal, Inc. and Subsidiaries

Schedule of Consolidated Debt

(In thousands)

 

 

 

Successor

 

 

Predecessor

 

 

 

December 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Term loan due 2021 ($326.5 million face value)

 

$

325,684

 

 

$

 

Term loan due 2018 ($1.9 billion face value)

 

 

 

1,875,429

 

7.00% senior notes due 2019 at par

 

 

 

1,000,000

 

9.875% senior notes ($375.0 million face value) due 2019

 

 

 

365,600

 

8.00% senior secured notes due 2019 at par

 

 

 

350,000

 

7.25% senior notes due 2020 at par

 

 

 

500,000

 

7.25% senior notes due 2021 at par

 

 

 

1,000,000

 

Other

 

37,195

 

 

47,134

 

Debt issuance costs

 

 

 

(64,857

)

 

 

362,879

 

 

5,073,306

 

Less: current maturities of debt

 

11,038

 

 

5,042,353

 

Long-term debt

 

$

351,841

 

 

$

30,953

 

 

 

 

 

 

 

 

Calculation of net debt

 

 

 

 

 

 

Total debt (excluding debt issuance costs)

 

$

362,879

 

 

$

5,138,163

 

Less liquid assets:

 

 

 

 

 

 

Cash and cash equivalents

 

305,372

 

 

450,781

 

Short term investments

 

88,072

 

 

200,192

 

 

 

393,444

 

 

650,973

 

Net debt

 

$

(30,565

)

 

$

4,487,190

 

 



 

Arch Coal, Inc. and Subsidiaries

Operational Performance

(In millions, except per ton data)

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016 through
December 31, 2016

 

 

January 1, 2016 through
October 1, 2016

 

Year ended December 31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

(Unaudited)

 

Powder River Basin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

21.8

 

 

 

 

54.9

 

 

 

108.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

$

270.9

 

$

12.41

 

 

$

714.2

 

$

13.01

 

$

1,426.3

 

$

13.15

 

Segment Cash Cost of Sales

 

215.5

 

9.88

 

 

601.5

 

10.95

 

1,143.4

 

10.54

 

Segment Cash Margin

 

55.4

 

2.53

 

 

112.6

 

2.06

 

282.9

 

2.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metallurgical

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

2.4

 

 

 

 

6.7

 

 

 

8.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

$

160.2

 

$

65.61

 

 

$

355.7

 

$

53.15

 

$

556.4

 

$

66.62

 

Segment Cash Cost of Sales

 

129.4

 

52.98

 

 

344.0

 

51.40

 

487.4

 

58.36

 

Segment Cash Margin

 

30.8

 

12.63

 

 

11.7

 

1.75

 

69.0

 

8.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Thermal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tons Sold

 

2.5

 

 

 

 

5.2

 

 

 

9.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Sales

 

$

85.4

 

$

34.01

 

 

$

187.4

 

$

36.16

 

$

364.4

 

$

37.32

 

Segment Cash Cost of Sales

 

54.7

 

21.79

 

 

156.9

 

30.28

 

273.5

 

28.01

 

Segment Cash Margin

 

30.7

 

12.22

 

 

30.5

 

5.88

 

91.0

 

9.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Segment Cash Margin

 

$

116.9

 

 

 

 

$

154.8

 

 

 

$

442.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

(22.8

)

 

 

 

(59.3

)

 

 

(98.8

)

 

 

Liquidated damages under export logistics contracts

 

 

 

 

 

(1.6

)

 

 

(52.9

)

 

 

Other

 

0.5

 

 

 

 

(6.6

)

 

 

(7.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDAR

 

$

94.5

 

 

 

 

$

87.3

 

 

 

$

283.8

 

 

 

 

Reconciliation of Non-GAAP Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016 through
December 31, 2016

 

 

January 1, 2016 through
October 1, 2016

 

Year ended December 31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment sales

 

$

516.4

 

 

 

 

$

1,257.2

 

 

 

$

2,347.1

 

 

 

Transportation costs billed to customers

 

57.2

 

 

 

 

121.7

 

 

 

181.2

 

 

 

Coal risk management derivative settlements

 

(0.1

)

 

 

 

0.4

 

 

 

(3.2

)

 

 

Other (1)

 

2.2

 

 

 

 

19.4

 

 

 

48.1

 

 

 

Revenues

 

$

575.7

 

 

 

 

$

1,398.7

 

 

 

$

2,573.3

 

 

 

 


(1) Other includes coal sales associated with mines that have operated historically but have been idled or disposed of and are no longer part of a segment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016 through
December 31, 2016

 

 

January 1, 2016 through
October 1, 2016

 

Year ended December 31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

Total segment cash cost of sales

 

$

399.6

 

 

 

 

$

1,102.4

 

 

 

$

1,904.3

 

 

 

Transportation costs billed to customers

 

57.2

 

 

 

 

121.7

 

 

 

181.2

 

 

 

Risk management derivative settlements—diesel fuel

 

0.4

 

 

 

 

(3.6

)

 

 

(8.1

)

 

 

Fresh start coal inventory fair value adjustment

 

7.3

 

 

 

 

 

 

 

 

 

 

Other (1)

 

6.2

 

 

 

 

44.0

 

 

 

95.3

 

 

 

Cost of sales

 

$

470.6

 

 

 

 

$

1,264.5

 

 

 

$

2,172.8

 

 

 

 


(1) Other includes costs associated with mines that have operated historically but have been idled or disposed of and are no longer part of a segment and operating overhead.

 



 

Arch Coal, Inc. and Subsidiaries

Reconciliation of Non-GAAP Measures

(In thousands, except per share data)

 

Included in the accompanying release, we have disclosed certain non-GAAP measures as defined by Regulation G. The following reconciles these items to net income and cash flows as reported under GAAP.

 

Adjusted EBITDAR

 

Adjusted EBITDAR is defined as net income attributable to the Company before the effect of net interest expense, income taxes, depreciation, depletion and amortization, accretion on asset retirement obligations, amortization of sales contracts and reorganization items, net. Adjusted EBITDAR may also be adjusted for items that may not reflect the trend of future results.

 

Adjusted EBITDAR is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted EBITDAR are significant in understanding and assessing our financial condition. Therefore, Adjusted EBITDAR should not be considered in isolation, nor as an alternative to net income, income from operations, cash flows from operations or as a measure of our profitability, liquidity or performance under generally accepted accounting principles.  The Company uses adjusted EBITDAR to measure the operating performance of its segments and allocate resources to the segments.  Furthermore, analogous measures are used by industry analysts to evaluate our operating performance. Investors should be aware that our presentation of Adjusted EBITDAR may not be comparable to similarly titled measures used by other companies. The table below shows how we calculate Adjusted EBITDAR.

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016
through December
31, 2016

 

 

January 1, 2016
through October 1,
2016

 

Year ended
December 31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

(Unaudited)

 

Net income (loss)

 

$

33,449

 

 

$

1,242,081

 

$

(2,913,142

)

Income tax (benefit) expense

 

1,156

 

 

(4,626

)

(373,380

)

Interest expense, net

 

10,754

 

 

133,235

 

393,549

 

Depreciation, depletion and amortization

 

32,604

 

 

191,581

 

379,345

 

Accretion on asset retirement obligations

 

7,634

 

 

24,321

 

33,680

 

Amortization of sales contracts, net

 

796

 

 

(728

)

(8,811

)

Asset impairment and mine closure costs

 

 

 

129,267

 

2,628,303

 

Losses from disposed operations resulting from Patriot Coal bankruptcy

 

 

 

 

116,343

 

Net loss resulting from early retirement of debt and debt restructuring

 

 

 

2,213

 

27,910

 

Reorganization items, net

 

759

 

 

(1,630,041

)

 

Fresh start coal inventory fair value adjustment

 

7,345

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDAR

 

$

94,497

 

 

$

87,303

 

$

283,797

 

 

Adjusted net income (loss) and adjusted diluted income (loss) per share

 

Adjusted net income (loss) and adjusted diluted income (loss) per common share are adjusted for the after-tax impact of reorganization items, net and are not measures of financial performance in accordance with generally accepted accounting principles.  We believe that adjusted net income (loss) and adjusted diluted income (loss) per common share better reflect the trend of our future results by excluding items relating to significant transactions. The adjustments made to arrive at these measures are significant in understanding and assessing our financial condition. Therefore, adjusted net income (loss) and adjusted diluted income (loss) per share should not be considered in isolation, nor as an alternative to net income (loss) or diluted income (loss) per common share under generally accepted accounting principles.

 

 

 

Successor

 

 

Predecessor

 

 

 

October 2, 2016
through December
31, 2016

 

 

January 1, 2016
through October 1,
2016

 

Year ended
December 31, 2015

 

 

 

(Unaudited)

 

 

(Unaudited)

 

(Unaudited)

 

Net income (loss)

 

$

33,449

 

 

$

1,242,081

 

$

(2,913,142

)

 

 

 

 

 

 

 

 

 

Amortization of sales contracts, net

 

796

 

 

(728

)

(8,811

)

Asset impairment and mine closure costs

 

 

 

129,267

 

2,628,303

 

Losses from disposed operations resulting from Patriot Coal bankruptcy

 

 

 

 

116,343

 

Net loss resulting from early retirement of debt and debt restructuring

 

 

 

2,213

 

27,910

 

Reorganization items, net

 

759

 

 

(1,630,041

)

 

Fresh start coal inventory fair value adjustment

 

7,345

 

 

 

 

Tax impact of adjustment

 

(287

)

 

262

 

(345,166

)

 

 

 

 

 

 

 

 

 

Adjusted net income (loss)

 

$

42,062

 

 

$

(256,946

)

$

(494,563

)

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

25,469

 

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Diluted income per share

 

$

1.31

 

 

N/A

 

N/A

 

 

 

 

 

 

 

 

 

 

Amortization of sales contracts, net

 

0.03

 

 

N/A

 

N/A

 

Asset impairment and mine closure costs

 

 

 

N/A

 

N/A

 

Losses from disposed operations resulting from Patriot Coal bankruptcy

 

 

 

N/A

 

N/A

 

Net loss resulting from early retirement of debt and debt restructuring

 

 

 

N/A

 

N/A

 

Reorganization items, net

 

0.03

 

 

N/A

 

N/A

 

Fresh start coal inventory fair value adjustment

 

0.29

 

 

N/A

 

N/A

 

Tax impact of adjustments

 

(0.01

)

 

N/A

 

N/A

 

Adjusted diluted income per share

 

$

1.65

 

 

N/A

 

N/A