SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 27, 2004 (July 26, 2004)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-13105 43-0921172
----------------------------- -------------------------- ----------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
One CityPlace Drive, Suite 300, St. Louis, Missouri 63141
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (314) 994-2700
Page 1 of 5 pages.
Exhibit Index begins on page 4.
Item 7 Financial Statements, ProForma Financial Information and Exhibits.
See the Exhibit Index at page 5 of this Report.
Item 9. Regulation FD Disclosure.
Item 12. Disclosure of Results of Operations and Financial Condition.
The information in this Report is being furnished under Item 9, "Regulation FD
Disclosure" and Item 12, "Disclosure of Results of Operations and Financial
Condition."
On July 26, 2004, Arch Coal, Inc. (the "Company"), announced via press
release its earnings and operating results for the second quarter of 2004. A
copy of the Company's press release is attached hereto and incorporated herein
by reference in its entirety.
The Company is also providing the following reconciliation of Adjusted
EBITDA for its Arch Western Resources, LLC subsidiary:
Arch Western Resources, LLC Three Months Ended Six Months Ended
Reconciliation of net income to adjusted EBITDA June 30 June 30
----------------------- -------------------------------
2004 2003 2004 2003
----------- ----------- -------------- --------------
(Amounts in 000's)
Net income $ 8,022 $ 10,421 $ 8,944 $ 254
Cumulative effect of accounting change - - - 18,278
Interest expense, net 9,073 6,476 18,270 13,056
Depreciation, depletion and amortization -
Arch Western Resources 16,760 16,115 33,396 30,980
DD&A - Equity interest in Canyon Fuel Company, LLC 4,463 5,826 8,853 11,319
Other nonoperating expense 3,388 4,896 6,775 4,896
----------- ----------- -------------- --------------
Adjusted EBITDA $ 41,706 $ 43,734 $ 76,238 $78,783
=========== =========== ============== ==============
Reconciliation of net income to income before other nonoperating
expense and cumulative effect of accounting change
Net income $ 8,022 $ 10,421 $ 8,944 $ 254
Cumulative effect of accounting change - - - 18,278
Other nonoperating expense 3,388 4,896 6,775 4,896
----------- ----------- -------------- --------------
Income before other nonoperating expense and cumulative
effect of accounting change $ 11,410 $ 15,317 $ 15,719 $23,428
=========== =========== ============== ==============
Page 2 of 5 pages.
Exhibit Index begins on page 5.
Note:Adjusted EBITDA is defined as net income before the effect of net interest
expense; income taxes; our depreciation, depletion and amortization; our
equity interest in the depreciation, depletion and amortization of Canyon
Fuel Company, LLC; cumulative effect of accounting changes; and expenses
resulting from early extinguishment of debt; and mark-to market adjustments
in the value of derivative instruments.
Adjusted EBITDA is not a measure of financial performance in
accordance with generally accepted accounting principles, and items
excluded to calculate Adjusted EBITDA are significant in understanding and
assessing our financial condition. Therefore, Adjusted EBITDA should not be
considered in isolation nor as an alternative to net income, income from
operations, cash flows from operations or as a measure of our
profitability, liquidity or performance under generally accepted accounting
principles. We believe that Adjusted EBITDA presents a useful measure of
our ability to service and incur debt based on ongoing operations.
Furthermore, analogous measures are used by industry analysts to evaluate
operating performance. Investors should be aware that our presentation of
Adjusted EBITDA may not be comparable to similarly titled measures used by
other companies.
In accordance with General Instruction B.6 of Form 8-K, the information in this
Current Report on Form 8-K, including Exhibit 99, shall not be deemed "filed"
for the purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liability of that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of 1933,
as amended, except as shall be expressly set forth by specific reference in such
a filing.
Page 3 of 5 pages.
Exhibit Index begins on page 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 27, 2004 ARCH COAL, INC.
By: /s/ Janet L. Horgan
----------------------------------
Janet L. Horgan
Assistant General Counsel and
Assistant Secretary
Page 4 of 5 pages.
Exhibit Index begins on page 4.
EXHIBIT INDEX
Exhibit No. Description
----------- ------------
99 Press Release dated as of July 26, 2004
Page 5 of 5 pages.
Exhibit 99
News from
Arch Coal, Inc.
--------------------------------------------------------------------------------
FURTHER INFORMATION:
Deck S. Slone
Vice President,
Investor and Public Relations
(314) 994-2717
FOR IMMEDIATE RELEASE
July 26, 2004
Arch Coal, Inc. Reports Second Quarter Results
|X| Revenue increases to $422.8 million, up 12% vs. the same period last year
|X| Earnings per fully diluted share rises to $0.17 ($0.20 excluding
swap-related charge), vs. a net loss in 2Q03
|X| Adjusted EBITDA increases 19% to $65.4 million
|X| Average margin increases to $1.45 per ton vs. $0.88 in 2Q03
|X| Secured all major permits for new longwall mine in Logan County, West
Virginia
St. Louis - Arch Coal, Inc. (NYSE:ACI) today reported that for its second
quarter ended June 30, 2004, it had income available to common shareholders of
$9.3 million, or $0.17 per fully diluted share. Excluding charges related to the
termination of hedge accounting for interest rate swaps, income available to
common shareholders totaled $11.2 million, or $0.20 per fully diluted share.
During the same period of 2003, Arch recorded a net loss available to common
shareholders of $3.3 million, or $0.06 per fully diluted share. Excluding
special items of $4.0 million principally related to the early extinguishment of
debt, Arch had income available to common shareholders of $0.7 million, or $0.01
per fully diluted share, during the 2003 quarter.
"During the quarter, Arch reported dramatically improved results due to
higher average sales realizations, growing premiums for its low-sulfur coal, and
overall strengthening in U.S. coal demand," said Steven F. Leer, Arch's
president and chief executive officer. "If not for previously disclosed
disruptions in rail service at several of our operations, Arch's results would
have been even stronger. In total, missed shipments and production curtailments
related to high inventory levels cost the company an estimated $8 million during
the period."
Revenues increased 12% for the quarter to $422.8 million, compared to
$378.9 million during the same period last year, due to stronger realizations in
both the East and West. Sales volumes increased 3% to 26.4 million tons,
reflecting an increase of 1.5 million tons, or 8.7%, at Arch's western
operations, but offset somewhat by a decline of 0.8 million tons, or 9.6%, in
the East. Operating income for the second quarter totaled $24.9 million, which
was nearly three times higher than the $9.4 million recorded during the same
period last year. Adjusted EBITDA increased 19% to $65.4 million, compared to
$54.8 million in the same period last year.
For the six months ended June 30, 2004, income available to common
shareholders increased to $22.5 million, or $0.41 per fully diluted share,
excluding a net gain of $81.9 million associated with the sale of nearly all of
its remaining interest in Natural Resource Partners, charges related to the
termination of hedge accounting for interest rate swaps, and severance costs
associated with the closing of the Skyline Mine in Utah. That compares to a loss
of $13.7 million, or $.26 per fully diluted share, excluding charges related to
early debt extinguishment and the cumulative effect of accounting change, during
the same period of 2003. Total coal sales for the six months increased 17% to
$826.3 million and coal sales volumes increased 8% to 52.3 million tons, vs.
$706.3 million and 48.3 million tons in the comparable period of 2003. Adjusted
EBITDA totaled $212.8 million for the first six months of 2004, compared to
$93.5 million for the same period of 2003.
Improving profit margins in both East and West
For the quarter, Arch's average per-ton operating margin rose to $1.45 per
ton, compared to $0.88 per ton during the same period last year.
Average realization for all tons sold increased 8% to $15.59 per ton, while
the average cost across all tons increased approximately 4.7% to $14.14. By
region, average realization per ton sold increased 22% in the East to $36.21 and
5% in the West to $7.67, as the company benefited from stronger contract prices
in both regions and very attractive margins on limited spot sales in the East.
Rail difficulties resulted in missed shipments in both the East and West,
including some of the company's highest margin eastern business. In addition,
the company was forced to curtail production during the quarter at the West Elk
mine in Colorado and the Black Thunder mine in Wyoming due to high inventory
levels stemming from insufficient rail service. Inventory levels increased more
than 30% to 9.4 million tons during the year's first half.
Average per-ton operating cost for all tons sold rose approximately 4.7%
during the quarter vs. the same period last year. Average per-ton operating cost
in the West increased approximately 4.6% to $6.79 due principally to
rail-related production constraints as well as higher sales-sensitive costs
related to improved realizations. In the East, the average per-ton operating
cost increased 16% to $33.29 as a result of lower volumes, higher commodity
costs (diesel fuel, explosives and steel), and increased contract mining
expenses, as well as higher sales-sensitive costs. In addition, the company
incurred higher coal preparation and purchased coal costs associated with an
ongoing effort to shift more of its eastern production into the metallurgical
market. During the quarter, the company sold approximately 650,000 tons of
metallurgical coal, an increase of 70% compared to the same period last year.
"We continue to focus on managing our costs effectively and running our
operations in a manner that will enable us to capitalize on opportunities in the
marketplace," Leer said. "Arch's operations in both the East and West rank among
the most productive and lowest cost in their respective operating regions. With
improved rail service and the completion of several small-scale expansion
projects in the East, we expect continued margin expansion and increased levels
of profitability across all of our operations."
Operating statistics
Second Quarter 2004 Regional Analysis:
Eastern Western Total
Operations Operations
2Q 04 2Q 03 2Q 04 2Q 03 2Q 04 2Q 03
Tons sold (in mm) 7.3 8.1 19.1 17.6 26.4 25.7
Sales price per ton (1) $36.21 $29.66 $7.67 $7.32 $15.59 $14.38
Operating cost per ton (1, 2) $33.29 $28.62 $6.79 $6.49 $14.14 $13.50
Operating margin per ton $ 2.92 $ 1.04 $0.88 $0.83 $ 1.45 $ 0.88
Note: Western operations data do not include the results of 65%-owned Canyon
Fuel Company, which is accounted for on the equity method.
(1) Per ton realizations and costs exclude transportation costs that are billed
to customers. Eastern transportation costs totaled $10.1 million in the second
quarter of 2004 and $8.7 million in the second quarter of 2003. Western
transportation costs totaled $0.7 million in the second quarter of 2004 and $0.9
million in the second quarter of 2003.
(2) Per ton costs exclude postretirement medical costs totaling $14.2 million in
the second quarter of 2004 and $16.2 million in the second quarter of 2003.
Capital Spending and DD&A (in millions):
Q2 2004 1st Half 2004 Q2 2003 1st Half 2003 FY 2004 (proj.)
Capital spending $38.2 $71.7 $21.4 $72.1 $300
DD&A $40.5 $81.0 $45.4 $90.4 $175
Note: Data on capital spending and depreciation, depletion and amortization
include Arch's ownership percentage in Canyon Fuel Company. Projected capital
spending has been updated to include the purchase of the remaining 35% of Canyon
Fuel Company, the inclusion of 100% of Canyon Fuel's expected capital
requirements for the remainder of the year, and capital related to initial
development work at the Mountain Laurel complex during the year's second half.
Projected DD&A includes Canyon Fuel at 100% for the third and fourth quarters.
Projected capital spending and DD&A do not include other potential acquisitions
or reserve additions.
Coal markets continue to strengthen
During the quarter, spot prices for many coal products rose to their
highest levels in many years as an expanding economy boosted power demand;
coal-based utilities sought to rebuild rapidly depleting stockpiles; and eastern
coal producers struggled to keep pace with demand.
"It is becoming increasingly evident that the fuels with which coal has
competed for decades - nuclear, natural gas and hydroelectric - are simply
incapable of keeping pace with America's growing demand for power," Leer said.
"As a result, domestic coal demand is booming - and the domestic coal market
appears to be at the outset of a long and sustained run."
Rapid declines in coal stockpiles at U.S. power plants are one indication
of the market's staying power, according to Leer. "Based on an estimated
increase in electric output of 2.4% year to date, according to Edison Electric
Institute, we expect that the amount of coal in power industry stockpiles will
fall to well under 100 million tons by year's end," Leer said. "That should act
as a powerful stimulus for an extended period of vigorous demand as utilities
seek to rebuild stockpiles at their coal-based power plants, which are
increasingly viewed as their most economic, reliable and strategic sources of
power."
In addition to strong domestic demand, world coal markets are showing
similar signs of strength, boosted by increasing coal consumption in some of the
world's fastest growing economies, including China and India, according to Leer.
Robust international demand - coupled with a rejuvenated global steel industry -
has greatly enhanced the outlook for U.S. coal exports, which are up an
estimated four million tons, or 25%, through the end of May.
In addition, sulfur dioxide emissions allowance credits are now trading at
over $500 per ton, nearly four times higher than the level just 18 months ago.
"Since the passage of the Clean Air Act Amendments of 1990, Arch has pursued
focused growth in the nation's three principal low-sulfur coal regions," Leer
said. "As a result, we are extremely well positioned to capitalize on the
current market environment and the significant premiums being paid for lower
sulfur coals."
Development work to commence at Mountain Laurel during third quarter
In July, Arch received the last major permit needed to begin development
work on a new longwall mine, located at the Mountain Laurel complex in Logan
County, West Virginia. "Arch's extensive reserve base creates many attractive
opportunities for profitable growth," Leer said. "We view Mountain Laurel as one
of the best undeveloped longwall reserves in the eastern low-sulfur coalfields."
The Mountain Laurel longwall mine is expected to produce five million tons
of coal on an annualized basis once it ramps to full production in mid-2007.
Initial production should begin in late 2005. The mine's entire output will be
available for sale as either a metallurgical coal or a high-quality steam coal,
depending on market dynamics at the time. Arch expects to invest approximately
$190 million to develop the longwall operation.
"Once development work is completed, we expect Mountain Laurel to become
the centerpiece of our eastern operations," Leer said. "It is a unique property
that should rank among the most productive and lowest cost operations in the
region for many years to come." The start-up of the Mountain Laurel longwall is
expected to coincide with the projected depletion of the Mingo Logan longwall
reserves in late 2006.
Other recent developments
On July 15, Arch announced that it had signed a definitive agreement to
acquire the remaining 35% interest in Canyon Fuel Company. The present value of
the purchase price less cash acquired totals approximately $98 million. Canyon
Fuel will become a wholly owned subsidiary of Arch Coal following the closing of
the transaction, which is expected to occur sometime during the third quarter.
"This acquisition solidifies Arch's position as the leading coal producer in the
Western Bituminous Region," Leer said. "Demand for western bituminous coal has
increased significantly in recent months, as eastern utilities seek alternatives
for high-Btu, low-sulfur eastern coals, which remain in short supply. Through
the integration of our West Elk mine in Colorado and the Canyon Fuel operations
in Utah, we have established a strategic platform that will enable us to compete
aggressively for this business."
Arch also continues to pursue the acquisition of Triton Coal Company's
North Rochelle mine. As previously announced, the Federal Trade Commission filed
a lawsuit in late March 2004 to block the acquisition. Arch defended the
transaction in a hearing in U.S. District Court for the District of Columbia
that concluded on July 20. The court is expected to render a decision during the
third quarter on whether to enjoin the transaction from proceeding. "While we
hope for a favorable decision, Arch has incurred certain acquisition-related
costs - totaling approximately $12 million through June 30 - that would be
expensed immediately should the Triton transaction fail to be consummated," Leer
noted.
Arch ended the quarter with $296.3 million of cash on its balance sheet.
The company plans to use approximately $60 million of that cash to finance the
acquisition of Itochu's 35% stake in Canyon Fuel. The remainder - as well as
approximately $280 million in capacity under the company's existing revolver -
is available to fund other growth initiatives, including the potential
acquisition of Triton's North Rochelle mine. In addition, the company's Arch
Western subsidiary has an undrawn term loan of $100 million that could be used
to fund the potential acquisition of Triton.
Contract activity
Capitalizing on the market's current strength, Arch acted to lock in
pricing on a percentage of its unpriced tonnage during the second quarter. The
company signed attractive new commitments that increased the percentage of coal
already priced for delivery in 2005 from approximately 65% to 75%, and in 2006
from approximately 50% to 60%.
"An increasingly attractive contract portfolio and a significant open
market position for future production should lead to significant improvements in
our average per-ton realizations across all regions in coming quarters," Leer
said.
Looking ahead
Arch expects to record earnings of between $0.15 and $0.25 per share for
the third quarter, excluding charges related to the termination of hedge
accounting for interest rate swaps, with actual results dependent in large part
on rail performance. Rail service is expected to improve as the year progresses,
according to Leer.
"Despite rail-related challenges that are incorporated in our third quarter
earnings estimate, we expect strong upward momentum in earnings in future
periods," Leer said. "The fourth quarter is expected to be our strongest of the
year, and we anticipate even greater improvements in earnings next year, when an
increasing percentage of our production is expected to reflect recent market
conditions."
A conference call concerning second quarter earnings will be webcast live
today at 11 a.m. Eastern. The conference call can be accessed via the "investor"
section of the Arch Coal Web site (www.archcoal.com).
Arch Coal is one of the nation's largest coal producers, with subsidiary
operations in West Virginia, Kentucky, Virginia, Wyoming, Colorado and Utah.
Through these operations, Arch Coal provides the fuel for approximately 6% of
the electricity generated in the United States.
Forward-Looking Statements: Statements in this press release which are not
statements of historical fact are forward-looking statements within the "safe
harbor" provision of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on information currently available to, and
expectations and assumptions deemed reasonable by, the company. Because these
forward-looking statements are subject to various risks and uncertainties,
actual results may differ materially from those projected in the statements.
These expectations, assumptions and uncertainties include: the company's
expectation of continued growth in the demand for electricity; belief that
legislation and regulations relating to the Clean Air Act and the relatively
higher costs of competing fuels will increase demand for its compliance and
low-sulfur coal; expectation of continued improved market conditions for the
price of coal; expectation that the company will continue to have adequate
liquidity from its cash flow from operations, together with available borrowings
under its credit facilities, to finance the company's working capital needs; a
variety of operational, geologic, permitting, labor and weather related factors;
and the other risks and uncertainties which are described from time to time in
the company's reports filed with the Securities and Exchange Commission.
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- --------------------------
2004 2003 2004 2003
----------- ------------ ------------ ------------
(Unaudited) (Unaudited)
Revenues
Coal sales $ 422,778 $ 378,892 $ 826,268 $706,282
Costs and expenses
Cost of coal sales 398,701 372,323 781,892 705,963
Selling, general and administrative expenses 12,358 11,890 27,984 23,763
Amortization of coal supply agreements 628 4,526 1,238 10,320
Other expenses 7,046 4,972 12,819 9,520
------------------------------------------------------
418,733 393,711 823,933 749,566
------------------------------------------------------
Other operating income
Income from equity investments 5,995 12,191 9,685 23,301
Gain on sale of units of Natural Resource Partners, LP 384 - 81,851 -
Other operating income 14,446 11,995 37,908 23,085
------------------------------------------------------
20,825 24,186 129,444 46,386
------------------------------------------------------
Income from operations 24,870 9,367 131,779 3,102
Interest expense, net:
Interest expense (14,101) (11,667) (28,842) (23,219)
Interest income 903 493 1,613 826
------------------------------------------------------
(13,198) (11,174) (27,229) (22,393)
------------------------------------------------------
Other non-operating income (expense):
Expenses resulting from early debt extinguishment and termination of
hedge accounting for interest rate swaps (2,066) (4,823) (4,132) (4,823)
Other non-operating income 202 873 373 873
------------------------------------------------------
(1,864) (3,950) (3,759) (3,950)
------------------------------------------------------
Income (loss) before income taxes and cumulative effect of
accounting change 9,808 (5,757) 100,791 (23,241)
(Benefit from) provision for income taxes (1,300) (4,300) 19,700 (8,600)
------------------------------------------------------
Income (loss) before cumulative effect of accounting change 11,108 (1,457) 81,091 (14,641)
Cumulative effect of accounting change, net of taxes - - - (3,654)
------------------------------------------------------
Net income (loss) 11,108 (1,457) 81,091 (18,295)
Preferred stock dividends (1,797) (1,797) (3,594) (2,995)
------------------------------------------------------
Net income (loss) available to common shareholders $ 9,311 $ (3,254) $ 77,497 $(21,290)
======================================================
Earnings per common share
Earnings (loss) before cumulative effect of accounting change $ 0.17 $ (0.06) $ 1.43 $ (0.34)
Cumulative effect of accounting change - - - (0.07)
------------------------------------------------------
Basic earnings (loss) per common share $ 0.17 $ (0.06) $ 1.43 $ (0.41)
======================================================
Earnings (loss) before cumulative effect of accounting change $ 0.17 $ (0.06) $ 1.31 $ (0.34)
Cumulative effect of accounting change - - - (0.07)
------------------------------------------------------
Diluted earnings (loss) per common share $ 0.17 $ (0.06) $ 1.31 $ (0.41)
======================================================
Weighted average shares outstanding
Basic 54,582 52,418 54,206 52,401
Diluted 55,550 52,418 62,021 52,401
======================================================
Dividends declared per common share $ 0.0800 $ 0.0575 $ 0.1375 $0.1150
======================================================
Adjusted EBITDA (A) $ 65,413 $ 54,779 $ 212,817 $93,518
======================================================
(A) Adjusted EBITDA is defined as net income before the effect of net interest
expense; income taxes; our depreciation, depletion and amortization; our
equity interest in the depreciation, depletion and amortization of Canyon
Fuel Company, LLC; cumulative effect of accounting changes; expenses
resulting from early extinguishment of debt; and mark-to-market adjustments
in the value of derivative instruments.
Adjusted EBITDA is not a measure of financial performance in accordance
with generally accepted accounting principles, and items excluded to
calculate Adjusted EBITDA are significant in understanding and assessing
our financial condition. Therefore, Adjusted EBITDA should not be
considered in isolation nor as an alternative to net income, income from
operations, cash flows from operations or as a measure of our
profitability, liquidity or performance under generally accepted accounting
principles. We believe that Adjusted EBITDA presents a useful measure of
our ability to service and incur debt based on ongoing operations.
Furthermore, analogous measures are used by industry analysts to evaluate
operating performance. Investors should be aware that our presentation of
Adjusted EBITDA may not be comparable to similarly titled measures used by
other companies. The table below shows how we calculate Adjusted EBITDA.
Three Months Ended Six Months Ended
June 30 June 30
------------------------------------------------------
2004 2003 2004 2003
------------------------------------------------------
Net income (loss) $ 11,108 $ (1,457) $ 81,091 $(18,295)
Cumulative effect of accounting change - - - 3,654
(Benefit from) provision for income taxes (1,300) (4,300) 19,700 (8,600)
Interest expense, net 13,198 11,174 27,229 22,393
Depreciation, depletion and amortization - Arch Coal, Inc. 36,080 39,586 72,185 79,097
DD&A - Equity interest in Canyon Fuel Company, LLC 4,463 5,826 8,853 11,319
Expenses from early debt extinguishment and other nonoperating 1,864 3,950 3,759 3,950
------------------------------------------------------
Adjusted EBITDA $ 65,413 $ 54,779 $ 212,817 $ 93,518
======================================================
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2004 2003
-----------------------------------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 296,300 $ 254,541
Trade receivables 155,483 118,376
Other receivables 33,284 29,897
Inventories 83,306 69,907
Prepaid royalties 2,880 4,586
Deferred income taxes 10,700 19,700
Investment in Natural Resource Partners, LP, at market 5,288 -
Other 19,076 16,638
-----------------------------------------
Total current assets 606,317 513,645
-----------------------------------------
Property, plant and equipment, net 1,312,760 1,315,135
-----------------------------------------
Other assets
Prepaid royalties 87,397 70,880
Coal supply agreements 5,160 6,397
Deferred income taxes 249,240 246,024
Equity investments 158,042 172,045
Other 79,433 63,523
-----------------------------------------
579,272 558,869
-----------------------------------------
Total assets $ 2,498,349 $ 2,387,649
=========================================
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 108,226 $ 89,975
Accrued expenses 164,138 180,314
Current portion of debt - 6,349
-----------------------------------------
Total current liabilities 272,364 276,638
Long-term debt 700,071 700,022
Accrued postretirement benefits other than pension 363,722 352,097
Asset retirement obligations 144,896 143,545
Accrued workers' compensation 77,767 77,672
Other noncurrent liabilities 133,500 149,640
-----------------------------------------
Total liabilities 1,692,320 1,699,614
-----------------------------------------
Stockholders' equity
Preferred stock 29 29
Common stock 554 536
Paid-in capital 1,033,865 988,476
Retained deficit (185,907) (255,936)
Unearned compensation (3,132) -
Treasury stock, at cost (5,047) (5,047)
Accumulated other comprehensive loss (34,333) (40,023)
-----------------------------------------
Total stockholders' equity 806,029 688,035
-----------------------------------------
Total liabilities and stockholders' equity $ 2,498,349 $ 2,387,649
=========================================
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
----------------------------------
2004 2003
----------------------------------
(Unaudited)
Operating activities
Net income (loss) $ 81,091 $ (18,295)
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 72,185 79,097
Prepaid royalties expensed 7,853 7,259
Accretion on asset retirement obligations 5,893 7,204
Net gain on disposition of assets (607) (1,688)
Gain on sale of units of Natural Resource Partners, LP (81,851) -
Mark to market adjustment for investment in Natural Resource Partners, LP (8,104) -
Income from equity investments (9,685) (23,301)
Net (contributions to) distributions from equity investments (2,739) 23,622
Cumulative effect of accounting change - 3,654
Other non-operating expense 3,759 3,950
Changes in:
Receivables (40,495) 6,363
Inventories (13,399) (2,635)
Accounts payable and accrued expenses 2,417 (21,556)
Income taxes 4,729 (8,668)
Accrued postretirement benefits other than pension 11,625 12,944
Asset retirement obligations (4,542) (7,592)
Accrued workers' compensation benefits 95 (724)
Other (8,243) 5,199
----------------------------------
Cash provided by operating activities 19,982 64,833
----------------------------------
Investing activities
Capital expenditures (69,132) (66,941)
Proceeds from sale of units of Natural Resource Partners, LP 105,365 -
Proceeds from dispositions of capital assets 1,010 1,839
Proceeds from coal supply agreements - 52,548
Additions to prepaid royalties (22,663) (23,204)
----------------------------------
Cash provided by (used in) investing activities 14,580 (35,758)
----------------------------------
Financing activities
Net payments on revolver and lines of credit - (72,174)
Payments on long-term debt (6,300) (675,000)
Proceeds from issuance of senior notes - 700,000
Deferred financing costs (1,160) (15,468)
Dividends paid (11,062) (7,829)
Proceeds from sale of preferred stock - 139,024
Proceeds from sale of common stock 25,719 1,594
----------------------------------
Cash provided by financing activities 7,197 70,147
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Increase in cash and cash equivalents 41,759 99,222
Cash and cash equivalents, beginning of period 254,541 9,557
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Cash and cash equivalents, end of period $ 296,300 $ 108,779
==================================
Canyon Fuel Company cash flow information (Arch Coal ownership percentage)
Depreciation, depletion and amortization 8,853 11,319
Additions to property, plant and equipment (2,531) (5,164)
Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
Included in the accompanying release, we have disclosed income available to
common shareholders for the quarter ending June 30, 2004 and the six months
ending June 30, 2004 and 2003 excluding certain items. These measures are
considered non-GAAP measures as defined by Regulation G. The following
reconciles these amounts to net income available to common shareholders reported
under GAAP:
Three Months Ended Six Months Ended
June 30 June 30
2004 2003 2004 2003
--------------------------------------------------
(Unaudited) (Unaudited)
Net income (loss) available to common shareholders $ 9,311 $ (3,254) $ 77,497 $(21,290)
Other non-operating expense 1,864 3,950 3,759 3,950
Gain on sale of units of Natural Resource Partners, L.P. - - (81,851) -
Severance costs related to Skyline idling - - 2,110 -
Cumulative effect of accounting change - - - 3,654
Tax impact of the excluded items - - 20,990 -
--------------------------------------------------
Net income (loss) available to common shareholders excluding
items $ 11,175 $ 696 $ 22,505 $(13,686)
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Fully diluted shares outstanding 55,550 52,418 62,021 52,401
Adjustment to exclude impact of convertible preferred shares
that would not be dilutive - - (6,896) -
--------------------------------------------------
Fully diluted shares outstanding 55,550 52,418 55,125 52,401
--------------------------------------------------
Earnings (loss) per common share excluding items $ 0.20 $ 0.01 $ 0.41 $ (0.26)
==================================================