ARCH COAL INC ST. LOUIS, April 21, 2015 /PRNewswire/ --
Earnings Highlights
-------------------
Quarter Ended
In $ millions, except per
share data 3/31/15 3/31/14
------------------------- ------- -------
Revenues $677.0 $736.0
Loss from Operations (19.7) (73.1)
Net Loss (113.2) (124.1)
Diluted LPS (0.53) (0.59)
----------- ----- -----
Adjusted Diluted LPS (1) (0.54) (0.60)
Adjusted EBITDA (1) $81.8 $27.6
1/- Defined and reconciled under "Reconciliation of non-GAAP measures."
Arch Coal, Inc. (NYSE: ACI) today reported a net loss of $113 million, or $0.53 per diluted share, in the first quarter of 2015 compared with a net loss of $124 million, or $0.59 per diluted share, in the first quarter of 2014. Revenues totaled $677 million for the three months ended March 31, 2015 and adjusted earnings before interest, taxes, depreciation, depletion and amortization ("adjusted EBITDA") was $82 million, a threefold increase as compared to the prior-year quarter.
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"Our first quarter 2015 results reflect another strong operating performance with improved adjusted EBITDA generation over the prior-year period," said John W. Eaves, Arch's president and chief executive officer. "We continue to take proactive steps to reinforce our operational and financial flexibility. These actions are positioning us to maneuver through both near-term and long-term market challenges by optimizing our low-cost asset base, being market responsive, controlling costs and managing liquidity."
Financial Position
As of March 31, 2015, Arch had available liquidity of $1.1 billion, including cash and short-term investments of $939 million and undrawn borrowings on its credit facilities. "We are focused on managing our available liquidity through these difficult conditions," said John T. Drexler, Arch's senior vice president and chief financial officer. "As part of an ongoing review of our costs, we again reduced our capital and administrative spending during the three months ended March 31, 2015, enabling us to lower spending expectations for full year 2015."
Core Values
Arch made continued progress toward the company's ultimate goal of a Perfect Zero - a dual goal of operating without a reportable safety incident or environmental violation - with five operations achieving this high operating standard in the first quarter of 2015. The company also reported an improved total incident rate for the three months ended March 31, 2015 over the previous quarter and advanced its environmental compliance record.
In addition, Arch subsidiaries were honored with several state awards during the first quarter for outstanding safety and environmental practices. In February, the West Elk mine was recognized as the safest underground coal mine in Colorado for the sixth consecutive year - a record unmatched by any other large underground coal mine in Colorado.
"We are off to another year of strong safety and environmental performance," said Paul A. Lang, Arch's executive vice president and chief operating officer. "We commend our employees for their many achievements and are proud of their unwavering dedication to our core values."
Operational Results
"Despite lower shipment levels in the first quarter of 2015 when compared to the previous quarter, we increased cash margins by more than 20 percent in our Appalachian and Powder River Basin segments," said Lang. "Driven by a strong operating performance, our Appalachian region reported its lowest cost performance in four years, allowing us to lower our annual cost guidance for the region."
Arch Coal, Inc.
1Q15 4Q14 1Q14
---- ---- ----
Tons sold (in millions) 33.1 35.2 31.4
Average sales price per
ton $19.18 $19.82 $20.09
Cash cost per ton $15.43 $16.46 $18.39
Cash margin per ton $3.75 $3.36 $1.70
Total operating cost
per ton $18.55 $19.45 $21.70
Operating margin per
ton $0.63 $0.37 ($1.61)
Consolidated results may not tie to regional breakout due to exclusion of other assets, rounding.
Cash cost per ton is defined and reconciled under "Reconciliation of non-GAAP measures".
Operating cost per ton is the sum of cash costs and depreciation, depletion
and amortization expense divided by tons sold.
----------------------------------------------
On a consolidated basis, Arch earned $3.75 per ton in cash margin in the first quarter of 2015 compared with $3.36 per ton in the fourth quarter of 2014, reflecting higher realizations earned in the company's Powder River Basin segment and a strong cost performance in its Appalachian segment. Consolidated sales price per ton decreased slightly over the same time period, but was more than offset by a 6 percent decline in consolidated cash cost per ton, reflecting lower cash costs in the Appalachian segment.
Powder River Basin
1Q15 4Q14 1Q14
---- ---- ----
Tons sold (in millions) 28.5 29.3 25.7
Average sales price per
ton $13.48 $12.86 $12.73
Cash cost per ton $10.96 $10.81 $11.45
Cash margin per ton $2.52 $2.05 $1.28
Total operating cost
per ton $12.52 $12.32 $12.98
Operating margin per
ton $0.96 $0.54 ($0.25)
Cash cost per ton is defined and reconciled under "Reconciliation of non-GAAP measures".
Operating cost per ton is the sum of cash costs and depreciation, depletion
and amortization expense divided by tons
sold.
----------------------------------------
In the Powder River Basin, first quarter 2015 cash margin per ton increased 23 percent to $2.52 per ton versus the fourth quarter of 2014. The improvement was driven by a 5 percent increase in average sales price, reflecting higher pricing on contracted tons and a larger percentage of higher-quality tons in the company's regional volume mix. Cash cost per ton increased slightly in the quarter just ended, driven primarily by higher sales sensitive costs, the impact of lower shipment levels and planned repair and maintenance costs.
Appalachia
1Q15 4Q14 1Q14
---- ---- ----
Tons sold (in millions) 3.0 3.6 3.6
Average sales price per
ton $65.23 $69.27 $67.70
Cash cost per ton $52.41 $59.37 $65.48
Cash margin per ton $12.82 $9.90 $2.22
Total operating cost
per ton $68.55 $73.48 $80.80
Operating margin per
ton ($3.32) ($4.21) ($13.10)
Cash cost per ton is defined and reconciled under "Reconciliation of non-GAAP measures".
Operating cost per ton is the sum of cash costs and depreciation, depletion
and amortization expense divided by tons sold.
----------------------------------------------
In Appalachia, Arch earned a cash margin of $12.82 per ton in the first quarter of 2015 compared to $9.90 per ton in the fourth quarter of 2014. Average sales price per ton declined 6 percent over the same time period, reflecting softer pricing on metallurgical and thermal tons and a lower percentage of metallurgical tons in the regional sales mix. The $6.96 per ton decrease in cash cost in the quarter just ended more than offset the drop in the average sales price and the impact of lower sales volumes. The 12 percent cash cost decline reflects the strong operational performance in the region, especially at the Leer mine, and ongoing cost containment efforts.
Bituminous Thermal
1Q15 4Q14 1Q14
---- ---- ----
Tons sold (in
millions) 1.6 2.3 2.1
Average sales price
per ton $33.42 $31.22 $28.64
Cash cost per ton $25.00 $21.42 $22.64
Cash margin per ton $8.42 $9.80 $6.00
Total operating cost
per ton $31.21 $25.94 $27.17
Operating margin per
ton $2.21 $5.28 $1.47
Cash cost per ton is defined and reconciled under "Reconciliation of non-GAAP measures".
Operating cost per ton is the sum of cash costs and depreciation, depletion
and amortization expense divided by tons sold.
----------------------------------------------
In the Bituminous Thermal region, first quarter 2015 cash margin decreased to $8.42 per ton versus $9.80 per ton in the fourth quarter of 2014, reflecting the impact of a 30 percent decrease in sales volumes. Average sales price per ton increased 7 percent versus the prior quarter, reflecting higher pricing on contracted tons and fewer export shipments. Cash cost per ton increased 17 percent over the same time period due to the impact of lower volume levels at the West Elk mine.
Market Trends
The global coal trade remains under significant pressure, as prevailing seaborne thermal and metallurgical prices have further softened and supply continues to outpace demand growth in the international thermal and metallurgical markets. Global steel production has declined 1 percent since the start of the year, marked by weakness in Europe and Asia, and steel capacity factors in the United States fell below 69 percent in April from 77 percent at the end of 2014.
Given recent market trends, Arch believes industry-wide coal exports from the United States will decline below 90 million tons in 2015 compared with 2014 export levels of nearly 100 million tons, with metallurgical exports accounting for most of the reduction. We expect seaborne coal markets to rebalance in time as demand grows, new global supply slows, and previously announced supply rationalizations take effect.
Arch now expects U.S. coal consumption for power generation to decline by 80 million tons in 2015 as compared to 2014, due to the surplus of natural gas and the impact of new environmental regulations that took effect in April. As a result of these factors, utility stockpiles increased by an estimated 10 million tons during the first quarter and are expected to build further over the course of the year.
Domestic coal supply reductions are counterbalancing demand declines to some extent. Mine Safety and Health Administration data suggests that total domestic production decreased by 13 million tons in the first quarter of 2015 versus the fourth quarter of 2014. Arch expects coal supply reductions to continue and accelerate as the year progresses.
Company Outlook
Arch now expects thermal sales volumes for 2015 to be in the range of 120 million to 130 million tons. The company has lowered its metallurgical coal sales guidance, and now expects to ship between 6.0 million and 6.8 million tons for 2015. Using this revised volume guidance, Arch is more than 95% committed on thermal sales and 75% committed on metallurgical sales for the full year.
Arch has also reduced its annual cash cost-per-ton guidance range for its Appalachian segment, while maintaining its cost outlook for the Powder River Basin. The company has raised the 2015 cash cost-per-ton guidance range for the company's Bituminous Thermal region to reflect the impact of lower production levels.
"We started the year with a solid sales foundation, and we are building on that position by proactively adjusting our sales expectations and managing our exposure by layering in sales as appropriate to run our mines efficiently," said Eaves. "Looking ahead, we believe our diversified, low-cost asset portfolio and our continued focus on controlling the factors we can will enable us to effectively manage the business through market headwinds."
2015 2016
---- ----
Tons $ per ton Tons $ per ton
---- --------- ---- ---------
Sales Volume (in millions tons)
------------------------------
Thermal 120.0 - 130.0
Met 6.0 - 6.8
--- --- ---
Total 126.0 - 136.8
Powder River Basin
------------------
Committed, Priced 105.0 $13.34 43.8 $14.39
Committed, Unpriced 2.8 15.5
------------------- --- ----
Total Committed 107.8 59.3
Average Cash Cost $10.50 - $11.00
Appalachia
----------
Committed, Priced Thermal 5.3 $56.87 2.0 $57.97
Committed, Unpriced Thermal - -
Committed, Priced Metallurgical 4.4 $78.27 0.7 $82.69
Committed, Unpriced
Metallurgical 0.5 0.6
------------------- --- ---
Total Committed 10.2 3.3
Average Cash Cost $56.75 - $59.75
Bituminous Thermal
------------------
Committed, Priced 6.0 $33.60 2.8 $34.61
Committed, Unpriced 0.5 -
------------------- --- ---
Total Committed 6.5 2.8
Average Cash Cost $23.00 - $26.00
Corporate (in $ millions)
------------------------
D,D&A $410 - $440
S,G&A $112 - $118
Interest Expense $385 - $395
Capital Expenditures $140 - $155
Liqudated Damages $50 - $60
----------------- --- --- ---
A conference call regarding Arch Coal's first quarter 2015 financial results will be webcast live today at 10 a.m. Eastern time. The conference call can be accessed via the "investor" section of the Arch Coal website (http://investor.archcoal.com).
U.S.-based Arch Coal, Inc. is one of the world's top coal producers for the global steel and power generation industries, serving customers on five continents. Its network of mining complexes is the most diversified in the United States, spanning every major coal basin in the nation. The company controls more than 5 billion tons of high-quality metallurgical and thermal coal reserves, with access to all major railroads, inland waterways and a growing number of seaborne trade channels. For more information, visit www.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.
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended March
31,
-------------------------
2015 2014
---- ----
(Unaudited)
Revenues $677,005 $735,971
Costs, expenses and other operating
Cost of sales 562,322 686,314
Depreciation, depletion and
amortization 104,874 104,423
Amortization of acquired
sales contracts, net (3,390) (3,696)
Change in fair value of
coal derivatives and coal
trading activities, net 1,220 914
Selling, general and
administrative expenses 22,605 29,136
Other operating (income)
expense, net 9,086 (7,998)
----- ------
696,717 809,093
------- -------
Loss from operations (19,712) (73,122)
Interest expense, net
Interest expense (99,252) (96,471)
Interest and investment
income 2,373 1,843
----- -----
(96,879) (94,628)
Loss before income taxes (116,591) (167,750)
Benefit from income taxes (3,396) (43,611)
------ -------
Net loss $(113,195) $(124,139)
========= =========
Net loss per common share
Basic and diluted LPS -Net
loss $(0.53) $(0.59)
====== ======
Basic and diluted weighted
average shares outstanding 212,660 212,171
======= =======
Dividends declared per
common share $ - $0.01
============== =====
Adjusted EBITDA (A) $81,772 $27,605
======= =======
Adjusted diluted Loss per
common share (A) $(0.54) $(0.60)
====== ======
(A) Adjusted EBITDA and Adjusted
diluted Loss per common share are
defined and reconciled under
"Reconciliation of Non-GAAP
Measures" later in this release.
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
--------- ------------
2015 2014
---- ----
(Unaudited)
Assets
Current assets
Cash and
cash
equivalents $689,972 $734,231
Short
term
investments 249,518 248,954
Trade
accounts
receivable 198,314 211,506
Other
receivables 15,435 20,511
Inventories 240,113 190,253
Prepaid
royalties 12,841 11,118
Deferred
income
taxes 50,414 52,728
Coal
derivative
assets 14,777 13,257
Other
current
assets 59,605 60,193
------ ------
Total
current
assets 1,530,989 1,542,751
Property,
plant
and
equipment,
net 6,371,335 6,453,458
Other assets
Prepaid
royalties 63,622 66,806
Equity
investments 225,030 235,842
Other
noncurrent
assets 123,964 130,866
------- -------
Total
other
assets 412,616 433,514
------- -------
Total
assets $8,314,940 $8,429,723
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts
payable $167,480 $180,113
Accrued
expenses
and
other
current
liabilities 321,503 302,396
Current
maturities
of debt 34,368 36,885
------ ------
Total
current
liabilities 523,351 519,394
Long-
term
debt 5,117,982 5,123,485
Asset
retirement
obligations 404,844 398,896
Accrued
pension
benefits 14,436 16,260
Accrued
postretirement
benefits
other
than
pension 34,453 32,668
Accrued
workers'
compensation 98,683 94,291
Deferred
income
taxes 419,064 422,809
Other
noncurrent
liabilities 141,804 153,766
------- -------
Total
liabilities 6,754,617 6,761,569
Stockholders' equity
Common
Stock 2,145 2,141
Paid-in
capital 3,050,216 3,048,460
Treasury
stock,
at cost (53,863) (53,863)
Accumulated
deficit (1,445,020) (1,331,825)
Accumulated
other
comprehensive
income 6,845 3,241
----- -----
Total
stockholders'
equity 1,560,323 1,668,154
--------- ---------
Total
liabilities
and
stockholders'
equity $8,314,940 $8,429,723
========== ==========
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended March
31,
-------------------------
2015 2014
---- ----
(Unaudited)
Operating activities
Net loss $(113,195) $(124,139)
Adjustments to reconcile to cash
provided by operating activities:
Depreciation,
depletion
and
amortization 104,874 104,423
Amortization
of
acquired
sales
contracts,
net (3,390) (3,696)
Prepaid
royalties
expensed 1,674 1,803
Employee
stock-
based
compensation
expense 1,760 2,333
Gains on
disposals
and
divestitures (46) (15,129)
Amortization
relating
to
financing
activities 6,219 3,236
Changes in:
Receivables 18,252 (27,245)
Inventories (49,860) 7,441
Accounts
payable,
accrued
expenses
and other
current
liabilities 7,186 43,989
Income
taxes,
net 40 (115)
Deferred
income
taxes (3,433) (43,698)
Other 25,646 10,522
Cash
provided
by (used
in)
operating
activities (4,273) (40,275)
Investing activities
Capital
expenditures (22,880) (14,454)
Additions
to
prepaid
royalties (213) (591)
Proceeds
from
disposals
and
dispositions 46 28,195
Purchases
of short
term
investments (101,793) (119,176)
Proceeds
from
sales of
short
term
investments 99,914 117,681
Investments
in and
advances
to
affiliates,
net (1,843) (3,242)
------ ------
Cash
provided
by (used
in)
investing
activities (26,769) 8,413
Financing activities
Payments
on term
loan (4,875) (4,875)
Net
payments
on other
debt (4,810) (4,521)
Debt
financing
costs - (1,957)
Dividends
paid - (2,123)
Withdrawals
(deposits)
of
restricted
cash (3,532) -
------ ---
Cash used
in
financing
activities (13,217) (13,476)
------- -------
Increase
(decrease)
in cash
and cash
equivalents (44,259) (45,338)
Cash and
cash
equivalents,
beginning
of period 734,231 911,099
------- -------
Cash and
cash
equivalents,
end of
period $689,972 $865,761
======== ========
Arch Coal, Inc. and Subsidiaries
Schedule of Consolidated Debt
(In thousands)
March 31, December 31,
--------- ------------
2015 2014
---- ----
(Unaudited)
Term loan due
2018 ($1.9
billion and
$1.93
billion face
value,
respectively) $1,886,971 $1,890,846
7.00% senior
notes due
2019 at par 1,000,000 1,000,000
9.875% senior
notes
($375.0
million face
value) due
2019 363,997 363,493
8.00% senior
secured
notes due
2019 at par 350,000 350,000
7.25% senior
notes due
2020 at par 500,000 500,000
7.25% senior
notes due
2021 at par 1,000,000 1,000,000
Other 51,382 56,031
------ ------
5,152,350 5,160,370
Less: current
maturities
of debt 34,368 36,885
Long-term
debt $5,117,982 $5,123,485
========== ==========
Calculation
of net debt
Total debt $5,152,350 $5,160,370
Less liquid
assets:
Cash and cash
equivalents 689,972 734,231
Short term
investments 249,518 248,954
------- -------
939,490 983,185
Net debt $4,212,860 $4,177,185
========== ==========
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 EBITDA
Adjusted EBITDA is defined as net
income attributable to the Company
before the effect of net interest
expense, income taxes, depreciation,
depletion and amortization, and the
amortization of acquired sales
contracts. Adjusted EBITDA may also
be adjusted for items that may not
reflect the trend of future results.
Adjusted EBITDA is not a measure of
financial performance in accordance
with generally accepted accounting
principles, and items excluded from
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
incur and service debt based on
ongoing operations. Furthermore,
analogous measures are used by
industry analysts to evaluate our
operating performance. In addition,
acquisition related expenses are
excluded to make results more
comparable between periods.
Investors should be aware that our
presentation of Adjusted EBITDA may
not be comparable to similarly titled
measures used by other companies. The
table below shows how we calculate
Adjusted EBITDA.
Three Months Ended March
31,
-------------------------
2015 2014
---- ----
(Unaudited)
Net loss $(113,195) $(124,139)
Income tax (benefit) expense (3,396) (43,611)
Interest expense, net 96,879 94,628
Depreciation, depletion and
amortization 104,874 104,423
Amortization of acquired sales
contracts, net (3,390) (3,696)
------
Adjusted EBITDA $81,772 $27,605
======= =======
Adjusted net loss and adjusted diluted loss per share
Adjusted net loss and adjusted diluted loss per
common share are adjusted for the after-tax impact
of acquisition related costs and are not measures of
financial performance in accordance with generally
accepted accounting principles. We believe that
adjusted net loss and adjusted diluted 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,
Three Months Ended March
31,
-------------------------
2015 2014
---- ----
(Unaudited)
Net loss $(113,195) $(124,139)
Amortization of acquired sales
contracts, net (3,390) (3,696)
Tax impact of adjustment 1,220 1,331
----- -----
Adjusted net loss $(115,365) $(126,504)
========= =========
Diluted weighted average shares
outstanding 212,660 212,171
======= =======
Diluted loss per share $(0.53) $(0.59)
Amortization of acquired sales
contracts, net (0.02) (0.02)
Tax impact of adjustments 0.01 0.01
---- ----
Adjusted diluted loss per share $(0.54) $(0.60)
====== ======
Cash costs per ton
Cash costs per ton exclude the costs of
depreciation, depletion and amortization
and pass-through transportation costs,
and may be adjusted for other items
that, due to accounting rules, are
classified in "other income/expense" on
the statement of operations, but relate
directly to the costs incurred to
produce coal. Cash costs per ton are not
measures of financial performance in
accordance with generally accepted
accounting principles. We believe cash
costs per ton better reflect our
controllable costs and our operating
results by including all cash costs
incurred to produce coal. The
adjustments made to arrive at these
measures are significant in
understanding and assessing our
financial condition. Therefore, cash
costs per ton should not be considered
in isolation, nor as an alternative to
cost of sales per ton under generally
accepted accounting principles.
Three Months Ended March 31,
2015 2014
---- ----
(Unaudited)
Cost of sales on condensed
consolidated statements of
operations $562,322 $686,314
Transportation costs billed
to customers (43,073) (106,959)
Settlements of heating oil
derivatives used to manage
diesel fuel purchase price
risk 1,224 1,879
Other (other operating
segments, operating
overhead, land management,
etc.) (9,738) (4,689)
------ ------
Total cash costs $510,735 $576,545
Total tons sold 33,108 31,357
------ ------
Total cash cost per ton $15.43 $18.39
====== ======
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SOURCE Arch Coal, Inc.
