ARCH RESOURCES, INC. ST. LOUIS, July 27, 2017 /PRNewswire/ -- Arch Coal, Inc. (NYSE: ARCH) today reported second quarter 2017 net income of $37.2 million, or $1.48 per diluted share, compared with $51.7 million, or $2.03 per diluted share, in the first quarter of 2017. Excluding certain charges, adjusted diluted earnings per share ("adjusted EPS")( 1) was $1.85. The charges for the second quarter include non-cash sales contract amortization, reorganization expenses and early debt extinguishment charges and related tax impact. The company earned adjusted earnings before interest, taxes, depreciation, depletion, amortization, reorganization items and early debt extinguishment charges ("adjusted EBITDAR") (1 )of $95.4 million in the second quarter of 2017.
Revenues totaled $549.9 million for the three months ended June 30, 2017, representing a sequential decline and reflective of the timing of sales in the metallurgical segment as well as anticipated reduced shipment levels in the Powder River Basin typical of the shoulder season.
"While extreme volatility in global metallurgical markets delayed the timing of second quarter spot sales, Arch continued to generate strong free cash flow, execute its operational strategy and make progress on many fronts," said John W. Eaves, Arch's chief executive officer. "Since the last update, Arch returned nearly $60 million to shareholders through share repurchases and quarterly dividends; further streamlined its operational structure with the announced sale of the Lone Mountain complex and two other idled facilities; and capitalized on favorable dynamics in seaborne thermal markets. Looking ahead, we are confident in our strengthened annual guidance for coking coal sales, and we continue to execute on our strategic priorities and return capital to shareholders."
Capital Allocation Progress and Financial Position
During the second quarter, Arch utilized its healthy cash generation to repurchase 711,000 shares of common stock, representing 2.8 percent of shares outstanding, at a total cost of $51 million and an average price of $71.82 per share. At quarter-end, $249 million remained available in the current share repurchase authorization. As previously announced, the share repurchase plan has no time limit.
"We continue to be optimistic about the company's strong long-term prospects," said John T. Drexler, Arch's chief financial officer. "We fully expect to continue to make significant and ongoing purchases under the existing authorization during the remainder of 2017."
In addition, the company paid $8.6 million in cash dividends to shareholders during the second quarter of 2017. The next quarterly cash dividend payment of $0.35 per common share was approved by the board of directors, and will be paid on September 15, 2017 to stockholders of record at the close of business on August 31, 2017.
Future dividend declarations and share repurchases will be subject to ongoing board review and authorization and will be based on a number of factors, including business and market conditions, Arch's future financial performance and other capital priorities.
Including the impact of the share repurchases and dividends, Arch's cash and short-term investment balance grew by $23 million from the end of the first quarter 2017 to over $490 million at June 30, 2017. At quarter-end, Arch's debt level totaled $330 million, inclusive of the term loan, equipment financing and other debt.
Arch Executes Sale of Lone Mountain Complex
On July 21, 2017, Arch signed a definitive agreement to sell its wholly-owned subsidiary, Lone Mountain Processing Company, LLC. ("Lone Mountain"), to Revelation Energy, LLC ("Revelation") for $8.3 million. The sale includes the Lone Mountain complex as well as two other idled properties in Central Appalachia. Revelation will assume responsibility for all reclamation liabilities and final mine closure expenses for the properties.
"While we have been successful in placing Lone Mountain's products in domestic thermal and pulverized coal injection (PCI) markets, margins have been thin or negative in recent months in the face of cost pressures," said Eaves. "This strategic divestiture will further streamline and strengthen Arch's key metallurgical segment and allow the company to deepen its focus on its four core coking coal operations."
As a result of the sale of the company's highest-cost Appalachian operation, Arch expects the cost structure of its metallurgical segment to benefit over time. After customary working capital adjustments, the company expects to record a pre-tax gain of approximately $15 million to $20 million related to the sale of Lone Mountain. Closing of the transaction is subject to customary closing conditions and is expected to occur within the next 60 days.
Arch's Commitment to its Fundamental Values
Arch continued to deliver industry-leading safety and environmental performances in the second quarter of 2017. Arch's total-incident rate for the first half of 2017 was more than three times better than the national coal industry average. Arch also achieved a perfect environmental compliance record for the period. Notably, the Coal Creek operation was recognized with the Rocky Mountain Coal Mining Institute regional safety award. This is the fifth time Coal Creek has received this prestigious honor.
"We congratulate our mine personnel for continuing to earn external recognition for outstanding safety and environmental performances," said Paul A. Lang, Arch's president and chief operating officer. "In addition, three operations attained A Perfect Zero - a dual goal of operating without a reportable safety incident or SMCRA environmental violation - in the second quarter. These achievements exemplify our constant commitment to operating in a safe and environmentally responsible manner. We commend the hard work and focus of our employees in these critical areas of performance."
Arch's Operational Results
"During the second quarter, Arch's mining complexes ran well and each operating segment delivered solid cash flow," said Lang. "Good cost control and judicious capital spending are top priorities at Arch, and we are currently expecting to deliver strong operational results in the year's second half. At the same time, we are working to opportunistically and selectively place our uncommitted volume, with the objective of enhancing future profitability."
Metallurgical
2Q17 1Q17
---- ----
Tons sold (in millions) 2.1 2.1
Coking 1.5 1.5
PCI 0.3 0.1
Thermal 0.3 0.5
Average sales price per
ton $90.59 $90.84
Coking $103.44 $105.51
PCI $72.26 $62.34
Thermal $42.02 $47.64
Cash cost per ton $60.95 $57.67
Cash margin per ton $29.64 $33.17
Cash cost per ton is defined and
reconciled under "Reconciliation of
non-GAAP measures".
Mining complexes included in this
segment are Beckley, Leer, Lone
Mountain, Mountain Laurel and Sentinel
In the Metallurgical segment, Arch delivered solid cash margins despite limited spot buying activity in seaborne metallurgical markets during much of the quarter. Average coking coal realizations continued to benefit from strong pricing on index-linked tons that priced in the second quarter, but were offset to some degree by an increased percentage of annual fixed-priced tons that shipped during the period. Higher per-ton cash costs in the segment were driven mainly by higher costs at the Lone Mountain complex and challenging operating conditions in the last panel of the Alma seam at the Mountain Laurel complex. Excluding Lone Mountain, segment cash costs for the second quarter would have been $57.15 per ton - which, while higher than the expected cash costs in the year's second half, would still place Arch well below the average cost structure for the U.S. metallurgical coal industry. Due to the outlook for increased coking coal volumes in the back half of the year, Arch remains confident in its 2017 cash cost guidance of $51.00 per ton to $56.00 per ton, excluding Lone Mountain.
Powder River Basin
2Q17 1Q17
---- ----
Tons sold (in millions) 18.1 21.3
Average sales price per
ton $12.55 $12.57
Cash cost per ton $10.82 $10.33
Cash margin per ton $1.73 $2.24
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, second quarter 2017 sales volumes declined 15 percent when compared with the first quarter of 2017 due largely to typical shoulder season decline, while the average sales price per ton was essentially flat when compared with the prior-quarter period. Segment cash costs increased $0.49 per ton over the first quarter of 2017, primarily reflecting the impact of lower volume levels in the segment and an unplanned repair expense. Given strong cost control coupled with expected shipment levels in the year's second half, Arch is reducing the top end of its cost guidance for the segment. The company now expects cash costs to be in the range of $10.20 per ton to $10.60 per ton for 2017.
Other Thermal
2Q17 1Q17
---- ----
Tons sold (in millions) 2.3 2.3
Average sales price per
ton $33.41 $35.51
Cash cost per ton $22.06 $23.82
Cash margin per ton $11.35 $11.69
Cash cost per ton is defined and
reconciled under "Reconciliation of
non-GAAP measures".
Mining complexes included in this
segment are Coal-Mac, Viper and West
Elk
In the Other Thermal segment, Arch recorded a second quarter 2017 cash margin of $11.35 per ton compared with $11.69 per ton in the first quarter. Sales volumes were flat during the period, supported by strong international and domestic demand for West Elk, while average sales price per ton declined slightly due to mix of customer shipments. Cash costs per ton declined 7 percent when compared to the prior quarter, reflecting increased sales volume from the low-cost West Elk mine and strong cost control from the other operations in the segment. Given the ongoing demand for Arch's West Elk product in both domestic and international thermal markets and increased interest in Coal-Mac's higher-quality product, Arch is lowering its full-year cost guidance for the segment. The company now anticipates cash costs to be in the range of $23.00 per ton to $27.00 per ton for 2017.
Key Market Developments
Metallurgical Coal Markets
-- At the outset of the second quarter, global coking coal prices increased
dramatically to nearly $300 per metric ton following the cyclone-driven
rail closures in Queensland. However, very few tons were sold at peak
levels as buyers headed to the sidelines and coking coal prices retraced
back to pre-cyclone levels by mid-June.
-- Since then, the market has found support, with recent global supply
disruptions moving near-term pricing up strongly. The Platts East Coast
price assessment shows all products up roughly $20 per metric ton on
average, with High-vol A marks increasing more than $23 to reach $167
per metric ton, since June 20, 2017.
-- Additionally, imports into China are up strongly year to date and it
appears buyers have returned to the market, encouraged in part by the
fact that seaborne metallurgical coal is trading at a discount to
Chinese domestic production.
-- Moreover, global hot metal production has provided support with demand
up 2.5 percent through the first half of 2017, while global steel prices
remain in a fairly healthy and sustainable range.
-- Counterbalancing the positive demand trends somewhat, global coking coal
supply is increasing in response to the stronger pricing environment,
led by the United States and Mozambique. Arch continues to believe that
metallurgical prices will need to remain well above historical levels to
keep these tons in the market and keep the market balanced.
Thermal Coal Markets
-- Higher temperatures across much of the country in recent weeks should
support natural gas prices and advance the continued liquidation of
stockpiles. Cooling degree days (CDDs), which are a good indicator of
summer temperatures, are more than 2 percent above the five-year average
at present.
-- With a reasonably normal summer and relatively stable natural gas
prices, coal inventories could fall below 70 days of supply by year-end.
While that is still above projected target levels, it's a dramatic
improvement from the 108 days of supply with which we started 2016.
-- Moreover, the recent heat has prompted some large U.S. coal consumers -
particularly Powder River Basin users - to approach the market to
fulfill spot volume needs.
-- Globally, fundamentals for moving U.S. coal into seaborne thermal
markets have remained positive. Arch has continued to leverage higher
Newcastle and API2 prices to opportunistically move West Elk and other
thermal products into seaborne thermal markets.
Company Outlook
Based on the company's current expectations regarding the outlook for metallurgical coal markets, Arch has raised its coking coal volume guidance for 2017. Arch now expects to sell between 6.9 million tons and 7.1 million tons of coking coal. At the midpoint of its volume guidance level, Arch is now more than 90-percent committed on coking coal sales for the full year, with more than 20 percent of that committed volume exposed to index-based pricing. At the midpoint of guidance, Arch's thermal sales are 95-percent committed for the full year 2017.
"Looking ahead, Arch is in a uniquely competitive position to leverage its complementary lines of business to capitalize on strong metallurgical markets and dynamic thermal markets," said Eaves. "As we progress through the balance of the year, Arch remains financially sound, operationally strong, strategically positioned and completely committed to creating long-term value for our shareholders."
2017 2018
---- ----
Tons $ per ton Tons $ per ton
---- --------- ---- ---------
Sales Volume (in millions of tons)
---------------------------------
Coking 6.9 - 7.1
Thermal 87.0 - 95.0
------- ---- ----
Total 93.9 - 102.1
Metallurgical (in millions of tons)
----------------------------------
Committed, Priced Coking 5.0 $97.14 0.1 $97.37
Committed, Unpriced Coking 1.4 2.0
-------------------------- --- ---
Total Committed Coking 6.4 2.1
Committed, Priced Thermal Byproduct 0.9 $24.45 0.4 $30.33
Committed, Unpriced Thermal Byproduct - -
------------------------------------- --- ---
Total Committed Thermal Byproduct 0.9 0.4
Average Metallurgical Cash Cost $51.00 - $56.00
Powder River Basin (in millions of tons)
---------------------------------------
Committed, Priced 76.4 $12.47 36.5 $12.20
Committed, Unpriced 1.8 3.0
------------------- --- ---
Total Committed 78.2 39.5
Average Cash Cost $10.20 - $10.60
Other Thermal (in millions of tons)
----------------------------------
Committed, Priced 8.4 $34.61 2.9 $37.94
Committed, Unpriced - -
------------------- --- ---
Total Committed 8.4 2.9
Average Cash Cost $23.00 - $27.00
Corporate (in $ millions)
------------------------
D,D&A excluding Sales Contract Amortization $124 - $132
Sales Contract Amortization $50 - $58
ARO Accretion $30 - $32
S,G&A $85 - $89
Interest Expense $23 - $27
Capital Expenditures $52 - $60
Tax Provision 0% - 3%
As a result of the sale of Lone
Mountain, all of its related
information has been removed from
the guidance table and the thermal
line item contained in the
Metallurgical Segment has been
changed to ''Thermal Byproducts"
to more accurately reflect the
product. Through June 30, 2017,
Lone Mountain had shipped 344,000
tons of thermal coal and 374,000
tons of PCI coal. For full year,
the complex has committed 796,000
tons of thermal coal and 772,000
tons of PCI coal. Cash cost
guidance for the metallurgical
segment excludes the Lone Mountain
complex.
A conference call regarding Arch Coal's second quarter 2017 financial results will be webcast live today at 10 a.m. Eastern time. The conference call can be accessed via the "investor" section of the Arch Coal website (http://investor.archcoal.com).
Forward-Looking Statements: This press release contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties arise from changes in the demand for our coal by the domestic electric generation industry; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from operational, geological, permit, labor and weather-related factors; from fluctuations in the amount of cash we generate from operations; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. For a 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.
(1) Adjusted EPS and Adjusted EBITDAR
are defined and reconciled in the
"Reconciliation of Non-GAAP
measures" in this release.
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Successor Predecessor Successor Predecessor
--------- ----------- --------- -----------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues $549,866 $420,298 $1,150,841 $848,404
Costs, expenses and other operating
Cost of sales 435,038 410,992 896,448 822,002
Depreciation, depletion
and amortization 30,701 58,459 62,622 122,158
Accretion on asset
retirement obligations 7,623 8,050 15,246 16,356
Amortization of sales
contracts, net 14,352 1 29,042 (832)
Change in fair value of
coal derivatives and
coal trading
activities, net 863 1,158 1,717 2,368
Asset impairment and
mine closure costs - 43,701 - 129,221
Selling, general and
administrative
expenses 22,146 19,019 42,669 38,845
Other operating income,
net (3,549) (10,561) (5,859) (12,781)
------ ------- ------ -------
507,174 530,819 1,041,885 1,117,337
------- ------- --------- ---------
Income (loss) from
operations 42,692 (110,521) 108,956 (268,933)
Interest expense, net
Interest expense (6,003) (45,273) (15,428) (89,724)
Interest and investment
income 842 933 1,369 2,071
--- -----
(5,161) (44,340) (14,059) (87,653)
------ ------- ------- -------
Income (loss) before
nonoperating expenses 37,531 (154,861) 94,897 (356,586)
Nonoperating expense
Net loss resulting from
early retirement of
debt and debt
restructuring (31) - (2,061) (2,213)
Reorganization items,
net (21) (21,271) (2,849) (25,146)
--- ------- ------ -------
(52) (21,271) (4,910) (27,359)
--- ------- ------ -------
Income (loss) before
income taxes 37,479 (176,132) 89,987 (383,945)
Provision for (benefit
from) income taxes 319 (245) 1,159 (1,356)
--- ---- ----- ------
Net income (loss) $37,160 $(175,887) $88,828 $(382,589)
======= ========= ======= =========
Net income (loss) per common share
Basic EPS (LPS) $1.51 $(8.26) $3.58 $(17.97)
===== ====== ===== =======
Diluted EPS (LPS) $1.48 $(8.26) $3.52 $(17.97)
===== ====== ===== =======
Weighted average shares outstanding
Basic weighted average
shares outstanding 24,659 21,293 24,834 21,293
====== ====== ====== ======
Diluted weighted
average shares
outstanding 25,082 21,293 25,245 21,293
====== ====== ====== ======
Dividends declared per
common share $0.35 $ - $0.35 $ -
===== ================ ===== ================
Adjusted EBITDAR (A)
(Unaudited) $95,368 $(310) $215,866 $(2,030)
======= ===== ======== =======
Adjusted diluted income
(loss) per common
share (A) $1.85 $(5.32) $4.41 $(10.80)
===== ====== ===== =======
(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)
June 30, December 31,
2017 2016
---- ----
(Unaudited)
Assets
Current assets
Cash and
cash
equivalents $333,548 $305,372
Short term
investments 159,822 88,072
Restricted
cash 41,755 71,050
Trade
accounts
receivable 190,256 184,483
Other
receivables 21,504 19,877
Inventories 137,056 113,462
Other
current
assets 61,474 96,306
------ ------
Total
current
assets 945,415 878,622
Property,
plant and
equipment,
net 1,007,570 1,053,603
Other assets
Equity
investments 104,015 96,074
Other
noncurrent
assets 75,058 108,298
------ -------
Total other
assets 179,073 204,372
------- -------
Total
assets $2,132,058 $2,136,597
========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts
payable $127,059 $95,953
Accrued
expenses
and other
current
liabilities 169,533 205,240
Current
maturities
of debt 7,414 11,038
----- ------
Total
current
liabilities 304,006 312,231
Long-term
debt 315,639 351,841
Asset
retirement
obligations 342,680 337,227
Accrued
pension
benefits 32,092 38,884
Accrued
postretirement
benefits
other than
pension 101,407 101,445
Accrued
workers'
compensation 186,128 184,568
Other
noncurrent
liabilities 65,048 63,824
------ ------
Total
liabilities 1,347,000 1,390,020
Stockholders' equity
Common
Stock 250 250
Paid-in
capital 694,780 688,424
Retained
earnings 113,574 33,449
Treasury
stock, at
cost (51,043) -
Accumulated
other
comprehensive
income 27,497 24,454
------ ------
Total
stockholders'
equity 785,058 746,577
------- -------
Total
liabilities
and
stockholders'
equity $2,132,058 $2,136,597
========== ==========
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Successor Predecessor
--------- -----------
Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016
------------- -------------
(Unaudited) (Unaudited)
Operating activities
Net income (loss) $88,828 $(382,589)
Adjustments to reconcile to cash provided by
operating activities:
Depreciation,
depletion and
amortization 62,622 122,158
Accretion on asset
retirement
obligations 15,246 16,356
Amortization of sales
contracts, net 29,042 (832)
Prepaid royalties
expensed 2,288 1,770
Deferred income taxes 5,996 (418)
Employee stock-based
compensation expense 4,942 1,435
Gains on disposals and
divestitures (2,005) (6,269)
Asset impairment and
noncash mine closure
costs - 119,194
Net loss resulting
from early retirement
of debt and debt
restructuring 2,061 2,213
Non-cash bankruptcy
reorganization items - (14,892)
Amortization relating
to financing
activities 1,565 7,657
Changes in:
Receivables (3,864) (7,776)
Inventories (23,594) 21,152
Accounts payable,
accrued expenses and
other current
liabilities (89) 84,160
Income taxes, net (3,796) (937)
Other 21,557 (22,634)
Cash provided by (used
in) operating
activities 200,799 (60,252)
Investing activities
Capital expenditures (16,922) (74,137)
Minimum royalty
payments (4,211) (217)
Proceeds from
(consideration paid
for) disposals and
divestitures 4,186 (3,303)
Purchases of short
term investments (157,364) (98,750)
Proceeds from sales of
short term
investments 85,035 94,589
Investments in and
advances to
affiliates, net (8,934) (2,890)
Withdrawals (deposits)
of restricted cash 29,295 (4,695)
------ ------
Cash used in investing
activities (68,915) (89,403)
Financing activities
Proceeds from issuance
of term loan due 2024 298,500 -
Payments to extinguish
term loan due 2021 (325,684) -
Payments on term loan
due 2024 (750) -
Net payments on other
debt (5,207) (10,293)
Debt financing costs (8,900) (18,806)
Net loss resulting
from early retirement
of debt and debt
restructuring (2,061) (2,213)
Dividends paid (8,563) -
Purchases of treasury
stock (51,043) -
------- ---
Cash used in financing
activities (103,708) (31,312)
-------- -------
Increase (decrease) in
cash and cash
equivalents 28,176 (180,967)
Cash and cash
equivalents,
beginning of period 305,372 450,781
------- -------
Cash and cash
equivalents, end of
period $333,548 $269,814
======== ========
Arch Coal, Inc. and Subsidiaries
Schedule of Consolidated Debt
(In thousands)
June 30, December 31,
2017 2016
---- ----
(Unaudited)
Term loan
due 2024
($299.3
million
face value) $297,808 $ -
Term loan
due 2021
($325.7
million
face value) - 325,684
Other 32,065 37,195
Debt
issuance
costs (6,820) -
------ ---
323,053 362,879
Less:
current
maturities
of debt 7,414 11,038
Long-term
debt $315,639 $351,841
======== ========
Calculation
of net debt
Total debt
(excluding
debt
issuance
costs) $329,873 $362,879
Less liquid
assets:
Cash and
cash
equivalents 333,548 305,372
Short term
investments 159,822 88,072
------- ------
493,370 393,444
Net debt $(163,497) $(30,565)
========= ========
Arch Coal, Inc. and Subsidiaries
Operational Performance
(In millions, except per ton data)
Successor Predecessor Successor Predecessor
--------- ----------- --------- -----------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Powder River Basin
Tons Sold 18.1 15.6 39.4 32.1
Segment Sales $227.1 $12.55 $204.5 $13.08 $495.2 $12.56 $423.0 $13.16
Segment Cash Cost of Sales 195.7 10.82 183.2 11.72 416.0 10.55 388.9 12.10
----- ----- ----- ----- ----- ----- ----- -----
Segment Cash Margin 31.4 1.73 21.3 1.36 79.1 2.01 34.1 1.06
Metallurgical
Tons Sold 2.1 2.3 4.2 4.5
Segment Sales $190.6 $90.59 $122.1 $52.94 $377.7 $90.72 $232.7 $52.05
Segment Cash Cost of Sales 128.2 60.95 125.8 54.52 247.0 59.33 230.1 51.45
----- ----- ----- ----- ----- ----- ----- -----
Segment Cash Margin 62.4 29.64 (3.6) (1.58) 130.7 31.39 2.7 0.60
Other Thermal
Tons Sold 2.3 1.4 4.6 2.7
Segment Sales $77.7 $33.41 $51.4 $35.76 $159.1 $34.45 $102.1 $37.66
Segment Cash Cost of Sales 51.3 22.06 52.3 36.39 105.9 22.93 99.9 36.83
---- ----- ---- ----- ----- ----- ---- -----
Segment Cash Margin 26.4 11.35 (0.9) (0.63) 53.2 11.52 2.3 0.83
Total Segment Cash Margin $120.2 $16.8 $263.0 $39.0
Selling, general and administrative expenses (22.1) (19.0) (42.7) (38.8)
Liquidated damages under export logistics contracts - - - (1.6)
Other (2.7) 2.0 (4.5) (0.5)
---- --- ---- ----
Adjusted EBITDAR $95.4 $(0.3) $215.9 $(2.0)
===== ===== ====== =====
Reconciliation of Non-GAAP Measures Successor Predecessor Successor Predecessor
--------- ----------- --------- -----------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Total segment sales $495.4 $378.0 $1,032.0 $757.9
Transportation costs billed to customers 54.5 37.8 118.8 75.3
Coal risk management derivative settlements - 0.2 - 0.3
Other (1) (0.0) 4.3 0.1 14.9
---- --- --- ----
Revenues $549.9 $420.3 $1,150.8 $848.4
(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 Successor Predecessor
--------- ----------- --------- -----------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
Total segment cash cost of sales $375.2 $361.2 $768.9 $718.9
Transportation costs billed to customers 54.5 37.8 118.8 75.3
Risk management derivative settlements--diesel fuel (0.9) (1.2) (1.5) (2.5)
Other (1) 6.2 13.1 10.2 30.3
--- ---- ---- ----
Cost of Sales $435.0 $411.0 $896.4 $822.0
(1) Other includes costs associated with mines that have operated historically but have been idled or disposed of and are no longer part of a segment and operating overhead.
Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)
Included in the accompanying release, we have disclosed certain non-GAAP measures as defined by Regulation G.
The following reconciles these items to net income and cash flows as reported under GAAP.
Adjusted EBITDAR
Adjusted EBITDAR is defined as net income attributable to the Company before the effect of net interest expense, income taxes, depreciation, depletion and amortization, accretion on asset retirement obligations, amortization of
sales contracts and reorganization items, net. Adjusted EBITDAR may also be adjusted for items that may not reflect the trend of future results.
Adjusted EBITDAR is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded from Adjusted EBITDAR are significant in understanding and assessing our financial
condition. Therefore, Adjusted EBITDAR should not be considered in isolation, nor as an alternative to net income, income from operations, cash flows from operations or as a measure of our profitability, liquidity or
performance under generally accepted accounting principles. The Company uses adjusted EBITDAR to measure the operating performance of its segments and allocate resources to the segments. Furthermore, analogous measures are
used by industry analysts and investors to evaluate our operating performance. Investors should be aware that our presentation of Adjusted EBITDAR may not be comparable to similarly titled measures used by other companies. The
table below shows how we calculate Adjusted EBITDAR.
Successor Predecessor Successor Predecessor
--------- ----------- --------- -----------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income (loss) $37,160 $(175,887) $88,828 $(382,589)
Income tax (benefit)
expense 319 (245) 1,159 (1,356)
Interest expense, net 5,161 44,340 14,059 87,653
Depreciation, depletion and
amortization 30,701 58,459 62,622 122,158
Accretion on asset
retirement obligations 7,623 8,050 15,246 16,356
Amortization of sales
contracts, net 14,352 1 29,042 (832)
Asset impairment and mine
closure costs - 43,701 - 129,221
Net loss resulting from
early retirement of debt
and debt restructuring 31 - 2,061 2,213
Reorganization items, net 21 21,271 2,849 25,146
--- ------ ----- ------
Adjusted EBITDAR $95,368 $(310) $215,866 $(2,030)
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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 Successor Predecessor
--------- ----------- --------- -----------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income (loss) $37,160 $(175,887) $88,828 $(382,589)
Amortization of sales
contracts, net 14,352 1 29,042 (832)
Asset impairment and mine
closure costs - 43,701 - 129,221
Net loss resulting from
early retirement of debt
and debt restructuring 31 - 2,061 2,213
Reorganization items, net 21 21,271 2,849 25,146
Tax impact of adjustment (5,180) (2,298) (11,505) (3,213)
------ ------ ------- ------
Adjusted net income (loss) $46,384 $(113,212) $111,275 $(230,054)
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Diluted weighted average
shares outstanding 25,082 21,293 25,245 21,293
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Diluted income (loss) per
share $1.48 $(8.26) $3.52 $(17.97)
Amortization of sales
contracts, net 0.57 - 1.16 (0.04)
Asset impairment and mine
closure costs - 2.05 - 6.07
Net loss resulting from
early retirement of debt
and debt restructuring - - 0.08 0.10
Reorganization items, net - 1.00 0.11 1.18
Tax impact of adjustments (0.20) (0.11) (0.46) (0.14)
Adjusted diluted income
(loss) per share $1.85 $(5.32) $4.41 $(10.80)
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SOURCE Arch Coal, Inc.
