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):
April 23, 2001 (April 23, 2001)
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-13105 43-0921172
(State or other jurisidiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
CityPlace One, 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 4 pages.
Exhibit Index begins on page 4.
Item 5. Other Events.
On April 23, 2001, Arch Coal, Inc. (the "Company"), announced via press
release its earnings and operating results for the first quarter of 2001. A copy
of the Company's press release is attached hereto and incorporated herein by
reference in its entirety.
Item 7. Financial Statements and Exhibits.
(c) The following Exhibit is filed with this Current Report on Form 8-K:
Exhibit No. Description
99 Press Release dated as of April 23, 2001
Page 2 of 4 pages.
Exhibit Index begins on page 4.
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: April 23, 2001 ARCH COAL, INC.
By:_________________________
Robert G. Jones
Vice President - Law, Secretary
and General Counsel
Page 3 of 4 pages.
Exhibit Index begins on page 4.
EXHIBIT INDEX
Exhibit No. Description
99 Press Release dated as of April 23, 2001
Page 4 of 4 pages.
Exhibit 99
News from
Arch Coal, Inc.
FOR FURTHER INFORMATION:
Deck S. Slone
Director, Investor Relations
and Public Affairs
(314) 994-2717
FOR IMMEDIATE RELEASE
April 23, 2001
Arch Coal, Inc. Reports First Quarter Results
Highlights:
o Net income of $6.1 million, or $.15 per share, vs. a net loss of $15.0
million, or $.39 per share, in 1Q00
o Adjusted EBITDA of $80.3 million, vs. $63.6 million in 1Q00
Total debt reduction of $98.7 million, or 9%
o Revenues of $381.4 million, vs. $357.8 million in 1Q00
o Coal sales of 27.2 million tons, vs. 27.8 million tons in 1Q00
ST. LOUIS, April 23 /PRNewswire Interactive News Release/ -- Arch Coal, Inc.
(NYSE: ACI - news) announced today that it had net income of $6.1 million, or
$.15 per share, for its first quarter ended March 31, 2001. In comparison, Arch
had a net loss of $15.0 million, or $.39 per share, in the same quarter of 2000.
"As previously announced, Arch Coal realized very strong margins on the limited
tonnage that was open to market-based pricing during the quarter," said Steven
F. Leer, Arch Coal's president and chief executive officer. "Moreover, nearly
all of our mines performed well during the period, and continue to operate at
high levels of efficiency today."
The one operation that struggled during the quarter was the West Elk mine in
Colorado, which encountered higher-than-expected methane levels following the
relocation of its longwall mining system to a new reserve area in late February.
"We have made progress in combating the problem, and we are optimistic that the
mine can return to reasonably strong levels of production in the second half of
the year," Leer said. "However, the problem did lead to a substantial
curtailment of planned shipments in the first quarter, and it will have an
impact on shipments during the second quarter as well."
In addition to strong market-based pricing on its open tonnage, the company also
benefited from income tax credits related to depletion and a $3.5 million
pre-tax gain associated with the reversal of certain previously recorded
reclamation liabilities. Offsetting those benefits were accruals related to
stock-based compensation benefit programs that could be realized in future
periods as a result of improved stock performance.
Arch had revenues of $381.4 million and coal sales of 27.2 million tons in the
first quarter of 2001, compared to $357.8 million and 27.8 million tons in the
same period of 2000. Adjusted EBITDA for the quarter totaled $80.3 million,
compared to $63.6 million in the first quarter of 2000.
Coal markets
Coal markets continued to strengthen during the quarter, especially in Arch's
two principal producing regions. "The spot price of Powder River Basin coal has
tripled in the past 12 months, and the spot price of central Appalachian
compliance coal has doubled," Leer said. "We are particularly encouraged by the
fact that prices continued to improve in both regions during March and April,
months when electricity demand typically falls off and coal prices soften."
As previously announced, Arch had committed nearly all of its expected
production for 2001 before the year began, and has only about 1.5 million tons
of coal to ship at current spot pricing for the remainder of 2001. The company
currently has approximately 30% of its expected production open to market-based
pricing in 2002, 50% in 2003, and 75% in 2004.
"In recent years, power generators have waited until the summer months or even
later before seeking to secure new supply commitments for the following year,"
Leer said. "In contrast, we have already received a substantial number of
solicitations for 2002 business and are engaged in active negotiations with some
of these generators. We view this development as a positive indication that
pricing for our open-to-market business in 2002 could be quite strong."
Debt reduction
During the quarter, Arch reduced its total debt by $98.7 million, or more than
9%, principally through the use of proceeds raised in an equity offering in
early February made in connection with a secondary offering by Ashland Inc. "We
continue to view the strengthening of our balance sheet as our top financial
priority and one of the best options we have to create value for our
shareholders," Leer said.
Leer noted that the company was able to achieve this debt reduction despite the
fact that capital spending is historically higher in the first quarter due to
the timing of reserve acquisition payments for the Thundercloud lease and Arch's
normal capital budget cycle. Arch made the third of five annual payments of
$31.6 million on the Thundercloud lease in January 2001.
West Elk mine
In recent weeks, West Elk has completed revisions to its ventilation plan and
has made progress in diluting the liberated methane levels. "We are making
strides in addressing the higher methane levels, and we are optimistic about our
ability to effectively manage the problem over the long term," Leer said. West
Elk is in the process of drilling degasification holes inside the mine and will
soon drill similar holes from the surface that should help control methane
levels over time.
The West Elk mine was idle for roughly six months in 2000 due to a fire that
occurred in the western section of the mine. In February 2001, West Elk
completed mining the last longwall panel in the western section and moved its
longwall mining system to a new reserve area on the mine's east side. West Elk
recently completed efforts to permanently seal the entire west side of the mine.
Operating statistics
Regional analysis: Of the 27.2 million tons of coal that Arch sold during the
first quarter, approximately 8.9 million tons originated at its eastern
operations and 18.3 million tons originated at its western operations. Arch Coal
had an average operating realization of $13.24 per ton and average operating
costs of $12.12 per ton. The eastern operations had an average realized sales
price of $27.76 per ton and an average cost of $24.57 per ton during the
quarter. The western operations had an average realized sales price of $6.28 per
ton and an average cost of $6.14 per ton during the quarter. (Western operations
data does not include the results of 65%-owned Canyon Fuel Company, which is
accounted for on the equity method.)
Expected 2001 production: In the east, Arch expects to sell a total of
approximately 34 million tons of coal in 2001 from its mines in central
Appalachia. In the west, Arch expects to sell approximately 65 million tons of
coal at its Black Thunder mine in the Powder River Basin of Wyoming and between
4 million and 6 million tons of coal at the West Elk mine in Colorado. The
actual volume produced at West Elk will be largely dependent on the company's
ability to manage the high methane levels currently being experienced there.
Financial: Arch currently expects depreciation, depletion and amortization to
total approximately $225 million in 2001, which includes $54.1 million in the
quarter just ended. Capital expenditures are expected to total approximately
$130 million, which includes $51.5 million expended in the quarter just ended.
(Projections for depreciation, depletion and amortization and capital
expenditures include Arch's ownership percentage in Canyon Fuel Company.)
Looking ahead
"In recent weeks, we have received a substantial number of solicitations from
power generators that are looking to secure a supply of coal for 2002 and
thereafter," Leer said. "Given the current tightness in U.S. coal markets, we
expect favorable pricing for our tonnage that is uncommitted or open to
market-based pricing."
"Moreover, we continue to be encouraged by other developments that should
continue to exert a positive influence on coal prices," Leer continued. "Natural
gas prices remain high, hydroelectric output is being adversely affected by
drought-like conditions in the western United States, and the nuclear system is
producing at near its practical capacity. Furthermore, coal stockpiles at U.S.
power plants were 35% lower at the outset of 2001 than a year earlier, and given
current coal production levels we could see a further erosion of those
stockpiles this summer.
"Meanwhile, coal-fired power plants are operating at a utilization rate of only
70%. "Clearly, coal demand will continue to climb as power generators seek to
run these plants at ever-higher levels of efficiency," Leer said.
The longer-term demand picture is strengthening as well. "The high price of
competing fuels has spurred a renewed interest in new coal-fired generation,"
Leer added. "The announced additional capacity that is expected to come on-line
towards the middle of the decade should provide a smooth transition for
continued coal demand growth as existing coal-fired plants begin to approach
their effective capacity limits."
So far, plans to build roughly 20,000 megawatts of new coal-fired capacity have
already been announced, according to Energy Ventures Analysis. That equates to
between 60 million and 80 million tons of new coal demand annually.
A conference call concerning first quarter earnings will be webcast live today
at 11 a.m. EST. The conference call can be accessed via the "investor info"
section of the Arch Coal web site (www.archcoal.com ).
Arch Coal is the nation's second largest coal producer 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.
Definition: Adjusted EBITDA is presented above because it is a widely accepted
financial indicator of a company's ability to incur and service debt. Adjusted
EBITDA should not be considered in isolation or as an alternative to net income,
operating income, cash flows from operations, or as a measure of a company's
profitability, liquidity or performance under generally accepted accounting
principles. Adjusted EBITDA is defined as income from operations before the
effect of net interest expense; income taxes; and depreciation, depletion and
amortization for Arch Coal, Inc., its subsidiaries and its ownership percentage
in its equity investments.
Forward-Looking Statements: Statements contained 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 our current expectations and
projections about future events, some or all of which may be incorrect, and
which are also subject to various risks and uncertainties that could cause
actual results to differ materially from those projected in the statements.
These expectations, assumptions and uncertainties include the following: our
expectation of continued growth in the demand for electricity; our belief that
legislation, regulations and the relatively higher costs of competing fuels will
increase demand for our compliance and low-sulfur coal; projected production and
financial results; our expectation of improving market conditions for the price
of our coal; our expectation that we will continue to have adequate liquidity
from our cash flow from operations, together with available borrowings under our
credit facilities, to pay down our debt and to finance our working capital
needs; a variety of operational, geologic, permitting, labor and weather-related
factors, including equipment availability; and other risks and uncertainties
detailed 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
March 31
2001 2000
(Unaudited)
Revenues
Coal sales $360,043 $344,399
Income from equity investment 6,059 3,631
Other revenues 15,325 9,771
381,427 357,801
Costs and expenses
Cost of coal sales 329,525 329,985
Selling, general and administrative expenses 13,794 9,756
Amortization of coal supply agreements 7,586 10,096
Other expenses 4,329 5,066
355,234 354,903
Income from operations 26,193 2,898
Interest expense, net:
Interest expense (21,354) (22,920)
Interest income 251 295
(21,103) (22,625)
Income (loss) before income taxes 5,090 (19,727)
Benefit from income taxes (1,000) (4,700)
Net income (loss) $6,090 $(15,027)
Basic and diluted earnings (loss) per
common share $0.15 $(0.39)
Weighted average shares outstanding 40,411 38,164
Dividends declared per share $0.0575 $0.0575
Adjusted EBITDA (A) $80,313 $63,589
(A) Adjusted EBITDA is defined as income from operations before the
effect of net interest expense; income taxes; depreciation, depletion
and amortization for Arch Coal, Inc., its subsidiaries and its
ownership percentage in its equity investments.
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2001 2000
Assets (Unaudited)
Current assets
Cash and cash equivalents $2,349 $6,028
Trade receivables 153,628 141,727
Other receivables 24,305 38,540
Inventories 51,288 47,930
Prepaid royalties 3,459 2,262
Deferred income taxes 27,440 27,440
Other 14,911 13,963
Total current assets 277,380 277,890
Property, plant and equipment, net 1,441,749 1,430,053
Other assets
Prepaid royalties 33,500 17,500
Coal supply agreements 101,298 108,884
Deferred income taxes 194,067 179,343
Investment in Canyon Fuel 174,004 188,700
Other 29,393 30,244
532,262 524,671
Total assets $2,251,391 $2,232,614
Liabilities and stockholders' equity
Current liabilities
Accounts payable $115,164 $103,014
Accrued expenses 154,402 152,303
Current portion of debt 95,000 60,129
Total current liabilities 364,566 315,446
Long-term debt 957,070 1,090,666
Accrued postretirement benefits other
than pension 332,837 336,663
Accrued reclamation and mine closure 116,133 118,928
Accrued workers' compensation 79,637 78,593
Accrued pension cost 21,453 19,287
Obligations under capital leases 10,596 11,348
Other noncurrent liabilities 63,118 41,809
Total liabilities 1,945,410 2,012,740
Stockholders' equity
Common stock 435 397
Paid-in capital 550,940 473,428
Retained deficit (231,385) (234,980)
Treasury stock, at cost - (18,971)
Accumulated other comprehensive loss (14,009) -
Total stockholders' equity 305,981 219,874
Total liabilities and
stockholders' equity $2,251,391 $2,232,614
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended
March 31,
2001 2000
(Unaudited)
Operating activities
Net income (loss) $6,090 $(15,027)
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 44,240 51,769
Prepaid royalties expensed 1,607 1,590
Net gain on disposition of assets (3,435) (2,343)
Income from equity investment (6,059) (3,631)
Net distributions from (contributions to)
equity investment 20,755 (7,800)
Changes in:
Receivables 2,334 18,953
Inventories (3,358) (1,191)
Accounts payable and accrued expenses 14,249 26,307
Income taxes (5,767) (4,642)
Accrued postretirement benefits other
than pension (3,826) (661)
Accrued reclamation and mine closure (2,795) 699
Accrued workers' compensation benefits 1,044 (6,325)
Other 413 (1,711)
Cash provided by operating activities 65,492 55,987
Investing activities
Additions to property, plant and equipment (48,547) (50,129)
Proceeds from dispositions of property,
plant and equipment 3,631 2,942
Additions to prepaid royalties (18,804) (17,901)
Cash used in investing activities (63,720) (65,088)
Financing activities
Net (payments on) borrowings from revolver
and lines of credit (98,725) 11,101
Reductions of obligations under capital lease (752) -
Dividends paid (2,495) (2,195)
Proceeds from sale of common stock 77,550 -
Proceeds from sale of treasury stock 18,971 -
Cash provided by (used in) financing
activities (5,451) 8,906
Decrease in cash and cash equivalents (3,679) (195)
Cash and cash equivalents, beginning of period 6,028 3,283
Cash and cash equivalents, end of period $2,349 $3,088
Canyon Fuel Company cash flow information
(Arch Coal Ownership Percentage)
Depreciation, depletion and amortization 9,880 8,922
Additions to property, plant and equipment 2,901 1,637