10-Q 1 a13-8581_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 10-Q

 

(Mark One)

 

x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2013

 

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from                      to                      .

 

Commission file number: 1-13105

 

 

Arch Coal, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

43-0921172

(State or other jurisdiction

 

(I.R.S. Employer

of incorporation or organization)

 

Identification Number)

 

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

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

At May 1, 2013 there were 212,246,799 shares of the registrant’s common stock outstanding.

 

 

 




Table of Contents

 

Part I

FINANCIAL INFORMATION

 

Item 1.    Financial Statements.

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(Unaudited)

 

Revenues

 

$

825,502

 

$

1,039,651

 

Costs, expenses and other

 

 

 

 

 

Cost of sales (exclusive of items shown separately below)

 

710,573

 

850,871

 

Depreciation, depletion and amortization

 

118,868

 

139,966

 

Amortization of acquired sales contracts, net

 

(2,810

)

(14,017

)

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

 

1,308

 

(3,613

)

Selling, general and administrative expenses

 

33,209

 

30,861

 

Other operating income, net

 

(3,217

)

(18,498

)

 

 

857,931

 

985,570

 

Income (loss) from operations

 

(32,429

)

54,081

 

Interest expense, net:

 

 

 

 

 

Interest expense

 

(95,087

)

(74,772

)

Interest and investment income

 

2,836

 

1,021

 

 

 

(92,251

)

(73,751

)

 

 

 

 

 

 

Loss before income taxes

 

(124,680

)

(19,670

)

Benefit from income taxes

 

(54,631

)

(21,079

)

Net income (loss)

 

(70,049

)

1,409

 

Less: Net income attributable to noncontrolling interest

 

 

(203

)

Net income (loss) attributable to Arch Coal, Inc.

 

$

(70,049

)

$

1,206

 

Earnings per common share

 

 

 

 

 

Basic earnings (loss) per common share

 

$

(0.33

)

$

0.01

 

Diluted earnings (loss) per common share

 

$

(0.33

)

$

0.01

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

212,062

 

211,687

 

Diluted

 

212,062

 

211,908

 

Dividends declared per common share

 

$

0.03

 

$

0.11

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(Unaudited)

 

Net income (loss)

 

$

(70,049

)

$

1,409

 

 

 

 

 

 

 

Derivative instruments

 

 

 

 

 

Total comprehensive income (loss) before tax

 

(1,179

)

10,287

 

Tax impact

 

425

 

(3,702

)

 

 

(754

)

6,585

 

 

 

 

 

 

 

Pension, postretirement and other post-employment benefits

 

 

 

 

 

Total comprehensive income before tax

 

1,954

 

724

 

Tax impact

 

(703

)

(261

)

 

 

1,251

 

463

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

Total comprehensive income before tax

 

1,553

 

394

 

Tax impact

 

(559

)

(142

)

 

 

994

 

252

 

Total other comprehensive income

 

1,491

 

7,300

 

Total comprehensive income (loss)

 

$

(68,558

)

$

8,709

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

4



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

 

 

 

March 31,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

730,119

 

$

784,622

 

Restricted cash

 

2,290

 

3,453

 

Short term investments

 

248,414

 

234,305

 

Trade accounts receivable

 

263,294

 

247,539

 

Other receivables

 

81,750

 

84,541

 

Inventories

 

368,240

 

365,424

 

Prepaid royalties

 

13,105

 

11,416

 

Deferred income taxes

 

67,337

 

67,360

 

Coal derivative assets

 

20,856

 

22,975

 

Other

 

88,977

 

92,469

 

Total current assets

 

1,884,382

 

1,914,104

 

Property, plant and equipment, net

 

7,272,541

 

7,337,098

 

Other assets:

 

 

 

 

 

Prepaid royalties

 

91,691

 

87,773

 

Goodwill

 

265,423

 

265,423

 

Equity investments

 

246,807

 

242,215

 

Other

 

159,300

 

160,164

 

Total other assets

 

763,221

 

755,575

 

Total assets

 

$

9,920,144

 

$

10,006,777

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

229,269

 

$

224,418

 

Coal derivative liabilities

 

643

 

1,737

 

Accrued expenses and other current liabilities

 

352,040

 

318,018

 

Current maturities of debt

 

28,306

 

32,896

 

Total current liabilities

 

610,258

 

577,069

 

Long-term debt

 

5,082,205

 

5,085,879

 

Asset retirement obligations

 

410,975

 

409,705

 

Accrued pension benefits

 

69,342

 

67,630

 

Accrued postretirement benefits other than pension

 

46,413

 

45,086

 

Accrued workers’ compensation

 

81,039

 

81,629

 

Deferred income taxes

 

610,195

 

664,182

 

Other noncurrent liabilities

 

227,363

 

221,030

 

Total liabilities

 

7,137,790

 

7,152,210

 

Stockholders’ equity

 

 

 

 

 

Common stock, $0.01 par value, authorized 260,000 shares, issued 213,759 shares at both March 31, 2013 and December 31, 2012

 

2,141

 

2,141

 

Paid-in capital

 

3,029,536

 

3,026,823

 

Treasury stock, at cost

 

(53,848

)

(53,848

)

Accumulated deficit

 

(180,459

)

(104,042

)

Accumulated other comprehensive loss

 

(15,016

)

(16,507

)

Total stockholders’ equity

 

2,782,354

 

2,854,567

 

Total liabilities and stockholders’ equity

 

$

9,920,144

 

$

10,006,777

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

5



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(70,049

)

$

1,409

 

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

Depreciation, depletion and amortization

 

118,868

 

139,966

 

Amortization of acquired sales contracts, net

 

(2,810

)

(14,017

)

Amortization relating to financing activities

 

6,167

 

4,288

 

Prepaid royalties expensed

 

3,537

 

8,586

 

Employee stock-based compensation expense

 

2,713

 

4,079

 

Changes in:

 

 

 

 

 

Receivables

 

(12,340

)

88,082

 

Inventories

 

(2,816

)

(111,196

)

Coal derivative assets and liabilities

 

(192

)

(5,347

)

Accounts payable, accrued expenses and other current liabilities

 

38,249

 

(66,222

)

Income taxes, net

 

458

 

23,002

 

Deferred income taxes

 

(54,801

)

(21,742

)

Other

 

16,307

 

4,102

 

Cash provided by operating activities

 

43,291

 

54,990

 

Investing activities

 

 

 

 

 

Capital expenditures

 

(54,522

)

(93,271

)

Minimum royalty payments

 

(9,142

)

(8,262

)

Proceeds from dispositions of property, plant and equipment

 

714

 

22,105

 

Purchases of short term investments

 

(26,787

)

 

Proceeds from sales of short term investments

 

11,534

 

 

Investments in and advances to affiliates

 

(4,298

)

(5,777

)

Change in restricted cash

 

1,163

 

1,455

 

Cash used in investing activities

 

(81,338

)

(83,750

)

Financing activities

 

 

 

 

 

Net increase in borrowings under lines of credit

 

 

34,000

 

Payments on term note

 

(4,125

)

 

Net payments on other debt

 

(5,964

)

(7,323

)

Debt financing costs

 

 

(100

)

Dividends paid

 

(6,367

)

(23,327

)

Proceeds from exercise of options under incentive plans

 

 

5,131

 

Cash provided by (used in) financing activities

 

(16,456

)

8,381

 

Decrease in cash and cash equivalents

 

(54,503

)

(20,379

)

Cash and cash equivalents, beginning of period

 

784,622

 

138,149

 

Cash and cash equivalents, end of period

 

$

730,119

 

$

117,770

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

6



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

1.  Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Coal, Inc. and its subsidiaries and controlled entities (the “Company”). The Company’s primary business is the production of thermal and metallurgical coal from surface and underground mines located throughout the United States, for sale to utility, industrial and steel producers both in the United States and around the world. The Company currently operates 16 mining complexes in West Virginia, Kentucky, Maryland, Virginia, Illinois, Wyoming, Colorado and Utah. In addition,  the Company has a metallurgical coal mine in development in West Virginia.  All subsidiaries are wholly-owned. Intercompany transactions and accounts have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three month period ended March 31, 2013 are not necessarily indicative of results to be expected for the year ending December 31, 2013. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2012 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission.

 

Arch Western Resources, LLC became a wholly-owned subsidiary when the remaining 0.5% interest was purchased on July 2, 2012. Net income attributable to noncontrolling interest is shown on the condensed consolidated statement of operations prior to this date.

 

2.  Accounting Policies

 

There is no new accounting guidance that is expected to have a significant impact on the Company’s financial statements.

 

3. Accumulated Other Comprehensive Loss

 

Other comprehensive loss includes transactions recorded in stockholders’ equity during the year, excluding net income and transactions with stockholders. In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The standard requires that companies present, either parenthetically on the face of the financial statements or in a single note, the effect of significant amounts reclassified from each component of accumulated other comprehensive income and the income statement line items affected by the reclassification. The Company adopted the provisions of the new guidance during the first quarter of 2013.

 

The following items are included in accumulated other comprehensive loss:

 

 

 

 

 

Pension,

 

 

 

 

 

 

 

 

 

Postretirement

 

 

 

 

 

 

 

 

 

and Other

 

 

 

Accumulated

 

 

 

 

 

Post-

 

 

 

Other

 

 

 

Derivative

 

Employment

 

Available-for-

 

Comprehensive

 

 

 

Instruments

 

Benefits

 

Sale Securities

 

Loss

 

 

 

(In thousands)

 

Balance at December 31, 2012

 

$

2,244

 

$

(18,286

)

$

(465

)

$

(16,507

)

Unrealized gains (losses)

 

(204

)

 

956

 

752

 

Amounts reclassified from accumulated other comprehensive income

 

(550

)

1,251

 

38

 

739

 

Balance at March 31, 2013

 

$

1,490

 

$

(17,035

)

$

529

 

$

(15,016

)

 

The following items were reclassified out of accumulated other comprehensive loss during the three months ended March 31, 2013:

 

7



Table of Contents

 

 

 

Amount Reclassified

 

Affected Line Item in

 

 

 

From Accumulated Other

 

the Condensed Consolidated

 

Details about accumulated other comprehensive income components

 

Comprehensive Loss

 

Statement of Operations

 

 

 

(In thousands)

 

 

 

Derivatives instruments

 

$

859

 

Revenues

 

 

 

(309

)

Benefit from income taxes

 

 

 

$

550

 

Net of tax

 

 

 

 

 

 

 

Pension, postretirement and other post-employment benefits

 

 

 

 

 

Amortization of prior service credits

 

$

2,908

 

(1)

 

Amortization of actuarial gains (losses) net

 

(4,862

)

(1)

 

 

 

(1,954

)

Total before tax

 

 

 

703

 

Benefit from income taxes

 

 

 

$

(1,251

)

Net of tax

 

 

 

 

 

 

 

Available-for-sale securities

 

$

(59

)

Interest and investment income

 

 

 

21

 

Benefit from income taxes

 

 

 

$

(38

)

Net of tax

 

 


(1) Production-related benefit and workers’ compensation costs are included in the costs of coal inventory. See Note 12, “Workers’ Compensation Expense” and Note 13”Employee Benefit Plans” for more information about pension, postretirement and postemployment benefit costs.

 

4. Inventories

 

Inventories consist of the following:

 

 

 

March 31

 

December 31

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Coal

 

$

182,998

 

$

180,917

 

Repair parts and supplies

 

170,040

 

172,139

 

Work-in-process

 

15,202

 

12,368

 

 

 

$

368,240

 

$

365,424

 

 

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $14.0 million at March 31, 2013, and $13.6 million at December 31, 2012.

 

5. Investments in Available-for-Sale Securities

 

The Company has invested in marketable debt securities, primarily highly liquid AA - rated corporate bonds and U.S. government and government agency securities.  These investments are held in the custody of a major financial institution.  These securities, along with the Company’s investments in marketable equity securities, are classified as available-for-sale securities and, accordingly, the unrealized gains and losses are recorded through other comprehensive income.

 

8



Table of Contents

 

The Company’s investments in available-for-sale marketable securities are as follows:

 

 

 

March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Gross

 

Gross

 

 

 

Classification

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

Short-Term

 

Other

 

 

 

Cost Basis

 

Gains

 

Losses

 

Value

 

Investments

 

Assets

 

 

 

(In thousands)

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

135,457

 

$

1

 

$

(705

)

$

134,753

 

$

134,753

 

$

 

Corporate notes and bonds

 

114,905

 

 

(1,244

)

113,661

 

113,661

 

 

Equity securities

 

5,271

 

5,547

 

(2,774

)

8,044

 

 

8,044

 

Total Investments

 

$

255,633

 

$

5,548

 

$

(4,723

)

$

256,458

 

$

248,414

 

$

8,044

 

 

 

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Gross

 

Gross

 

 

 

Classification

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

Short-Term

 

Other

 

 

 

Cost Basis

 

Gains

 

Losses

 

Value

 

Investments

 

Assets

 

 

 

(In thousands)

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

146,993

 

$

2

 

$

(412

)

$

146,583

 

$

146,583

 

$

 

Corporate notes and bonds

 

88,118

 

 

(396

)

87,722

 

87,722

 

 

Equity securities

 

5,271

 

2,704

 

(2,628

)

5,347

 

 

5,347

 

Total Investments

 

$

240,382

 

$

2,706

 

$

(3,436

)

$

239,652

 

$

234,305

 

$

5,347

 

 

The aggregate fair value of investments with unrealized losses that have been owned for less than a year was $245.4 million and $223.3 million at March 31, 2013 and December 31, 2012, respectively. The aggregate fair value of investments with unrealized losses that have been owned for over a year was $0.3 million and $0.4 million at March 31, 2013 and December 31, 2012, respectively.

 

The debt securities outstanding at March 31, 2013 have maturity dates ranging from the second quarter of 2013 through the third quarter of 2014.  The Company classifies its investments as current based on the nature of the investments and their availability for use in current operations.

 

6. Equity Method Investments and Membership Interests in Joint Ventures

 

The Company accounts for its investments and membership interests in joint ventures under the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the entity. Below are the equity method investments reflected in the condensed consolidated balance sheets:

 

In thousands

 

Knight Hawk

 

DKRW

 

DTA

 

Tenaska

 

Millennium

 

Tongue River

 

Total

 

Balance at December 31, 2012

 

$

149,063

 

$

15,515

 

$

15,462

 

$

15,264

 

$

32,214

 

$

14,697

 

$

242,215

 

Advances to affiliates, net

 

 

 

593

 

 

1,790

 

1,001

 

3,384

 

Equity in comprehensive income (loss)

 

4,515

 

(733

)

(1,609

)

 

(684

)

(281

)

1,208

 

Balance at March 31, 2013

 

$

153,578

 

$

14,782

 

$

14,446

 

$

15,264

 

$

33,320

 

$

15,417

 

$

246,807

 

Notes receivable from investees:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

$

 

$

38,680

 

$

 

$

5,148

 

$

 

$

 

$

43,828

 

Balance at March 31, 2013

 

$

 

$

41,019

 

$

 

$

5,197

 

 

 

$

 

$

46,216

 

 

The Company may be required to make future contingent payments of up to $72.8 million related to development financing for certain of its equity investees. The Company’s obligation to make these payments, as well as the timing of any payments required, is contingent upon a number of factors, including project development progress, receipt of permits and construction financing.

 

7. Derivatives

 

Diesel fuel price risk management

 

The Company is exposed to price risk with respect to diesel fuel purchased for use in its operations. The Company anticipates purchasing approximately 57 to 67 million gallons of diesel fuel for use in its operations during 2013. To protect the Company’s cash flows from increases in the price of diesel fuel for its operations, the Company uses forward physical diesel purchase contracts and purchased heating oil call options. At March 31, 2013, the Company had protected the price of approximately 97% of its expected purchases for the remainder of 2013 and 42% of its 2014 purchases. At March 31, 2013, the Company had purchased heating oil call options for approximately 71 million gallons for the purpose of managing the price risk associated with future diesel purchases.

 

The Company also purchased heating oil call options to manage the price risk associated with fuel surcharges on its barge and rail shipments, which cover increases in diesel fuel prices. At March 31, 2013, the Company held purchased call options for approximately 6 million gallons for the purpose of managing the fluctuations in cash flows associated with fuel surcharges on future shipments.

 

These positions reduce the Company’s risk of cash flow fluctuations related to these surcharges but the positions are not accounted for as hedges.

 

Coal risk management positions

 

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market in order to manage its exposure to coal prices. The Company has exposure to the risk of fluctuating coal prices related to forecasted sales or purchases of coal or to the risk of changes in the fair value of a fixed price physical sales contract. Certain derivative contracts may be designated as hedges of these risks.

 

At March 31, 2013, the Company held derivatives for risk management purposes that are expected to settle in the following years:

 

(Tons in thousands)

 

2013

 

2014

 

2015

 

Total

 

Coal sales

 

5,399

 

4,260

 

780

 

10,439

 

Coal purchases

 

1,131

 

1,260

 

 

2,391

 

 

Coal trading positions

 

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market for trading purposes. The Company is exposed to the risk of changes in coal prices on the value of its coal trading portfolio. The estimated future realization of the value of the trading portfolio is $4.1 million of losses in 2013 and $3.6 million of gains in 2014.

 

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Tabular derivatives disclosures

 

The Company has master netting agreements with all of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the condensed consolidated balance sheets. The amounts shown in the table below represent the fair value position of individual contracts, and not the net position presented in the accompanying condensed consolidated balance sheets. The fair value and location of derivatives reflected in the accompanying condensed consolidated balance sheets are as follows:

 

 

 

March 31, 2013

 

 

 

December 31, 2012

 

 

 

Fair Value of Derivatives

 

Asset

 

Liability

 

 

 

Asset

 

Liability

 

 

 

(In thousands)

 

Derivative

 

Derivative

 

 

 

Derivative

 

Derivative

 

 

 

Derivatives Designated as Hedging Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

$

2,379

 

$

(252

)

 

 

$

3,277

 

$

(10

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives Not Designated as Hedging Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Heating oil — diesel purchases

 

6,227

 

 

 

 

7,379

 

 

 

 

Heating oil — fuel surcharges

 

207

 

 

 

 

1,961

 

 

 

 

Coal — held for trading purposes

 

41,675

 

(42,234

)

 

 

17,403

 

(16,933

)

 

 

Coal — risk management

 

22,354

 

(3,709

)

 

 

24,843

 

(7,342

)

 

 

Total

 

70,463

 

(45,943

)

 

 

51,586

 

(24,275

)

 

 

Total derivatives

 

72,842

 

(46,195

)

 

 

54,863

 

(24,285

)

 

 

Effect of counterparty netting

 

(45,552

)

45,552

 

 

 

(22,548

)

22,548

 

 

 

Net derivatives as classified in the balance sheets

 

$

27,290

 

$

(643

)

$

26,647

 

$

32,315

 

$

(1,737

)

$

30,578

 

 

 

 

 

 

March 31, 2013

 

December 31,
2012

 

Net derivatives as reflected on the balance sheets

 

 

 

 

 

 

 

Heating oil

 

Other current assets

 

$

6,434

 

$

9,340

 

Coal

 

Coal derivative assets

 

20,856

 

22,975

 

 

 

Coal derivative liabilities

 

(643

)

(1,737

)

 

 

 

 

$

26,647

 

$

30,578

 

 

The Company had a current asset for the right to reclaim cash collateral of $24.6 million and $16.2 million at March 31, 2013 and December 31, 2012, respectively. These amounts are not included with the derivatives presented in the table above and are included in “other current assets” in the accompanying condensed consolidated balance sheets.

 

The effects of derivatives on measures of financial performance are as follows:

 

Derivatives used in Cash Flow Hedging Relationships (in thousands)

For the three months ended March 31,

 

 

 

Gain (Loss) Recognized in Other
Comprehensive
Income(Effective Portion)

 

Gains (Losses) Reclassified from
Other Comprehensive Income into
Income
(Effective Portion)

 

 

 

2013

 

2012

 

2013

 

2012

 

Coal sales

(1)

 

$

(176

)

$

2,493

 

$

1,221

 

$

201

 

Coal purchases

(2)

 

(182

)

(202

)

(362

)

 

Totals

 

$

(358

)

$

2,291

 

$

859

 

$

201

 

 

No ineffectiveness or amounts excluded from effectiveness testing relating to the Company’s cash flow hedging relationships were recognized in the results of operations in the three month periods ended March 31, 2013 and 2012.

 

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Derivatives Not Designated as Hedging Instruments (in thousands)

For the three months ended March 31,

 

 

 

Gain (Loss) Recognized

 

 

 

2013

 

2012

 

Coal — unrealized

(3)

 

$

1,470

 

$

7,552

 

Coal — realized

(4)

 

$

9,217

 

$

3,158

 

Heating oil — diesel purchases

(4)

 

$

(4,261

)

$

423

 

Heating oil — fuel surcharges

(4)

 

$

(565

)

$

367

 

 


Location in statement of operations:

(1) — Revenues

(2) — Cost of sales

(3) — Change in fair value of coal derivatives and coal trading activities, net

(4) — Other operating income, net

 

The Company recognized net unrealized and realized losses of $2.8 million and $3.9 million during the three months ended March 31, 2013 and 2012, respectively, related to its trading portfolio, which are included in the caption “Change in fair value of coal derivatives and coal trading activities, net” in the accompanying condensed consolidated statements of operations, and are not included in the previous tables reflecting the effects of derivatives on measures of financial performance.

 

Based on fair values at March 31, 2013, gains on derivative contracts designated as hedge instruments in cash flow hedges of approximately $1.0 million are expected to be reclassified from other comprehensive income into earnings during the next twelve months.

 

8. Debt

 

 

 

March 31, 2013

 

December 31,
2012

 

 

 

(In thousands)

 

Term loan ($1.64 billion face value) due 2018

 

$

1,623,955

 

$

1,627,384

 

8.75% senior notes ($600.0 million face value) due 2016

 

591,535

 

590,999

 

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

 

360,621

 

360,042

 

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

 

34,400

 

40,350

 

 

 

5,110,511

 

5,118,775

 

Less current maturities of debt

 

28,306

 

32,896

 

Long-term debt

 

$

5,082,205

 

$

5,085,879

 

 

9. Fair Value Measurements

 

The hierarchy of fair value measurements assigns a level to fair value measurements based on the inputs used in the respective valuation techniques. The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

·    Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale equity securities, U.S. Treasury securities, and coal futures that are submitted for clearing on the New York Mercantile Exchange.

 

·    Level 2 is defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The

 

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Company’s level 2 assets and liabilities include U.S. government agency securities and commodity contracts (coal and heating oil) with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

 

·    Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. These include the Company’s commodity option contracts (coal and heating oil) valued using modeling techniques, such as Black-Scholes, that require the use of inputs, particularly volatility, that are rarely observable. Changes in the unobservable inputs would not have a significant impact on the reported Level 3 fair values at March 31, 2013.

 

The table below sets forth, by level, the Company’s financial assets and liabilities that are recorded at fair value in the accompanying condensed consolidated balance sheet:

 

 

 

Fair Value at March 31, 2013

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Investments in marketable securities

 

$

256,458

 

$

98,410

 

$

158,048

 

$

 

Derivatives

 

27,290

 

21,250

 

 

6,040

 

Total assets

 

$

283,748

 

$

119,660

 

$

158,048

 

$

6,040

 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

643

 

$

 

$

245

 

$

398

 

 

The Company’s contracts with its counterparties allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. For classification purposes, the Company records the net fair value of all the positions with these counterparties as a net asset or liability. Each level in the table above displays the underlying contracts according to their classification in the accompanying condensed consolidated balance sheet, based on this counterparty netting.

 

The following table summarizes the change in the fair values of financial instruments categorized as level 3.

 

 

 

Three Months Ended
March 31, 2013

 

Balance, beginning of period

 

$

8,174

 

Realized and unrealized losses recognized in earnings, net

 

(4,472

)

Realized and unrealized losses recognized in other comprehensive income, net

 

 

Purchases

 

3,217

 

Issuances

 

(25

)

Settlements

 

(1,252

)

Ending balance

 

$

5,642

 

 

Net unrealized losses during the three month period ended March 31, 2013 related to level 3 financial instruments held on March 31, 2013 were $4.0 million.

 

Fair Value of Long-Term Debt

 

At March 31, 2013 and December 31, 2012, the fair value of the Company’s debt, including amounts classified as current, was $5.0 billion. Fair values are based upon observed prices in an active market, when available, or from valuation models using market information, which fall into Level 2 in the fair value hierarchy.

 

10. Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

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March 31,

 

December 31,

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Payroll and employee benefits

 

$

63,375

 

$

72,405

 

Taxes other than income taxes

 

121,159

 

121,029

 

Interest

 

83,855

 

42,413

 

Acquired sales contracts

 

14,456

 

14,038

 

Workers’ compensation

 

12,732

 

10,371

 

Asset retirement obligations

 

38,919

 

38,920

 

Other

 

17,544

 

18,842

 

 

 

$

352,040

 

$

318,018

 

 

11. Stock-Based Compensation and Other Incentive Plans

 

During the three months ended March 31, 2013 the Company granted options to purchase approximately 2.0 million shares of common stock with a weighted average exercise price of $5.23 per share and a weighted average grant-date fair value of $2.38 per share. The options’ fair value was determined using the Black-Scholes option pricing model, using a weighted average risk-free rate of 0.648%, a weighted average dividend yield of 2.29% and a weighted average volatility of 66.76%. The options’ expected life is 4.5 years and the options vest ratably over three years and provide for the continuation of vesting after retirement for recipients that meet certain criteria. The expense for these options will be recognized through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn all or part of the award.

 

During the three months ended March 31, 2013, the Company also granted restricted stock units totaling 974,500 shares whose grant date fair value at the time of grant was $5.23. The shares vest at the end of three years.

 

The Company has a long-term incentive program that allows for the award of performance units. The total number of units earned by a participant is based on financial and operational performance measures, and may be paid out in cash or in shares of the Company’s common stock. The Company recognizes compensation expense over the three-year term of the grant. Amounts accrued and unpaid for all grants under the plan totaled $10.4 million and $13.1 million as of March 31, 2013 and December 31, 2012, respectively.

 

12. Workers’ Compensation Expense

 

The following table details the components of workers’ compensation expense:

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Service cost

 

$

505

 

$

968

 

Interest cost

 

656

 

680

 

Net amortization

 

235

 

277

 

Total occupational disease

 

1,396

 

1,925

 

Traumatic injury claims and assessments

 

7,358

 

5,176

 

Total workers’ compensation expense

 

$

8,754

 

$

7,101

 

 

13. Employee Benefit Plans

 

The following table details the components of pension benefit costs (credits):

 

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Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Service cost

 

$

7,700

 

$

7,596

 

Interest cost

 

3,926

 

3,980

 

Expected return on plan assets

 

(5,806

)

(5,538

)

Amortization of prior service credits

 

(158

)

(36

)

Amortization of other actuarial losses

 

4,551

 

3,571

 

Net benefit cost

 

$

10,213

 

$

9,573

 

 

The following table details the components of other postretirement benefit costs (credits):

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Service cost

 

$

556

 

$

549

 

Interest cost

 

431

 

491

 

Amortization of prior service credits

 

(2,750

)

(2,995

)

Amortization of other actuarial losses (gains)

 

77

 

(90

)

Net benefit credit

 

$

(1,686

)

$

(2,045

)

 

14. Earnings (Loss) Per Common Share

 

The following table provides the basis for earnings (loss) per share calculations by reconciling basic and diluted weighted average shares outstanding:

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Weighted average shares outstanding:

 

 

 

 

 

Basic weighted average shares outstanding

 

212,062

 

211,687

 

Effect of common stock equivalents under incentive plans

 

 

221

 

Diluted weighted average shares outstanding

 

212,062

 

211,908

 

 

The effect of options, restricted stock and restricted stock units equaling 8.6 million and 3.0 million shares of common stock were excluded from the calculation of diluted weighted average shares outstanding for the three month periods ended March 31, 2013 and 2012, respectively, because the exercise price or grant price of the securities exceeded the average market price of the Company’s common stock for these periods. The weighted average share impact of options, restricted stock and restricted stock units that were excluded from the calculation of weighted average shares due to the Company’s incurring a net loss for the three months ended March 31, 2013 were not significant.

 

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15. Commitments and Contingencies

 

Allegheny Energy Supply (“Allegheny”), the sole customer of coal produced at the Company’s subsidiary Wolf Run Mining Company’s (“Wolf Run”) Sycamore No. 2 mine, filed a lawsuit against Wolf Run, Hunter Ridge Holdings, Inc. (“Hunter Ridge”), and ICG in state court in Allegheny County, Pennsylvania on December 28, 2006, and amended its complaint on April 23, 2007. Allegheny claimed that Wolf Run breached a coal supply contract when it declared force majeure under the contract upon idling the Sycamore No. 2 mine in the third quarter of 2006, and that Wolf Run continued to breach the contract by failing to ship in volumes referenced in the contract. The Sycamore No. 2 mine was idled after encountering adverse geologic conditions and abandoned gas wells that were previously unidentified and unmapped. After extensive searching for gas wells and rehabilitation of the mine, it was re-opened in 2007, but with notice to Allegheny that it would necessarily operate at reduced volumes in order to safely and effectively avoid the many gas wells within the reserve. The amended complaint also alleged that the production stoppages constitute a breach of the guarantee agreement by Hunter Ridge and breach of certain representations made upon entering into the contract in early 2005. Allegheny voluntarily dropped the breach of representation claims later. Allegheny claimed that it would incur costs in excess of $100 million to purchase replacement coal over the life of the contract. ICG, Wolf Run and Hunter Ridge answered the amended complaint on August 13, 2007, disputing all of the remaining claims.

 

On November 3, 2008, ICG, Wolf Run and Hunter Ridge filed an amended answer and counterclaim against the plaintiffs seeking to void the coal supply agreement due to, among other things, fraudulent inducement and conspiracy. On September 23, 2009, Allegheny filed a second amended complaint alleging several alternative theories of liability in its effort to extend contractual liability to ICG, which was not a party to the original contract and did not exist at the time Wolf Run and Allegheny entered into the contract.  No new substantive claims were asserted.  ICG answered the second amended complaint on October 13, 2009, denying all of the new claims. ICG’s counterclaim was dismissed on motion for summary judgment entered on May 11, 2010.  Allegheny’s claims against ICG were also dismissed by summary judgment, but the claims against Wolf Run and Hunter Ridge were not. The court conducted a non-jury trial of this matter beginning on January 10, 2011 and concluding on February 1, 2011. At the trial, Allegheny presented its evidence for breach of contract and claimed that it is entitled to past and future damages in the aggregate of between $228.0 million and $377.0 million. Wolf Run and Hunter Ridge presented their defense of the claims, including evidence with respect to the existence of force majeure conditions and excuse under the contract and applicable law. Wolf Run and Hunter Ridge presented evidence that Allegheny’s damage calculations were significantly inflated because they were not determined as of the time of the breach and, in some instances, artificially assumed future non-delivery or did not take into account the apparent requirement to supply coal in the future. On May 2, 2011, the trial court entered a Memorandum and Verdict determining that Wolf Run had breached the coal supply contract and that the performance shortfall was not excused by force majeure. ICG and Allegheny filed post-verdict motions in the trial court and on August 23, 2011, the court denied the parties’ motions.  The court entered a final judgment on August 25, 2011, in the amount of $104.1 million, which included pre-judgment interest.  The parties appealed the lower court’s decision to the Superior Court of Pennsylvania.  Wolf Run and Hunter Ridge have filed an appeal bond in the amount of $124.9 million.  On August 13, 2012, the Superior Court of Pennsylvania ruled that the lower court should have calculated damages as of the date of breach, and remanded the matter back to the lower court with instructions to recalculate the award.  This ruling resulted in a reduction of the Company’s best estimate of the probable loss related to this lawsuit.  On November 19, 2012, Allegheny filed a Petition for Allowance of Appeal with the Supreme Court of Pennsylvania and Wolf Run and Hunter Ridge filed an Answer.  This Petition is pending.

 

In addition, the Company is a party to numerous claims and lawsuits with respect to various matters. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably determinable.  As of March 31, 2013 and December 31, 2012, the Company had accrued $32.7 million and $32.8 million, respectively, for all legal matters, including $4.0 million and $4.4 million classified as current.  The ultimate resolution of any such legal matter could result in outcomes which may be materially different from amounts the Company has accrued for such matters.

 

16. Segment Information

 

The Company has three reportable business segments, which are based on the major coal producing basins in which the Company operates. Each of these reportable business segments includes a number of mine complexes. The Company manages its coal sales by coal basin, not by individual mine complex. Geology, coal transportation routes to customers, regulatory environments and coal quality are characteristic to a basin. Accordingly, market and contract pricing have developed by coal basin. Mine operations are evaluated based on their per-ton operating costs (defined as including all mining costs but excluding pass-through transportation expenses), as well as on other non-financial measures, such as safety and environmental performance. The Company’s reportable segments are the Powder River Basin (PRB) segment, with operations in Wyoming; the Western Bituminous (WBIT) segment, with operations in Utah and Colorado; the Appalachia (APP) segment, with operations in West Virginia, Kentucky, Maryland and Virginia.  The “Other” operating segment represents primarily the Company’s Illinois operations and ADDCAR subsidiary, which manufactures and sells its patented highwall mining system.

 

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Table of Contents

 

Operating segment results for the three months ended March 31, 2013 and 2012 are presented below. Results for the reportable segments include all direct costs of mining, including all depreciation, depletion and amortization related to the mining operations, even if the assets are not recorded at the operating segment level.  Corporate, Other and Eliminations includes these charges, as well as the change in fair value of coal derivatives and coal trading activities, net; corporate overhead; land management; other support functions; and the elimination of intercompany transactions.

 

The asset amounts below represent an allocation of assets consistent with the basis used for the Company’s incentive compensation plans. The amounts in Corporate, Other and Eliminations represent primarily corporate assets (cash, receivables, investments, plant, property and equipment) as well as unassigned coal reserves, above-market acquired sales contracts and other unassigned assets. Goodwill is allocated to the respective reporting units, even though it may not be reflected in the subsidiaries’ financial statements.  Prior year asset amounts have been restated to reflect a change in how certain unassigned coal reserves and goodwill amounts are presented.

 

 

 

PRB

 

APP

 

WBIT

 

Other
Operating
Segments

 

Corporate,
Other and
Eliminations

 

Consolidated

 

 

 

(in thousands)

 

 

 

 

 

Three months ended March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

361,946

 

$

282,618

 

$

155,644

 

$

25,294

 

$

 

$

825,502

 

Income (loss) from operations

 

15,515

 

(27,117

)

24,951

 

1,435

 

(47,213

)

(32,429

)

Depreciation, depletion and amortization

 

42,227

 

55,331

 

17,371

 

2,609

 

1,330

 

118,868

 

Amortization of acquired sales contracts, net

 

(1,199

)

(2,472

)

 

861

 

 

(2,810

)

Total assets

 

1,939,892

 

4,334,324

 

623,243

 

159,090

 

2,863,595

 

9,920,144

 

Capital expenditures

 

2,157

 

49,296

 

1,502

 

482

 

1,085

 

54,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

401,177

 

$

469,058

 

$

144,559

 

$

24,857

 

$

 

$

1,039,651

 

Income (loss) from operations

 

32,543

 

15,835

 

31,241

 

(3,750

)

(21,788

)

54,081

 

Depreciation, depletion and amortization

 

41,223

 

76,017

 

18,600

 

3,687

 

439

 

139,966

 

Amortization of acquired sales contracts, net

 

(816

)

(13,088

)

 

(113

)

 

(14,017

)

Total assets

 

2,263,517

 

4,640,344

 

752,197

 

72,382

 

2,436,678

 

10,165,118

 

Capital expenditures

 

3,986

 

66,303

 

15,137

 

5,644

 

2,201

 

93,271

 

 

A reconciliation of segment income (loss) from operations to consolidated loss before income taxes follows:

 

 

 

Three Months Ended March 31,

 

 

 

2013

 

2012

 

 

 

(In thousands)

 

Income (loss) from operations

 

$

(32,429

)

$

54,081

 

Interest expense

 

(95,087

)

(74,772

)

Interest and investment income

 

2,836

 

1,021

 

Loss before income taxes

 

$

(124,680

)

$

(19,670

)

 

17. Supplemental Condensed Consolidating Financial Information

 

Pursuant to the indentures governing Arch Coal, Inc.’s senior notes, certain wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes on a joint and several basis. The following tables present condensed consolidating financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the guarantors under the senior

 

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Table of Contents

 

notes, and (iv) the entities which are not guarantors under the senior notes (Arch Receivable Company, LLC and the Company’s subsidiaries outside the U.S.):

 

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Table of Contents

 

Condensed Consolidating Statements of Operations

Three Months Ended March 31, 2013

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Revenues

 

$

 

$

825,502

 

$

 

$

 

$

825,502

 

Costs, expenses and other

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

2,883

 

707,690

 

 

 

710,573

 

Depreciation, depletion and amortization

 

1,406

 

117,453

 

9

 

 

118,868

 

Amortization of acquired sales contracts, net

 

 

(2,810

)

 

 

(2,810

)

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

 

 

1,308

 

 

 

1,308

 

Selling, general and administrative expenses

 

21,698

 

10,035

 

1,476

 

 

33,209

 

Other operating income, net

 

(5,907

)

3,702

 

(1,012

)

 

(3,217

)

 

 

20,080

 

837,378

 

473

 

 

857,931

 

Income from investment in subsidiaries

 

(2,871

)

 

 

2,871

 

 

Loss from operations

 

(22,951

)

(11,876

)

(473

)

2,871

 

(32,429

)

Interest expense, net:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(110,827

)

(6,455

)

(1,041

)

23,236

 

(95,087

)

Interest and investment income

 

9,098

 

15,443

 

1,531

 

(23,236

)

2,836

 

 

 

(101,729

)

8,988

 

490

 

 

(92,251

)

Income (loss) before income taxes

 

(124,680

)

(2,888

)

17

 

2,871

 

(124,680

)

Benefit from income taxes

 

(54,631

)

 

 

 

(54,631

)

Net income (loss)

 

(70,049

)

(2,888

)

17

 

2,871

 

(70,049

)

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

(68,558

)

$

(3,324

)

$

17

 

$

3,307

 

$

(68,558

)

 

18



Table of Contents

 

Condensed Consolidating Statements of Operations

Three Months Ended March 31, 2012

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Revenues

 

$

 

$

1,039,651

 

$

 

$

 

$

1,039,651

 

Costs, expenses and other

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

2,967

 

847,904

 

 

 

850,871

 

Depreciation, depletion and amortization

 

1,216

 

138,744

 

6

 

 

139,966

 

Amortization of acquired sales contracts, net

 

 

(14,017

)

 

 

(14,017

)

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

 

 

(3,613

)

 

 

(3,613

)

Selling, general and administrative expenses

 

18,644

 

9,637

 

2,580

 

 

30,861

 

Other operating income, net

 

(3,111

)

(3,027

)

(12,360

)

 

(18,498

)

 

 

19,716

 

975,628

 

(9,774

)

 

985,570

 

Income from investment in subsidiaries

 

77,315

 

 

 

(77,315

)

 

Income from operations

 

57,599

 

64,023

 

9,774

 

(77,315

)

54,081

 

Interest expense, net:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(82,097

)

(11,484

)

(1,038

)

19,847

 

(74,772

)

Interest and investment income

 

4,828

 

14,128

 

1,912

 

(19,847

)

1,021

 

 

 

(77,269

)

2,644

 

874

 

 

(73,751

)

Income (loss) before income taxes

 

(19,670

)

66,667

 

10,648

 

(77,315

)

(19,670

)

Provision for (benefit from) income taxes

 

(22,660

)

 

1,581

 

 

(21,079

)

Net income

 

2,990

 

66,667

 

9,067

 

(77,315

)

1,409

 

Less: Net income attributable to noncontrolling interest

 

(203

)

 

 

 

(203

)

Net income attributable to Arch Coal, Inc.

 

$

2,787

 

$

66,667

 

$

9,067

 

$

(77,315

)

$

1,206

 

Total comprehensive income

 

$

8,709

 

$

68,111

 

$

9,067

 

$

(77,178

)

$

8,709

 

 

19



Table of Contents

 

Condensed Consolidating Balance Sheets

March 31, 2013

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-Guarantor

Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

597,308

 

$

120,429

 

$

12,382

 

$

 

$

730,119

 

Restricted cash

 

2,290

 

 

 

 

2,290

 

Short term investments

 

248,414

 

 

 

 

248,414

 

Receivables

 

50,179

 

36,477

 

263,123

 

(4,735

)

345,044

 

Inventories

 

 

368,240

 

 

 

368,240

 

Other

 

101,003

 

88,903

 

369

 

 

190,275

 

Total current assets

 

999,194

 

614,049

 

275,874

 

(4,735

)

1,884,382

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

26,716

 

7,245,761

 

64

 

 

7,272,541

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

8,259,302

 

 

 

(8,259,302

)

 

Intercompany receivables

 

(1,389,356

)

1,637,093

 

(247,737

)

 

 

Note receivable from Arch Western

 

675,000

 

 

 

(675,000

)

 

Other

 

184,571

 

578,560

 

90

 

 

763,221

 

Total other assets

 

7,729,517

 

2,215,653

 

(247,647

)

(8,934,302

)

763,221

 

Total assets

 

$

8,755,427

 

$

10,075,463

 

$

28,291

 

$

(8,939,037

)

$

9,920,144

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

27,269

 

$

201,925

 

$

75

 

$

 

$

229,269

 

Accrued expenses and other current liabilities

 

105,059

 

251,850

 

509

 

(4,735

)

352,683

 

Current maturities of debt

 

26,218

 

2,088

 

 

 

28,306

 

Total current liabilities

 

158,546

 

455,863

 

584

 

(4,735

)

610,258

 

Long-term debt

 

5,059,611

 

22,594

 

 

 

5,082,205

 

Note payable to Arch Coal

 

 

675,000

 

 

(675,000

)

 

Asset retirement obligations

 

1,672

 

409,303

 

 

 

410,975

 

Accrued pension benefits

 

34,595

 

34,747

 

 

 

69,342

 

Accrued postretirement benefits other than pension

 

14,486

 

31,927

 

 

 

46,413

 

Accrued workers’ compensation

 

24,032

 

57,007

 

 

 

81,039

 

Deferred income taxes

 

610,195

 

 

 

 

610,195

 

Other noncurrent liabilities

 

69,936

 

157,210

 

217

 

 

227,363

 

Total liabilities

 

5,973,073

 

1,843,651

 

801

 

(679,735

)

7,137,790

 

Stockholders’ equity

 

2,782,354

 

8,231,812

 

27,490

 

(8,259,302

)

2,782,354

 

Total liabilities and stockholders’ equity

 

$

8,755,427

 

$

10,075,463

 

$

28,291

 

$

(8,939,037

)

$

9,920,144

 

 

20