Supplemental Guarantor/Non-Guarantor Financial Information

12 Months Ended

Dec. 31, 2017

Supplemental Guarantor/Non-Guarantor Financial Information

Supplemental Guarantor/Non-Guarantor Financial Information

22. Supplemental Guarantor/Non-Guarantor Financial Information

In accordance with the indentures governing the senior notes, CPE Inc. and certain of our 100% owned U.S. subsidiaries (the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed the senior notes on a joint and several basis. These guarantees of the senior notes are subject to release in the following customary circumstances:

• a sale or other disposition (including by way of consolidation or merger or otherwise) of the Guarantor Subsidiary or the sale or other disposition of all or substantially all the assets of the Guarantor Subsidiary (other than to CPE Inc. or a Restricted Subsidiary (as defined in the applicable indenture) of CPE Inc. otherwise not in violation of the applicable indenture;
• a disposition of the majority of the capital stock of a Guarantor Subsidiary to a third person otherwise not in violation of the applicable indenture, after which the applicable Guarantor Subsidiary is no longer a Restricted Subsidiary;
• upon a liquidation or dissolution of a Guarantor Subsidiary so long as no default under the applicable indenture occurs as a result thereof;
• the designation in accordance with the applicable indenture of the Guarantor Subsidiary as an Unrestricted Subsidiary or the Guarantor Subsidiary otherwise ceases to be a Restricted Subsidiary of CPE Inc. in accordance with the applicable indenture;
• defeasance or discharge of such series of senior notes;
• the release, other than the discharge through payment by the Guarantor Subsidiary, of all other guarantees by such Restricted Subsidiary of Debt (as defined in the applicable indenture) of either issuer of the senior notes or the debt of another Guarantor Subsidiary under the Credit Agreement; or
• in the case of the indenture for the 2021 Notes, as set forth in the First Lien/Second Lien Intercreditor Agreement, dated October 17, 2016, among Cloud Peak Energy Resources LLC, Cloud Peak Energy Finance Corp., PNC Bank, National Association, as Senior Representative for the First Lien Credit Agreement Secured Parties and Wilmington Trust, National Association, as the Second Priority Representative for the Second Lien Indenture Secured Parties.

The following historical financial statement information is provided for CPE Inc. and the Guarantor/Non-Guarantor Subsidiaries:

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income
		(in thousands)
			Year Ended December 31, 2017
			Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue			$	7,721	$	―	$	887,706	$	―	$	(7,721)	$	887,706
Costs and expenses
	Cost of product sold (exclusive of
		depreciation, depletion, amortization and
		accretion, shown separately)		―		13		752,697		5		―		752,715
	Depreciation and depletion			―		897		71,373		―		―		72,270
	Accretion			―		―		7,072		―		―		7,072
	(Gain) loss on derivative financial instruments			―		―		2,672		―		―		2,672
	Selling, general and administrative expenses			―		55,203		―		―		(7,721)		47,482
	Debt restructuring costs			―		23		―		―		―		23
	Other operating costs			―		―		532		―		―		532
Total costs and expenses				―		56,136		834,346		5		(7,721)		882,766
Operating income (loss)				7,721		(56,136)		53,360		(5)		―		4,940
Other income (expense)
	Interest income			1		484		―		―		―		485
	Interest expense			(47)		(39,970)		(536)		(809)		―		(41,362)
	Other, net			―		(227)		(886)		228		―		(885)
Total other (expense) income				(46)		(39,713)		(1,422)		(581)		―		(41,762)
Income (loss) before income tax provision and
	earnings from unconsolidated affiliates			7,675		(95,849)		51,938		(586)		―		(36,822)
	Income tax benefit (expense)			(30,244)		62,757		(3,043)		―		―		29,470
	Income (loss) from unconsolidated affiliates,
		net of tax		―		13		700		―		―		713
	Earnings (losses) from consolidated
		affiliates, net of tax		15,930		49,009		(586)		―		(64,353)		―
Net income (loss)				(6,639)		15,930		49,009		(586)		(64,353)		(6,639)
Other comprehensive income (loss)
	Postretirement medical plan amortization
		of prior service costs		(7,283)		(7,283)		(7,283)		―		14,566		(7,283)
	Postretirement medical plan adjustment			(794)		(794)		(794)		―		1,588		(794)
	Income tax on retiree medical
		and pension changes		―		―		―		―		―		―
Other comprehensive income (loss)				(8,077)		(8,077)		(8,077)		―		16,154		(8,077)
Total comprehensive income (loss)			$	(14,716)	$	7,853	$	40,932	$	(586)	$	(48,199)	$	(14,716)

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income
		(in thousands)
			Year Ended December 31, 2016
			Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue			$	8,274	$	―	$	800,438	$	―	$	(8,274)	$	800,438
Costs and expenses
	Cost of product sold (exclusive of
		depreciation, depletion, amortization and
		accretion, shown separately)		―		122		646,282		―		―		646,404
	Depreciation and depletion			―		1,172		26,046		―		―		27,218
	Accretion			―		―		6,645		―		―		6,645
	(Gain) loss on derivative financial instruments			―		―		(8,180)		―		―		(8,180)
	Selling, general and administrative expenses			―		59,142		―		―		(8,274)		50,868
	Impairments			―		2,048		2,561		―		―		4,609
	Debt restructuring costs			―		4,665		―		―		―		4,665
	Other operating costs			―		―		941		―		―		941
Total costs and expenses				―		67,149		674,295		―		(8,274)		733,170
Operating income (loss)				8,274		(67,149)		126,143		―		―		67,268
Other income (expense)
	Interest income			27		110		1		―		―		138
	Interest expense			(244)		(46,318)		(489)		(383)		―		(47,434)
	Other, net			―		(138)		(1,001)		138		―		(1,001)
Total other income (expense)				(217)		(46,346)		(1,489)		(245)		―		(48,297)
Income (loss) before income tax provision and
	earnings from unconsolidated affiliates			8,057		(113,495)		124,654		(245)		―		18,971
	Income tax benefit (expense)			(6,278)		15,586		(7,095)		―		―		2,213
	Income (loss) from unconsolidated affiliates,
		net of tax		―		16		641		―		―		657
	Earnings (losses) from consolidated
		affiliates, net of tax		20,062		117,955		(245)		―		(137,772)		―
Net income (loss)				21,841		20,062		117,955		(245)		(137,772)		21,841
Other comprehensive income (loss)
	Postretirement medical plan amortization
		of prior service costs		(5,253)		(5,253)		(5,253)		―		10,506		(5,253)
	Postretirement medical plan adjustment			(1,792)		(1,792)		(1,792)		―		3,584		(1,792)
	Postretirement medical plan change			42,851		42,851		42,851		―		(85,702)		42,851
	Income tax on postretirement medical
		and pension changes		(971)		(971)		(971)		―		1,942		(971)
Other comprehensive income (loss)				34,835		34,835		34,835		―		(69,670)		34,835
Total comprehensive income (loss)			$	56,676	$	54,897	$	152,790	$	(245)	$	(207,442)	$	56,676

Supplemental Condensed Consolidating Statement of Operations and Comprehensive Income
		(in thousands)
			Year Ended December 31, 2015
			Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Revenue			$	7,308	$	―	$	1,124,111	$	―	$	(7,308)	$	1,124,111
Costs and expenses
	Cost of product sold (exclusive of
		depreciation, depletion, amortization and
		accretion, shown separately)		―		(32)		950,612		―		―		950,580
	Depreciation and depletion			―		2,127		63,937		―		―		66,064
	Amortization of port access rights			―		―		3,710		―		―		3,710
	Accretion			―		―		12,555		―		―		12,555
	(Gain) loss on derivative financial instruments			―		―		30,635		―		―		30,635
	Selling, general and administrative expenses			―		56,233		―		―		(7,308)		48,925
	Goodwill Impairments			―		―		91,541		―		―		91,541
	Other operating costs			―		―		1,493		―		(1)		1,492
Total costs and expenses				―		58,328		1,154,483		―		(7,309)		1,205,502
Operating income (loss)				7,308		(58,328)		(30,372)		―		1		(81,391)
Other income (expense)
	Interest income			―		169		1		―		―		170
	Interest expense			(36)		(43,638)		(3,543)		(344)		―		(47,561)
	Other, net			―		(177)		62		177		―		62
Total other income (expense)				(36)		(43,646)		(3,480)		(167)		―		(47,329)
Income (loss) before income tax provision and
	earnings from unconsolidated affiliates			7,272		(101,974)		(33,851)		(167)		1		(128,720)
	Income tax benefit (expense)			(62,019)		15,339		(30,762)		62		―		(77,380)
	Income (loss) from unconsolidated affiliates,
		net of tax		―		11		1,188		―		1		1,200
	Earnings (losses) from consolidated
		affiliates, net of tax		(150,153)		(63,530)		(105)		―		213,788		―
Net income (loss)				(204,900)		(150,153)		(63,530)		(105)		213,790		(204,900)
Other comprehensive income (loss)
	Postretirement medical plan amortization
		of prior service costs		1,252		1,252		1,252		―		(2,504)		1,252
	Postretirement medical plan adjustment			(3,874)		(3,874)		(3,874)		―		7,748		(3,874)
	Income tax on retiree medical
		and pension changes		970		970		970		―		(1,940)		970
Other comprehensive income (loss)				(1,652)		(1,652)		(1,652)		―		3,304		(1,652)
Total comprehensive income (loss)			$	(206,552)	$	(151,805)	$	(65,182)	$	(105)	$	217,092	$	(206,552)

Supplemental Condensed Consolidating Balance Sheets
(in thousands)
			December 31, 2017
			Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
ASSETS
Current assets
	Cash and cash equivalents		$	—	$	107,818	$	130	$	—	$	—	$	107,948
	Accounts receivable			—		—		17,359		32,716		—		50,075
	Due from related parties			—		46,350		23,044		—		(69,272)		122
	Inventories, net			—		—		72,904		—		—		72,904
	Income tax receivable			256		—		—		—		—		256
	Other prepaid and deferred charges			283		—		36,681		—		—		36,964
	Other assets			—		—		1,765		—		—		1,765
		Total current assets		539		154,168		151,883		32,716		(69,272)		270,034
Noncurrent assets
Property, plant and equipment, net				—		3,480		1,362,275		—		—		1,365,755
Goodwill				—		—		2,280		—		—		2,280
Income tax receivable				29,454		—		—		—		—		29,454
Other assets				1,036,162		1,289,487		33,612		341		(2,328,424)		31,178
		Total assets	$	1,066,155	$	1,447,135	$	1,550,050	$	33,057	$	(2,397,696)	$	1,698,701
LIABILITIES AND MEMBER'S EQUITY
Current liabilities
	Accounts payable		$	1	$	24	$	29,748	$	59	$	—	$	29,832
	Royalties and production taxes			—		—		54,327		—		—		54,327
	Accrued expenses			3,160		5,659		23,999		—		—		32,818
	Due to related parties			44,039		71		—		25,162		(69,272)		—
	Other liabilities			—		—		2,435		—		—		2,435
		Total current liabilities		47,200		5,754		110,509		25,221		(69,272)		119,412
Noncurrent liabilities
Senior notes				—		405,266		—		—		—		405,266
Asset retirement obligations, net of
	current portion			—		—		99,297		—		—		99,297
Accumulated postretirement benefit obligation,
	net of current portion			—		—		24,958		—		—		24,958
Royalties and production taxes,
	net of current portion			—		—		21,896		—		—		21,896
Other liabilities				11,146		—		8,917		—		—		20,063
	Total liabilities			58,346		411,020		265,577		25,221		(69,272)		690,892
Commitments and Contingencies (Note 17)
Total equity				1,007,809		1,036,115		1,284,473		7,836		(2,328,424)		1,007,809
	Total liabilities and equity		$	1,066,155	$	1,447,135	$	1,550,050	$	33,057	$	(2,397,696)	$	1,698,701

Supplemental Condensed Consolidating Balance Sheets
(in thousands)
			December 31, 2016
			Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
ASSETS
Current assets
	Cash and cash equivalents		$	—	$	83,673	$	35	$	—	$	—	$	83,708
	Accounts receivable			—		—		13,261		36,050		—		49,311
	Due from related parties			—		116,486		—		—		(116,486)		—
	Inventories, net			—		70		68,613		—		—		68,683
	Derivative financial instruments			—		—		752		—		—		752
	Income tax receivable			1,601		—		—		—		—		1,601
	Other prepaid and deferred charges			278		—		20,083		—		—		20,361
	Other assets			—		—		741		—		—		741
		Total current assets		1,879		200,229		103,485		36,050		(116,486)		225,157
Noncurrent assets
	Property, plant and equipment, net			—		3,307		1,429,054		—		—		1,432,361
	Goodwill			—		—		2,280		—		—		2,280
	Other assets			1,019,289		1,299,413		52,793		—		(2,316,517)		54,978
		Total assets	$	1,021,168	$	1,502,949	$	1,587,612	$	36,050	$	(2,433,003)	$	1,714,776
LIABILITIES AND MEMBER'S EQUITY
Current liabilities
	Accounts payable		$	4	$	1,748	$	25,896	$	30	$	—	$	27,678
	Royalties and production taxes			—		—		63,018		—		—		63,018
	Accrued expenses			3,646		6,879		25,332		—		—		35,857
	Due to related parties			59,638		71		27,250		29,598		(116,486)		71
	Other liabilities			—		—		2,567		—		—		2,567
		Total current liabilities		63,288		8,698		144,063		29,628		(116,486)		129,191
Noncurrent liabilities
	Senior notes			—		475,009		—		—		—		475,009
	Asset retirement obligations, net of
		current portion		—		—		97,048		—		—		97,048
	Accumulated postretirement benefit obligation,
		net of current portion		—		—		22,950		—		—		22,950
	Royalties and production taxes,
		net of current portion		—		—		21,557		—		—		21,557
	Other liabilities			6,219		—		11,141		—		—		17,360
		Total liabilities		69,507		483,707		296,759		29,628		(116,486)		763,115
Commitments and Contingencies (Note 17)				—		—		—		—		—		—
		Total equity		951,661		1,019,241		1,290,854		6,422		(2,316,517)		951,661
		Total liabilities and equity	$	1,021,168	$	1,502,948	$	1,587,613	$	36,050	$	(2,433,003)	$	1,714,776

Supplemental Condensed Consolidating Statement of Cash Flows
(in thousands)
		Year Ended December 31, 2017
		Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by (used in) operating
	activities	$	—	$	36,301	$	15,327	$	408	$	—	$	52,036
Investing activities
	Purchases of property, plant and equipment		—		(2,004)		(11,093)		—		—		(13,097)
	Investment in development projects		—		—		(1,750)		—		—		(1,750)
	Other		—		—		195		—		—		195
Net cash provided by (used in) investing
	activities		—		(2,004)		(12,648)		—		—		(14,652)
Financing activities
	Repayment of senior notes		—		(62,094)		—		—		—		(62,094)
	Payment of debt refinancing costs		—		—		—		(408)		—		(408)
	Payment amortized to deferred gain		—		(12,395)		—		—		—		(12,395)
	Payment of debt restructuring costs		—		(23)		—		—		—		(23)
	Proceeds from issuance of common stock		—		68,850		—		—		—		68,850
	Cash paid for equity offering		—		(4,490)		—		—		—		(4,490)
	Other		—		—		(2,584)		—		—		(2,584)
Net cash provided by (used in) financing
	activities		—		(10,152)		(2,584)		(408)		—		(13,144)
Net increase (decrease) in cash and cash equivalents			—		24,145		95		—		—		24,240
Cash and cash equivalents at beginning of period			—		83,673		35		—		—		83,708
Cash and cash equivalents at the end of period		$	—	$	107,818	$	130	$	—	$	—	$	107,948

Supplemental Condensed Consolidating Statement of Cash Flows
(in thousands)
		Year Ended December 31, 2016
		Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by (used in) operating
	activities	$	—	$	25,246	$	23,470	$	—	$	—	$	48,716
Investing activities
	Purchases of property, plant and equipment		—		(2,003)		(31,636)		—		—		(33,639)
	Cash paid for capitalized interest		—		—		(1,444)		—		—		(1,444)
	Investment in development projects		—		—		(1,500)		—		—		(1,500)
	Payment of restricted cash		—		—		(725)		—		—		(725)
	Return of restricted cash		—		—		8,500		—		—		8,500
	Insurance proceeds		—		—		2,826		—		—		2,826
	Other		—		—		659		—		—		659
Net cash provided by (used in) investing
	activities		—		(2,003)		(23,320)		—		—		(25,323)
Financing activities
	Payment of deferred financing costs		—		(3,624)		—		—		—		(3,624)
	Cash paid on tender of 2019 and 2024 senior notes		—		(18,335)		—		—		—		(18,335)
	Payment of debt restructuring costs		—		(4,665)		—		—		—		(4,665)
	Other		—		—		(2,374)		—		—		(2,374)
Net cash provided by (used in) financing
	activities		—		(26,624)		(2,374)		—		—		(28,998)
Net increase (decrease) in cash and cash equivalents			—		(3,381)		(2,224)		—		—		(5,605)
Cash and cash equivalents at beginning of period			—		87,054		2,259		—		—		89,313
Cash and cash equivalents at the end of period		$	—	$	83,673	$	35	$	—	$	—	$	83,708

Supplemental Condensed Consolidating Statement of Cash Flows
(in thousands)
		Year Ended December 31, 2015
		Parent Guarantor (CPE Inc.)		Issuing Company (CPE Resources)		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Net cash provided by (used in) operating
	activities	$	—	$	(77,090)	$	118,679	$	—	$	—	$	41,589
Investing activities
	Purchases of property, plant and equipment		—		(3,397)		(34,265)		—		—		(37,662)
	Cash paid for capitalized interest		—		—		(843)		—		—		(843)
	Investment in port access rights		—		—		(2,160)		—		—		(2,160)
	Investment in development projects		—		—		(1,526)		—		—		(1,526)
	Investment in unconsolidated affiliate		—		—		(6,570)		—		—		(6,570)
	Payment of restricted cash		—		—		(6,500)		—		—		(6,500)
	Other		—		11		212		—		—		223
Net cash provided by (used in) investing
	activities		—		(3,386)		(51,652)		—		—		(55,038)
Financing activities
	Principal payments on federal coal leases		—		—		(63,970)		—		—		(63,970)
	Payment of deferred financing costs		—		(2)		(340)		—		—		(342)
	Other		—		—		(1,671)		—		—		(1,671)
Net cash provided by (used in) financing
	activities		—		(2)		(65,981)		—		—		(65,983)
Net increase (decrease) in cash and cash equivalents			—		(80,478)		1,046		—		—		(79,432)
Cash and cash equivalents at beginning of period			—		167,532		1,213		—		—		168,745
Cash and cash equivalents at the end of period		$	—	$	87,054	$	2,259	$	—	$	—	$	89,313