Arch Coal, Inc. Reports Third Quarter 2017 Results

ST. LOUIS, Oct. 31, 2017 /PRNewswire/ -- Arch Coal, Inc. (NYSE: ARCH) today reported net income of $68.4 million, or $2.83 per diluted share, in the third quarter of 2017, compared with net income of $37.2 million, or $1.48 per diluted share, in the second quarter of 2017. The company earned adjusted earnings before interest, taxes, depreciation, depletion, amortization, reorganization items and early debt extinguishment charges ("adjusted EBITDAR")(1 )of $104.3 million in the third quarter of 2017. Not included in adjusted EBITDAR is a $21.6 million gain resulting from the completion of the sale of the Lone Mountain complex on September 14.

The company recorded revenues of $613.5 million for the three months ended September 30, 2017, representing a 12 percent sequential increase and reflecting ongoing strength in coking coal pricing as well as overall strong performances from the Powder River Basin and Other Thermal segments.

"Arch turned in a solid financial performance during the third quarter, despite substandard rail service in July and August at our coking coal operations, coupled with adverse geologic conditions at our two longwall mines in West Virginia," said John W. Eaves, Arch's chief executive officer. "Even with these unexpected challenges, Arch moved forward aggressively with its share repurchase program, took advantage of ongoing strength in global thermal markets and completed a number of strategic initiatives that strengthened our financial foundation and optimized our operating portfolio. In fact, this past quarter demonstrates the company's ability to generate significant shareholder returns even in a less-than-optimal operating environment."

Capital Allocation Program and Financial Position

Today, Arch's Board of Directors announced that it has approved an incremental $200 million increase to the share repurchase authorization. This increase brings the total repurchase authorization to $500 million.

During the third quarter, Arch continued its commitment to enhancing shareholder value by purchasing 2.2 million shares of common stock, representing 9.1 percent of shares outstanding, at a total cost of nearly $167 million and at an average price of $75.49 per share. The third quarter purchases include the previously announced stock purchase transaction with Monarch Alternative Capital in early September. Since the initiation of the program, Arch has purchased 2.9 million shares of common stock, representing 11.7 percent of shares outstanding, at a total cost of $218 million. At quarter-end, and inclusive of the $200 million increase in authorization, the company has up to $282 million remaining for share repurchases under the program.

"The significant progress made under our share repurchase authorization and the recent decision to increase the company's authorization level further underscores our confidence in our business strategy, financial performance and positive long-term outlook for future success," said John T. Drexler, Arch's chief financial officer. "Given our current and anticipated cash position, we firmly believe this is an effective and prudent use of capital and an important benefit to our shareholders."

In addition, the company paid $8.2 million in cash dividends to shareholders during the third quarter of 2017. The next quarterly cash dividend payment of $0.35 per common share was approved by the board of directors, and is scheduled to be paid on December 15, 2017 to stockholders of record at the close of business on November 30, 2017.

Notably, since the commencement of the capital allocation program in early May 2017, Arch has returned nearly $235 million to shareholders through share repurchases and dividends.

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.

In the quarter, Arch also concluded other strategic initiatives to strengthen further its financial position and decrease the company's cost of capital. The company reduced its restricted cash balance by nearly $42 million by lowering collateral requirements and by fully utilizing its inventory credit facility. At quarter-end, Arch had no restricted cash on its balance sheet. Additionally, as previously indicated, the company successfully reduced the interest rate on its senior secured term loan, which is expected to generate annual cash interest savings of more than $2 million.

Arch's cash and short-term investments totaled $453 million at September 30, 2017. At quarter-end, Arch's debt level totaled $328 million, inclusive of the term loan, equipment financing and other debt.

Arch's Operational Results

"As indicated, we encountered operating challenges in our Metallurgical segment during the third quarter," said Paul A. Lang, Arch's president and chief operating officer. "We experienced tough geologic conditions at both the Mountain Laurel and Leer mining complexes, which contributed to lower-than-expected volumes and higher-than-expected costs. While challenges such as these are expected from time-to-time in our industry, it's unusual to confront issues at two mines simultaneously. Fortunately, strong performances from the other operations in the segment and from both of our thermal segments offset those operating issues to a large degree, and further highlight the importance and strength of Arch's balanced operating portfolio and complementary lines of business. Looking ahead, we believe the challenges experienced in the Metallurgical segment were confined to the third quarter."



                                                                                                              Metallurgical

                                                                                                             3Q17           2Q17
                                                                                                             ----           ----


    Tons sold (in
     millions)                                                                                                        2.2            2.1

             Coking                                                                                                   1.8            1.5

             PCI                                                                                                      0.1            0.3

            Thermal                                                                                                   0.3            0.3

    Average sales
     price per ton                                                                                                 $88.60         $90.59

             Coking                                                                                                $99.21        $103.44

             PCI                                                                                                   $69.01         $72.26

            Thermal                                                                                                $34.65         $42.02

    Cash cost per ton                                                                                              $64.46         $60.95

    Cash margin per
     ton                                                                                                           $24.14         $29.64

    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

Despite difficult mining conditions and rail service issues in the Metallurgical segment, Arch recorded cash margins of $24.14 for the third quarter of 2017 compared to $29.64 for the prior-quarter period. Average coking coal realizations continued to be supported by index-linked tons that priced during the period, but were partially offset by annual fixed-priced tons contracted prior to the start of 2017 and sequential decreases in the Platts East Coast assessments. Third quarter segment cash costs increased 6 percent when compared to the second quarter of 2017, driven primarily by difficult startup conditions in the transition to the Cedar Grove seam at the Mountain Laurel complex and the presence of an acute roll in the coal seam at the Leer mine. Excluding Lone Mountain, segment cash costs for the third quarter would have been $62.04 per ton and cash margins would have been $29.01 per ton.

Due to the production challenges experienced during the third quarter and lower-than-expected coking coal volumes for the year, Arch is raising its annual cash cost guidance range for the segment. The company now anticipates cash costs to be between $56 per ton and $60 per ton for 2017, excluding the Lone Mountain complex. Even with this increase, Arch believes its average coking coal cost structure is near the low-end of the U.S. metallurgical cost curve, and thus maintains its highly-competitive cost position both domestically and internationally.



                                        Powder River Basin

                                               3Q17                            2Q17
                                               ----                            ----


     Tons
     sold
     (in
     millions)                                         21.7                           18.1

     Average
     sales
     price
     per
     ton                                             $12.51                         $12.55

     Cash
     cost
     per
     ton                                             $10.27                         $10.82

     Cash
     margin
     per
     ton                                              $2.24                          $1.73

    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, third quarter 2017 cash margin per ton increased nearly 30 percent versus the second quarter, driven by lower cost per ton in the segment. Sales volumes increased 20 percent when compared with the prior-quarter period, reflecting typical seasonal demand trends, while the average sales price per ton declined marginally. Segment cash cost decreased $0.55 per ton during the period versus the second quarter of 2017, benefiting from the effect of higher volume levels and strong cost control across the segment's two mining complexes. The company still expects annual cash cost for the segment to be between $10.20 per ton and $10.60 per ton.



                                           Other Thermal

                                               3Q17                      2Q17
                                               ----                      ----


     Tons
     sold
     (in
     millions)                                          2.3                      2.3

     Average
     sales
     price
     per
     ton                                             $35.08                   $33.41

     Cash
     cost
     per
     ton                                             $26.05                   $22.06

     Cash
     margin
     per
     ton                                              $9.03                   $11.35

    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 earned a cash margin of $9.03 per ton in the third quarter compared with $11.35 per ton in the second quarter. Sales volumes were flat during the period, sustained by strong international demand for West Elk and Coal-Mac products and stable domestic demand for all three operations in the segment. Average sales price per ton during the quarter increased by 5 percent due to a favorable mix of customer shipments and strong pricing on export sales. Cash cost per ton increased by nearly $4 when compared to the prior quarter, reflecting increased sales volume from the segment's higher-cost Coal-Mac mine and a longwall move at the West Elk operation. Due to Arch's ability to leverage its high-quality thermal products and participate more meaningfully in the still-strong export thermal market, the company is again lowering its full-year cost guidance for the segment. The company now anticipates cash costs to be in the range of $22.50 per ton to $26.50 per ton for 2017.

Key Market Developments

Metallurgical Coal Markets

    --  In metallurgical coal markets, both demand and pricing for seaborne
        coking coal remain healthy, even with the ongoing recovery of Australian
        exports following Cyclone Debbie and modest supply growth elsewhere.
    --  Supporting these sound market fundamentals, global steel and hot metal
        production continue to expand, with global hot metal demand up 2.3
        percent through September and steel prices well above last year's levels
        in all key regions.
    --  Of particular importance to Arch, European metallurgical imports are up
        solidly year-to-date, and U.S. blast furnace utilization has rebounded
        in recent months. Platts currently assesses U.S. East Coast prices (FOB
        the vessel) at $167 per metric ton for Low-Vol coal, $149 per metric ton
        for High-Vol A coal, and $127 per metric ton for High-Vol B coal.
    --  Looking ahead, Arch believes the outlook for global metallurgical
        markets is attractive given buoyant steel markets, strong Chinese
        manufacturing activity, an improving economic outlook in other key
        countries, and the high cost structure of much of the recently added
        coking coal supply.
    --  Arch continues to believe that over the long term, global metallurgical
        markets will find support in the $130 to $150 per metric ton range,
        which the company believes is a breakeven level for 10 percent or more
        of global coking coal production capacity.

Thermal Coal Markets

    --  International thermal markets continue to be robust, buoyed by
        operational and labor challenges in key producing regions, Chinese
        thermal coal production constraints, and strong Chinese economic growth.
    --  At present, the prompt-month price for Newcastle coal stands at $99.40
        per metric ton, which provides for an attractive netback at the
        company's West Elk mine in Colorado. Similarly, strong API-2 prices into
        northern Europe allow high-quality thermal coal from Arch's Coal-Mac
        operation in West Virginia to participate more significantly in the
        Atlantic Basin export market.
    --  As for domestic thermal markets, mild summer weather relative to 2016
        and competitive natural gas prices resulted in lackluster coal
        consumption during the peak demand season.
    --  For the summer as a whole, cooling degree days were down 13 percent
        versus 2016, while natural gas prices tracked closely to the same period
        last year. In total, Arch estimates that coal burn for June through
        August was down an aggregate 16 million tons in 2017 versus 2016, and
        down another 5 million tons in September.
    --  Despite that fact, the stockpile liquidation that has been under way
        since the beginning of 2016 has continued, albeit at a slower pace than
        previously anticipated. Arch still expects utility stockpiles to fall
        below 75 days of supply by year-end 2017, and to reach average target
        levels of 55 to 60 days in mid-2018.

Company Outlook

Based on the company's current expectations regarding production levels at its coking coal operations, Arch has lowered its coking coal sales volume guidance for the year. Arch now expects to sell between 6.6 million tons and 6.8 million tons of coking coal in 2017. At the midpoint of its volume guidance level, Arch is now more than 98 percent committed on coking coal sales for the full year, with 10 percent of that committed volume exposed to index-based pricing. Furthermore, given strong demand fundamentals for U.S. thermal coal globally, Arch has raised its thermal coal sales guidance to reflect increased shipments from the company's Other Thermal segment. Arch now expects to sell between 90 million tons and 96 million tons of thermal coal in 2017. At the midpoint of guidance, Arch's thermal sales are 99 percent committed for full year 2017.

"While we faced a number of challenges during the quarter, we believe those issues are now behind us and we are pleased with our financial performance, the commitment and hard work of our employees and our ability to continue to create value for our shareholders while maintaining a strong and flexible balance sheet," said Eaves. "With our solid cash flows, nimble marketing strategy, durable operating portfolio and efficient method to returning capital to shareholders, Arch is poised for a strong finish to 2017."


                                                                                                       2017                                      2018
                                                                                                       ----                                      ----

                                                                           Tons                         $ per ton                                  Tons                       $ per ton
                                                                          ----                          ---------                                  ----                       ---------

    Sales Volume (in millions of tons)
    ---------------------------------

    Coking                                                           6.6                            -        6.8

    Thermal                                                         90.0                            -       96.0
    -------                                                         ----                                    ----

    Total                                                           96.6                            -      102.8


    Metallurgical (in millions of tons)
    ----------------------------------

    Committed, Priced Coking                                                                     6.0                                              $100.20                                                       0.5                              $105.00

    Committed, Unpriced Coking                                                                   0.6                                                                                                           2.4
    --------------------------                                                                   ---                                                                                                           ---

    Total Committed Coking                                                                       6.6                                                                                                           2.9


    Committed, Priced Thermal Byproduct                                                                 0.9                                                                 $24.86                                                0.4                    $30.45

    Committed, Unpriced Thermal Byproduct                                                                 -                                                                                                                       -
    -------------------------------------                                                               ---                                                                                                                     ---

    Total Committed Thermal Byproduct                                                                   0.9                                                                                                                      0.4


    Average Metallurgical Cash Cost                                                           $56.00           -                     $60.00


    Powder River Basin (in millions of tons)
    ---------------------------------------

    Committed, Priced                                                                                      81.1                                                                 $12.47                                               47.5                    $12.05

    Committed, Unpriced                                                                          0.9                                                                                                           2.8
    -------------------                                                                          ---                                                                                                           ---

    Total Committed                                                                                        82.0                                                                                                                     50.3

    Average Cash Cost                                                                                    $10.20                           -        $10.60



    Other Thermal (in millions of tons)
    ----------------------------------

    Committed, Priced                                                                                       9.3                                                                 $34.74                                                5.0                    $35.26

    Committed, Unpriced                                                                            -                                                                                                            -
    -------------------                                                                          ---                                                                                                          ---

    Total Committed                                                                                         9.3                                                                                                                      5.0

    Average Cash Cost                                                                                    $22.50                           -        $26.50


    Corporate (in $ millions)
    ------------------------

    D,D&A excluding Sales Contract Amortization           $120          -          $127

    Sales Contract Amortization                                                                             $50                           -           $58

    ARO Accretion                                                                                                                      $30              -                          $31

    S,G&A                                                                                                                              $84              -                          $88

    Interest Expense                                                                                                                   $23              -                          $26

    Capital Expenditures                                                                                    $52                           -           $58

    Tax Provision                                                                                                                       0%             -                           3%
    -------------                                                                                                                      ---            ---                          ---

    As a result of the sale of Lone Mountain, which closed on September 14, 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 September 14, 2017, Lone Mountain had shipped 402,000 tons of thermal coal and 527,000 tons of PCI coal. Cash cost guidance for the metallurgical segment excludes the Lone Mountain
     complex.
    -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A conference call regarding Arch Coal's third 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 EBITDAR is 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 September 30, 2017     Three Months Ended September 30, 2016   Nine Months Ended September 30, 2017     Nine Months Ended September 30, 2016
                                             -------------------------------------     -------------------------------------   ------------------------------------     ------------------------------------

                                                           (Unaudited)                              (Unaudited)                             (Unaudited)                              (Unaudited)


    Revenues                                                               $613,538                                   $550,305                               $1,764,379                                $1,398,709


    Costs, expenses and other operating

    Cost of sales                                                           495,424                                    442,462                                1,391,872                                 1,264,464

    Depreciation, depletion
     and amortization                                                        31,914                                     69,423                                   94,536                                   191,581

    Accretion on asset
     retirement obligations                                                   7,580                                      7,965                                   22,826                                    24,321

    Amortization of sales
     contracts, net                                                          13,861                                        104                                   42,903                                     (728)

    Change in fair value of
     coal derivatives and
     coal trading
     activities, net                                                          1,028                                        488                                    2,745                                     2,856

    Asset impairment and
     mine closure costs                                                           -                                        46                                        -                                  129,267

    Selling, general and
     administrative expenses                                                 21,052                                     20,498                                   63,721                                    59,343

    Gain on sale of Lone
     Mountain Processing,
     Inc.                                                                  (21,574)                                         -                                (21,574)                                        -

    Other operating income,
     net                                                                    (8,236)                                   (2,476)                                (14,095)                                 (15,257)
                                                                             ------                                     ------                                  -------                                   -------

                                                                            541,049                                    538,510                                1,582,934                                 1,655,847
                                                                            -------                                    -------                                ---------                                 ---------


    Income (loss) from
     operations                                                              72,489                                     11,795                                  181,445                                 (257,138)


    Interest expense, net

    Interest expense                                                        (5,972)                                  (46,164)                                (21,400)                                (135,888)

    Interest and investment
     income                                                                     720                                        582                                    2,089                                     2,653
                                                                                ---                                                                              -----

                                                                            (5,252)                                  (45,582)                                (19,311)                                (133,235)
                                                                             ------                                    -------                                  -------                                  --------


    Income (loss) before
     nonoperating expenses                                                   67,237                                   (33,787)                                 162,134                                 (390,373)


    Nonoperating expense

    Net loss resulting from
     early retirement of
     debt and debt
     restructuring                                                            (486)                                         -                                 (2,547)                                  (2,213)

    Reorganization items,
     net                                                                       (43)                                  (20,904)                                 (2,892)                                 (46,050)
                                                                                ---                                    -------                                   ------                                   -------

                                                                              (529)                                  (20,904)                                 (5,439)                                 (48,263)
                                                                               ----                                    -------                                   ------                                   -------


    Income (loss) before
     income taxes                                                            66,708                                   (54,691)                                 156,695                                 (438,636)

    Benefit from income
     taxes                                                                  (1,643)                                   (3,270)                                   (484)                                  (4,626)
                                                                             ------                                     ------                                     ----                                    ------


    Net income (loss)                                                       $68,351                                  $(51,421)                                $157,179                                $(434,010)
                                                                            =======                                   ========                                 ========                                 =========


    Net income (loss) per common share

    Basic EPS (LPS)                                                           $2.90                                    $(2.41)                                   $6.44                                  $(20.38)
                                                                              =====                                     ======                                    =====                                   =======

    Diluted EPS (LPS)                                                         $2.83                                    $(2.41)                                   $6.32                                  $(20.38)
                                                                              =====                                     ======                                    =====                                   =======


    Weighted average shares outstanding

    Basic weighted average
     shares outstanding                                                      23,580                                     21,293                                   24,416                                    21,293
                                                                             ======                                     ======                                   ======                                    ======

    Diluted weighted average
     shares outstanding                                                      24,135                                     21,293                                   24,875                                    21,293
                                                                             ======                                     ======                                   ======                                    ======


    Dividends declared per
     common share                                                             $0.35                    $                     -                                   $0.70                  $                      -
                                                                              =====                    =======================                                   =====                  ========================


    Adjusted EBITDAR (A)
     (Unaudited)                                                           $104,270                                    $89,333                                 $320,136                                   $87,303
                                                                           ========                                    =======                                 ========                                   =======

    Adjusted diluted income
     (loss) per common share
     (A)                                                                      $2.54                                    $(1.43)                                   $7.37                                  $(12.08)
                                                                              =====                                     ======                                    =====                                   =======


    (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)



                                                          September 30,          December 31,

                                                                            2017                    2016
                                                                            ----                    ----

                                                           (Unaudited)

    Assets

    Current assets

    Cash and
     cash
     equivalents                                                        $298,337                $305,372

    Short
     term
     investments                                                         154,629                  88,072

     Restricted
     cash                                                                      -                 71,050

    Trade
     accounts
     receivable                                                          207,059                 184,483

    Other
     receivables                                                          23,473                  19,877

    Inventories                                                          122,436                 113,462

    Other
     current
     assets                                                               63,685                  96,306
                                                                          ------                  ------

    Total
     current
     assets                                                              869,619                 878,622


    Property,
     plant and
     equipment,
     net                                                                 980,801               1,053,603


    Other assets

    Equity
     investments                                                         106,179                  96,074

    Other
     noncurrent
     assets                                                               65,934                 108,298
                                                                          ------                 -------

    Total
     other
     assets                                                              172,113                 204,372
                                                                         -------                 -------

    Total
     assets                                                           $2,022,533              $2,136,597
                                                                      ==========              ==========


    Liabilities and Stockholders' Equity

      Current liabilities

    Accounts
     payable                                                            $137,664                 $95,953

    Accrued
     expenses
     and
     other
     current
     liabilities                                                         164,939                 205,240

    Current
     maturities
     of debt                                                               8,566                  11,038
                                                                           -----                  ------

    Total
     current
     liabilities                                                         311,169                 312,231

    Long-
     term
     debt                                                                312,604                 351,841

    Asset
     retirement
     obligations                                                         334,479                 337,227

    Accrued
     pension
     benefits                                                             17,884                  38,884

    Accrued
     postretirement
     benefits
     other
     than
     pension                                                             104,733                 101,445

    Accrued
     workers'
     compensation                                                        192,262                 184,568

    Other
     noncurrent
     liabilities                                                          76,923                  63,824
                                                                          ------                  ------

    Total
     liabilities                                                       1,350,054               1,390,020


    Stockholders' equity

    Common
     Stock                                                                   250                     250

    Paid-in
     capital                                                             697,324                 688,424

    Retained
     earnings                                                            173,676                  33,449

    Treasury
     stock,
     at cost                                                           (217,728)                      -

     Accumulated
     other
     comprehensive
     income                                                               18,957                  24,454
                                                                          ------                  ------

    Total
     stockholders'
     equity                                                              672,479                 746,577
                                                                         -------                 -------

    Total
     liabilities
     and
     stockholders'
     equity                                                           $2,022,533              $2,136,597
                                                                      ==========              ==========


                                                  Arch Coal, Inc. and Subsidiaries

                                           Condensed Consolidated Statements of Cash Flows

                                                           (In thousands)



                                                              Successor                                 Predecessor
                                                              ---------                                 -----------

                                                Nine Months Ended September 30, 2017       Nine Months Ended September 30, 2016
                                                ------------------------------------       ------------------------------------

                                                             (Unaudited)                                (Unaudited)

    Operating activities

    Net income (loss)                                                         $157,179                                  $(434,010)

    Adjustments to reconcile to cash provided by operating
     activities:

    Depreciation, depletion
     and amortization                                                           94,536                                     191,581

    Accretion on asset
     retirement obligations                                                     22,826                                      24,321

    Amortization of sales
     contracts, net                                                             42,903                                       (728)

    Prepaid royalties
     expensed                                                                    2,905                                       4,791

    Deferred income taxes                                                        6,069                                       (419)

    Employee stock-based
     compensation expense                                                        7,485                                       2,096

    Gains on disposals and
     divestitures                                                             (23,006)                                    (6,628)

    Asset impairment and
     noncash mine closure
     costs                                                                           -                                    119,194

    Net loss resulting from
     early retirement of
     debt and debt
     restructuring                                                               2,547                                       2,213

    Non-cash bankruptcy
     reorganization items                                                            -                                   (16,634)

    Amortization relating
     to financing
     activities                                                                  2,628                                      12,800

    Changes in:

    Receivables                                                               (24,110)                                   (42,787)

    Inventories                                                               (13,102)                                     34,604

    Accounts payable,
     accrued expenses and
     other current
     liabilities                                                                 5,103                                      90,920

    Income taxes, net                                                          (2,430)                                    (4,217)

    Other                                                                       20,612                                     (8,331)

    Cash provided by (used
     in) operating
     activities                                                                302,145                                    (31,234)


    Investing activities

    Capital expenditures                                                      (30,503)                                   (82,434)

    Minimum royalty
     payments                                                                  (5,033)                                      (305)

    Proceeds from
     (consideration paid
     for) disposals and
     divestitures                                                               11,432                                     (2,921)

    Purchases of short term
     investments                                                             (191,327)                                   (98,750)

    Proceeds from sales of
     short term investments                                                    123,996                                     187,006

    Investments in and
     advances to
     affiliates, net                                                           (9,216)                                    (3,440)

    Withdrawals of
     restricted cash                                                            71,048                                      15,979
                                                                                ------                                      ------

    Cash provided by (used
     in) investing
     activities                                                               (29,603)                                     15,135


    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                                                                  (1,500)                                          -

    Net payments on other
     debt                                                                      (5,992)                                   (12,083)

    Debt financing costs                                                      (10,043)                                   (20,181)

    Net loss resulting from
     early retirement of
     debt and debt
     restructuring                                                             (2,360)                                    (2,213)

    Dividends paid                                                            (16,763)                                          -

    Purchases of treasury
     stock                                                                   (215,735)                                          -
                                                                              --------                                         ---

    Cash used in financing
     activities                                                              (279,577)                                   (34,477)
                                                                              --------                                     -------


    Decrease in cash and
     cash equivalents                                                          (7,035)                                   (50,576)

    Cash and cash
     equivalents, beginning
     of period                                                                 305,372                                     450,781
                                                                               -------                                     -------


    Cash and cash
     equivalents, end of
     period                                                                   $298,337                                    $400,205
                                                                              ========                                    ========


                 Arch Coal, Inc. and Subsidiaries

                  Schedule of Consolidated Debt

                          (In thousands)


                                 September 30,          December 31,

                                                   2017                  2016
                                                   ----                  ----

                                  (Unaudited)


    Term loan
     due 2024
     ($298.5
     million
     face
     value)                                    $297,137       $             -

    Term loan
     due 2021
     ($325.7
     million
     face
     value)                                           -              325,684

    Other                                        31,319                37,195

    Debt
     issuance
     costs                                      (7,286)                    -
                                                 ------                   ---

                                                321,170               362,879

    Less:
     current
     maturities
     of debt                                      8,566                11,038

    Long-term
     debt                                      $312,604              $351,841
                                               ========              ========


    Calculation
     of net debt

    Total debt
     (excluding
     debt
     issuance
     costs)                                    $328,456              $362,879

    Less liquid
     assets:

    Cash and
     cash
     equivalents                                298,337               305,372

    Short term
     investments                                154,629                88,072
                                                -------                ------

                                                452,966               393,444

    Net debt                                 $(124,510)            $(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                                       Nine Months Ended                       Nine Months Ended
                                                   September 30, 2017                                   September 30, 2016                                       September 30, 2017                     September 30, 2016
                                                   ------------------                                   ------------------                                       ------------------                     ------------------

                                                       (Unaudited)                                                                     (Unaudited)                                                          (Unaudited)                                             (Unaudited)

    Powder River Basin

    Tons Sold                                                          21.7                                                                             22.8                                                                  61.1                                                   54.9


    Segment Sales                                                    $271.7                     $12.51                                                 $291.2                     $12.79                                      $766.9                     $12.54                       $714.2 $13.01

    Segment Cash Cost of
     Sales                                                            223.1                      10.27                                                  212.6                       9.34                                       639.1                      10.45                        601.5  10.95
                                                                      -----                      -----                                                  -----                       ----                                       -----                      -----                        -----  -----

    Segment Cash Margin                                                48.6                       2.24                                                   78.6                       3.45                                       127.8                       2.09                        112.6   2.06


    Metallurgical

    Tons Sold                                                           2.2                                                                              2.2                                                                   6.4                                                    6.7


    Segment Sales                                                    $196.8                     $88.60                                                 $122.9                     $55.37                                      $574.5                     $89.98                       $355.7 $53.15

    Segment Cash Cost of
     Sales                                                            143.2                      64.46                                                  113.9                      51.29                                       390.2                      61.11                        344.0  51.40
                                                                      -----                      -----                                                  -----                      -----                                       -----                      -----                        -----  -----

    Segment Cash Margin                                                53.6                      24.14                                                    9.1                       4.08                                       184.3                      28.87                         11.7   1.75


    Other Thermal

    Tons Sold                                                           2.3                                                                              2.5                                                                   6.9                                                    5.2


    Segment Sales                                                     $81.6                     $35.08                                                  $85.2                     $34.52                                      $240.7                     $34.67                       $187.4 $36.16

    Segment Cash Cost of
     Sales                                                             60.6                      26.05                                                   57.0                      23.10                                       166.5                      23.98                        156.9  30.28
                                                                       ----                      -----                                                   ----                      -----                                       -----                      -----                        -----  -----

    Segment Cash Margin                                                21.0                       9.03                                                   28.2                      11.42                                        74.2                      10.69                         30.5   5.88


    Total Segment Cash
     Margin                                                          $123.3                                                                           $115.9                                                                $386.3                                                 $154.8


    Selling, general and
     administrative
     expenses                                                        (21.1)                                                                          (20.5)                                                               (63.7)                                                (59.3)

    Liquidated damages
     under export
     logistics contracts                                                  -                                                                               -                                                                    -                                                 (1.6)

    Other                                                               2.1                                                                            (6.0)                                                                (2.4)                                                 (6.5)
                                                                        ---                                                                             ----                                                                  ----                                                   ----


    Adjusted EBITDAR                                                 $104.3                                                                            $89.4                                                                $320.1                                                  $87.3
                                                                     ======                                                                            =====                                                                ======                                                  =====



    Reconciliation of Non-
     GAAP Measures                                      Successor                   Predecessor                                         Successor                   Predecessor
                                                        ---------                   -----------                                         ---------                   -----------

                                                   Three Months  Ended                                  Three Months Ended                                       Nine Months Ended                       Nine Months Ended
                                                   September 30, 2017                                   September 30, 2016                                       September 30, 2017                     September 30, 2016
                                                   ------------------                                   ------------------                                       ------------------                     ------------------

    Total segment sales                                              $550.1                                                                           $499.3                                                              $1,582.1                                               $1,257.2

    Transportation costs
     billed to customers                                               59.7                                                                             46.3                                                                 178.5                                                  121.7

    Coal risk management
     derivative
     settlements                                                        0.0                                                                              0.1                                                                   0.0                                                    0.5

    Other (1)                                                           3.7                                                                              4.5                                                                   3.8                                                   19.4
                                                                        ---                                                                              ---                                                                   ---                                                   ----

    Revenues                                                         $613.5                                                                           $550.3                                                              $1,764.4                                               $1,398.7


    (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. In the third quarter of 2017, includes $3.7MM of sales under contracts related to the divested Lone
     Mountain operation that were not assigned to the new owner.



                                                        Successor                   Predecessor                                         Successor                   Predecessor
                                                        ---------                   -----------                                         ---------                   -----------

                                                   Three Months  Ended                                  Three Months Ended                                       Nine Months Ended                       Nine Months Ended
                                                   September 30, 2017                                   September 30, 2016                                       September 30, 2017                     September 30, 2016
                                                   ------------------                                   ------------------                                       ------------------                     ------------------

    Total segment cash
     cost of sales                                                   $426.8                                                                           $383.5                                                              $1,195.8                                               $1,102.4

    Transportation costs
     billed to customers                                               59.7                                                                             46.3                                                                 178.5                                                  121.7

    Risk management
     derivative
     settlements--diesel
     fuel                                                             (0.9)                                                                           (1.2)                                                                (2.4)                                                 (3.7)

    Other (1)                                                           9.8                                                                             13.8                                                                  20.0                                                   44.1
                                                                        ---                                                                             ----                                                                  ----                                                   ----

    Cost of Sales                                                    $495.4                                                                           $442.5                                                              $1,391.9                                               $1,264.5



    (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. In the third quarter of 2017, includes $3.7MM of coal purchases to service sales
     contracts related to the divested Lone Mountain operation that were not assigned to the new owner.


                                                                                    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 by excluding transactions that are not indicative of the Company's
     core operating performance.


    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 September     Three Months Ended September 30,                Nine Months Ended September      Nine Months Ended September 30,
                                                                30, 2017                             2016                                        30, 2017                             2016
                                                    -----------------------------    ---------------------------------                ----------------------------     --------------------------------

                                                              (Unaudited)                        (Unaudited)                                  (Unaudited)                        (Unaudited)

    Net income (loss)                                                      $68,351                             $(51,421)                                   $157,179                            $(434,010)

    Benefit from income taxes                                              (1,643)                              (3,270)                                      (484)                              (4,626)

    Interest expense, net                                                    5,252                                45,582                                      19,311                               133,235

    Depreciation, depletion and
     amortization                                                           31,914                                69,423                                      94,536                               191,581

    Accretion on asset retirement
     obligations                                                             7,580                                 7,965                                      22,826                                24,321

    Amortization of sales
     contracts, net                                                         13,861                                   104                                      42,903                                 (728)

    Asset impairment and mine
     closure costs                                                               -                                   46                                           -                              129,267

    Gain on sale of Lone Mountain
     Processing, Inc.                                                     (21,574)                                    -                                   (21,574)                                    -

    Net loss resulting from early
     retirement of debt and debt
     restructuring                                                             486                                     -                                      2,547                                 2,213

    Reorganization items, net                                                   43                                20,904                                       2,892                                46,050
                                                                               ---                                ------                                       -----                                ------


    Adjusted EBITDAR                                                      $104,270                               $89,333                                    $320,136                               $87,303
                                                                          ========                               =======                                    ========                               =======


    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.  Adjusted net income (loss) and adjusted diluted income (loss) per common share
     may also be adjusted for items that may not reflect the trend of future results.  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 transactions that are not indicative of the Company's core operating performance. 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 September     Three Months Ended September 30,                Nine Months Ended September      Nine Months Ended September 30,
                                                                30, 2017                             2016                                        30, 2017                             2016
                                                    -----------------------------    ---------------------------------                ----------------------------     --------------------------------

                                                              (Unaudited)                        (Unaudited)                                  (Unaudited)                        (Unaudited)

    Net income (loss)                                                      $68,351                             $(51,421)                                   $157,179                            $(434,010)


    Amortization of sales
     contracts, net                                                         13,861                                   104                                      42,903                                 (728)

    Asset impairment and mine
     closure costs                                                               -                                   46                                           -                              129,267

    Gain on sale of Lone Mountain
     Processing, Inc.                                                     (21,574)                                    -                                   (21,574)                                    -

    Net loss resulting from early
     retirement of debt and debt
     restructuring                                                             486                                     -                                      2,547                                 2,213

    Reorganization items, net                                                   43                                20,904                                       2,892                                46,050

    Tax impact of adjustment                                                   144                                     -                                      (535)                                    -
                                                                               ---                                   ---                                       ----                                   ---


    Adjusted net income (loss)                                             $61,311                             $(30,367)                                   $183,412                            $(257,208)
                                                                           =======                              ========                                    ========                             =========


    Diluted weighted average
     shares outstanding                                                     24,135                                21,293                                      24,875                                21,293
                                                                            ======                                ======                                      ======                                ======


    Diluted income (loss) per
     share                                                                   $2.83                               $(2.41)                                      $6.32                              $(20.38)


    Amortization of sales
     contracts, net                                                           0.57                                     -                                       1.78                                (0.03)

    Asset impairment and mine
     closure costs                                                               -                                    -                                          -                                 6.07

    Gain on sale of Lone Mountain
     Processing, Inc.                                                       (0.89)                                    -                                     (0.87)                                    -

    Net loss resulting from early
     retirement of debt and debt
     restructuring                                                            0.02                                     -                                       0.11                                  0.10

    Reorganization items, net                                                    -                                 0.98                                        0.12                                  2.16

    Tax impact of adjustments                                                 0.01                                  0.00                                      (0.09)                                 0.00

    Adjusted diluted income
     (loss) per share                                                        $2.54                               $(1.43)                                      $7.37                              $(12.08)
                                                                             =====                                ======                                       =====                               =======

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SOURCE Arch Coal, Inc.