Arch Coal, Inc. Reports Fourth Quarter and Full Year 2019 Results
ST. LOUIS, Feb. 6, 2020 /PRNewswire/ -- Arch Coal, Inc. (NYSE: ARCH) today reported a net loss of $8.6 million, or $0.57 per diluted share, in the fourth quarter of 2019, compared with net income of $86.1 million, or $4.44 per diluted share, in the prior-year period. Included in the company's fourth quarter results was a loss of $9.0 million associated with the December sale of its Coal-Mac thermal operations. Arch had adjusted earnings before interest, taxes, depreciation, depletion, amortization, accretion on asset retirement obligations, amortization of sales contracts, and non-operating expenses ("adjusted EBITDA") (1) of $43.7 million in the fourth quarter of 2019, which includes a $1.3 million non-cash mark-to-market loss associated with the company's coal-hedging activities. This compares to $122.6 million of adjusted EBITDA recorded in the fourth quarter of 2018, which included a $13.0 million non-cash mark-to-market gain associated with the company's coal-hedging activities. Revenues totaled $549.5 million for the three months ended December 31, 2019, versus $651.0 million in the prior-year quarter.
"Arch wrapped up a strong 2019 financial performance with solid fourth quarter results, even as it executed a major operational transition at its Mountain Laurel metallurgical mine and despite lower metallurgical pricing," said John W. Eaves, Arch's chief executive officer. "Excluding Mountain Laurel, Arch's metallurgical portfolio achieved costs below $60 per ton for the quarter - including another mid-$40 per-ton cost performance at the Leer mine - and delivered cash margins from its coking coal segment in excess of $30 per ton."
As previously announced, Mountain Laurel embarked upon a transition from longwall to room-and-pillar mining during the quarter, and brought that process to a successful conclusion in January. This conversion to room-and-pillar mining should translate into lower costs, enhanced product quality, and a more consistent operating performance.
In addition, Arch bought back $10.5 million of stock and made dividend payments totaling $8.0 million. In the past 11 quarters, Arch has bought back a total of 10.1 million shares, or 40 percent of its initial shares outstanding, and returned a total of $913.3 million, including dividends, to shareholders.
"We are proud of the great progress we've made in returning capital to shareholders since initiating our capital return program in May 2017," Eaves said. "With the recent pullback in metallurgical prices, we expect to allocate most of our excess cash in 2020 to the accelerated build-out of Leer South, which promises to greatly enhance the long-term, cash-generating capabilities of our metallurgical portfolio."
Arch expects to invest $220 million at Leer South during 2020 and expects longwall mining to commence in the third quarter of 2021.
Financial and Liquidity Update
At year-end 2019, Arch had invested a total of $827.4 million since May 2017 to buy back 10.1 million shares while returning an additional $85.9 million to shareholders through its recurring quarterly dividend.
Arch ended the year with total liquidity of $412.1 million, including $288.7 million in cash.
"With our premier, high-margin metallurgical portfolio and low-cost, legacy thermal assets, Arch is well-equipped to fund its Leer South growth project with internal funding, even in a softer market environment," said John T. Drexler, Arch's chief financial officer.
In addition, Arch expects to monetize its recently announced $39 million land settlement with the federal government during the course of 2020.
Looking ahead, the board has approved an 11 percent increase in its quarterly dividend, bringing the quarterly cash dividend payment to $0.50 per share. Since launching the capital return program, Arch has increased the quarterly dividend rate three times, by a total of 43 percent.
The next quarterly cash dividend payment of $0.50 per share of common stock is scheduled to be paid on March 13, 2020 to stockholders of record at the close of business on March 3, 2020.
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.
Operational Results
"During 2019, Arch took significant strides to further enhance the competitive position of its core metallurgical segment - moving into thicker reserves at the Leer mine, transitioning Mountain Laurel to a room-and-pillar operation, and launching the development of Leer South," said Paul A. Lang, Arch's president and chief operating officer. "At the same time, we continued to exhibit strong cost control and solid capital discipline in our thermal segments, which allowed us to generate segment-level EBITDA from our thermal assets more than $100 million in excess of capital expenditures during 2019."
Metallurgical
4Q19
3Q19
4Q18
Tons sold (in
millions) 2.0 2.1 2.1
Coking 1.8 1.9 1.9
Thermal 0.2 0.2 0.2
Coal sales per ton
sold $90.51 $98.89 $121.53
Coking $97.39 $105.71 $130.49
Thermal $33.25 $32.17 $37.83
Cash cost per ton
sold $70.02 $64.89 $74.84
Cash margin per
ton $20.49 $34.00 $46.69
Coal sales per ton sold and cash cost per ton sold are defined and reconciled under "Reconciliation of non-GAAP measures."
Mining complexes included in this segment are Beckley, Leer, Mountain Laurel and Sentinel.
During the fourth quarter, Arch's metallurgical segment performed well even as it initiated an earlier-than-anticipated transition to room-and-pillar mining at its Mountain Laurel operation and despite weaker metallurgical market conditions.
While the longwall removal process at Mountain Laurel proved complex, the transition to room-and-pillar mining is off to a strong start. Four continuous miners were operating efficiently in room-and-pillar configuration at year-end, with the fifth and final unit expected to start up in March.
As a result of geologic conditions in the final longwall panel, Mountain Laurel was unable to recover 123 of the longwall system's 176 hydraulic shields. The company is finalizing a claim under its insurance policy of $30 to $35 million that will cover the amount of capital required for the new shields, and expects to be successful with that claim.
Arch expects to produce 6.8 to 7.2 million tons of coking coal in 2020, with per-ton cash costs for the full year of between $58.00 and $62.00. Metallurgical shipments are expected to be lower-than-ratable in the first quarter of 2020 due to seasonal dock closures on the Great Lakes that will act to reduce North American volumes, as well as the projected timing of certain other commitments.
Powder River Basin
4Q19 3Q19 4Q18
Tons sold (in
millions) 18.1 22.2 19.5
Coal sales per
ton sold $12.07 $12.02 $11.88
Cash cost per
ton sold $10.70 $9.77 $10.66
Cash margin per
ton $1.37 $2.25 $1.22
Coal sales per ton sold and cash cost per ton sold are 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, sales volumes for the fourth quarter of 2019 totaled 18.1 million tons compared to 22.2 million tons in the third quarter of 2019, which benefited from strong seasonal demand. Cash costs averaged $10.70 per ton sold compared to $9.77 per ton sold in the third quarter. The segment's average cash margin for the quarter was $1.37 per ton.
Looking ahead, Arch expects cash costs of between $10.90 and $11.30 per ton in its PRB segment during 2020, which includes the impact of recently enacted excise tax increases. Given the mild start to winter and currently depressed natural gas prices, the company expects its PRB segment to experience lower-than-ratable volumes and higher-than-ratable costs in the first quarter of 2020.
Other Thermal
4Q19 3Q19 4Q18
Tons sold (in
millions) 2.1 2.0 2.3
Coal sales per
ton sold $35.41 $39.52 $34.89
Cash cost per
ton sold $31.81 $31.16 $28.76
Cash margin per
ton $3.60 $8.36 $6.13
Coal sales per ton sold and cash cost per ton sold are 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, the average cash margin declined to $3.60 per ton in the fourth quarter of 2019 versus $8.36 per ton in the third quarter of 2019, due primarily to a shift in product mix and lower export-related pricing at the West Elk mine.
Arch is guiding to average operating costs of $25.00 to $29.00 per ton for full year 2020, which reflects the sale of Coal-Mac in December 2019. At year-end, the Other Thermal segment had 3.5 million tons committed for delivery in 2020, including 3.1 million tons committed at a fixed price of $33.65 per ton.
Progress at Leer South
During 2019, Arch invested $103 million in the build-out of Leer South, and expects to invest another $220 million in 2020. Total capex for Leer South is projected at between $360 million and $390 million.
"We continue to make excellent progress in developing Leer South, which we consider to be the industry's premier growth project," Lang said. "We are well on track for the commencement of longwall operations at the new mine in the third quarter of 2021. Even at today's weaker assessed High-Vol A metallurgical prices, we would expect Leer South to generate margins of approximately $45 per ton if the longwall were online today."
With the addition of Leer South, Arch expects to expand its High-Vol A output by an incremental 3 million tons; enhance its already advantageous position on the U.S. cost curve; strengthen its coking coal profit margins across a wide range of market conditions; and cement its position as the leading supplier of High-Vol A coking coal globally.
Market Developments
After a significant pullback in the back half of 2019, metallurgical markets have rebounded modestly since the start of the year, although ongoing concerns about the coronavirus and its potential impact on the global economy remain significant, near-term risks. The assessed price of the High-Vol A metallurgical product - which comprises nearly 70 percent of Arch's metallurgical product mix - has increased nearly 10 percent since January 1, and other metallurgical qualities have strengthened as well.
At year-end, Arch had committed to supply 1.8 million tons of its metallurgical products to North American customers in 2020, at a fixed price of approximately $107 per ton. In addition, Arch had committed to move 2.4 million tons of its metallurgical products into the seaborne market, with 2.2 million tons of that total at a market-based pricing structure and 200,000 tons of its lower-quality metallurgical products at a fixed price of approximately $83 per ton.
"We are pleased with the balance we have achieved to date in our 2020 metallurgical sales book," Lang said. "We have built a strong foundation of fixed-price business in North America at advantageous prices given current market conditions, and have complemented that with a solid start to our contracting efforts in seaborne markets, where market-based pricing structures provide us with exposure to potential future strengthening in metallurgical markets," Lang said.
In its thermal segments, Arch is more than 80 percent committed at current volume guidance levels, with 58.1 million tons of PRB coal committed at $12.22 per ton.
Outlook
"Heading into 2020, we are sharply focused on demonstrating continued operational excellence across our entire mine portfolio while advancing our well-defined strategy for long-term value creation and growth," Eaves said. "We are driving forward with our efforts to further reduce the cost structure of our metallurgical segment; enhance our metallurgical portfolio's already significant cash-generating capabilities through the build-out of Leer South; generate significant levels of cash at our low-cost thermal assets; prepare those assets for an increasingly challenging market environment through the completion of the synergistic joint venture with Peabody; and maintain our industry-leading balance sheet strength. In short, we are working aggressively to strengthen our performance across a range of significant operational and financial metrics in our ongoing efforts to maximize long-term value creation for our shareholders."
2020
Tons
$ per ton
Sales Volume (in millions of tons)
---
Coking 6.8 7.2
Thermal 76.0 80.0
---
Total 82.8 87.2
Metallurgical (in millions of tons)
---
Committed, Priced Coking North American 1.8 $107.11
Committed, Unpriced Coking North
American
Committed, Priced Coking Seaborne 0.2 $83.44
Committed, Unpriced Coking Seaborne 2.2
---
Total Committed Coking 4.2
Committed, Priced Thermal Byproduct 0.1 $19.74
Committed, Unpriced Thermal Byproduct 0.4
---
Total Committed Thermal Byproduct 0.5
Average Metallurgical Cash Cost
$58.00 - $62.00
Powder River Basin (in millions of
tons)
---
Committed, Priced 58.1 $12.22
Committed, Unpriced 1.8
---
Total Committed 59.9
Average Cash Cost
$10.90 - $11.30
Other Thermal (in millions of tons)
---
Committed, Priced 3.1 $33.65
Committed, Unpriced 0.4
---
Total Committed 3.5
Average Cash Cost
$25.00 - $29.00
Corporate (in $ millions)
---
D,D&A $120.0 $125.0
ARO Accretion $18.0 $20.0
S,G&A - cash $72.0 $76.0
S,G&A - non-cash $18.0 $20.0
Net Interest Expense $8.0 $10.0
Capital Expenditures $300.0 $320.0
Tax Provision (%) Approximately 0%
---
Note: The Company is unable to
present a quantitative
reconciliation of its forward-
looking non-GAAP Segment cash
cost per ton sold financial
measures to the most directly
comparable GAAP measures without
unreasonable efforts due to the
inherent difficulty in forecasting
and quantifying with reasonable
accuracy significant items
required for the reconciliation.
The most directly comparable GAAP
measure, GAAP cost of sales, is
not accessible without
unreasonable efforts on a forward-
looking basis. The reconciling
items include transportation
costs, which are a component of
GAAP cost of sales. Management is
unable to predict without
unreasonable efforts
transportation costs due to
uncertainty as to the end market
and FOB point for uncommitted
sales volumes and the final
shipping point for export
shipments. In addition, the impact
of hedging activity related to
commodity purchases that do not
receive hedge accounting and idle
and administrative costs that are
not included in a reportable
segment are additional reconciling
items for Segment cash cost per
ton sold. Management is unable to
predict without unreasonable
efforts the impact of hedging
activity related to commodity
purchases that do not receive
hedge accounting due to
fluctuations in commodity prices,
which are difficult to forecast
due to their inherent volatility.
These amounts have historically
varied and may continue to vary
significantly from quarter to
quarter and material changes to
these items could have a
significant effect on our future
GAAP results. Idle and
administrative costs that are not
included in a reportable segment
are expected to be between $15
million and $20 million in 2020.
A conference call regarding Arch Coal's fourth quarter and full year 2019 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).
U.S.-based Arch Coal, Inc. is a top coal producer for the global steel and power generation industries. Arch operates a streamlined portfolio of large-scale, low-cost mining complexes that produce high-quality metallurgical coals in Appalachia and low-emitting thermal coals in the Powder River Basin and other strategic supply regions. For more information, visit www.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 "should," "appears," "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 and steel industries; from legislation and regulations relating to the Clean Air Act and other environmental initiatives; from competition within our industry and with producers of competing energy sources; from our ability to successfully acquire or develop coal reserves; from operational, geological, permit, labor and weather-related factors; from the Tax Cuts and Jobs Act and other tax reforms; from the effects of foreign and domestic trade policies, actions or disputes; from fluctuations in the amount of cash we generate from operations, which could impact, among other things, our ability to pay dividends or repurchase shares in accordance with our announced capital allocation plan; from our ability to successfully integrate the operations that we acquire; from our ability to complete the joint venture transaction with Peabody Energy in a timely manner, including obtaining regulatory approvals and satisfying other closing conditions; from our ability to achieve expected synergies from the joint venture; from our ability to successfully integrate the operations of certain mines in the joint venture; 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 EBITDA 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)
Three Months Ended Twelve Months Ended
December 31, December 31,
---
2019 2018 2019 2018
---
(Unaudited)
(Unaudited)
Revenues $549,480 $650,963 $2,294,352 $2,451,787
Costs, expenses and other operating
Cost of sales
(exclusive of items
shown separately
below) 492,454 514,005 1,873,017 1,925,202
Depreciation,
depletion and
amortization 29,856 27,536 112,055 119,563
Accretion on asset
retirement
obligations 5,137 6,993 20,548 27,970
Amortization of sales
contracts, net (357) 1,567 (434) 11,107
Change in fair value
of coal derivatives
and coal trading
activities, net 1,250 (13,024) (18,601) 9,118
Selling, general and
administrative
expenses 21,917 26,687 95,781 100,300
Costs related to
proposed joint
venture with Peabody
Energy 7,044 13,816 -
Loss on sale of Coal-
Mac LLC 9,008 9,008 -
Loss on sale of Lone
Mountain Processing
LLC 4,304 -
Preference Rights
Lease Application
settlement income (39,000) -
Other operating
(income) expense, net (9,869) 709 (19,012) (20,611)
---
556,440 564,473 2,051,482 2,172,649
---
Income (loss) from
operations (6,960) 86,490 242,870 279,138
Interest expense, net
Interest expense (3,629) (4,847) (16,485) (20,471)
Interest and
investment income 1,751 2,156 9,691 6,782
(1,878) (2,691) (6,794) (13,689)
---
Income (loss) before
nonoperating expenses (8,838) 83,799 236,076 265,449
Nonoperating (expenses) income
Non-service related
pension and
postretirement
benefit (costs)
credits 74 (996) (2,053) (3,202)
Net loss resulting
from early retirement
of debt and debt
restructuring (485)
Reorganization items,
net (47) (60) 24 (1,661)
---
27 (1,056) (2,029) (5,348)
---
Income (loss) before
income taxes (8,811) 82,743 234,047 260,101
Provision for (benefit
from) income taxes (260) (3,351) 248 (52,476)
---
Net income (loss) $(8,551) $86,094 $233,799 $312,577
Net income (loss) per common share
Basic EPS $(0.57) $4.69 $14.42 $15.90
Diluted EPS $(0.57) $4.44 $13.52 $15.15
Weighted average shares outstanding
Basic weighted average
shares outstanding 15,097 18,344 16,218 19,663
===
Diluted weighted
average shares
outstanding 15,097 19,396 17,298 20,629
===
Dividends declared per
common share $0.45 $0.40 $1.80 $1.60
Adjusted EBITDA (A) $43,728 $122,586 $363,167 $437,778
(A) Adjusted EBITDA is defined and
reconciled under "Reconciliation of
Non-GAAP Measures" later in this
release.
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
December 31, December 31,
2019 2018
(Unaudited)
Assets
Current assets
Cash
and
cash
equivalents $153,020 $264,937
Short-
term
investments 135,667 162,797
Trade
accounts
receivable 168,125 200,904
Other
receivables 21,143 48,926
Inventories 130,898 125,470
Other
current
assets 97,894 75,749
Total
current
assets 706,747 878,783
Property,
plant
and
equipment,
net 984,509 834,828
Other assets
Equity
investments 105,588 104,676
Other
noncurrent
assets 70,912 68,773
Total
other
assets 176,500 173,449
Total
assets $1,867,756 $1,887,060
Liabilities and Stockholders'
Equity
Current liabilities
Accounts
payable $133,060 $128,024
Accrued
expenses
and
other
current
liabilities 157,167 183,514
Current
maturities
of
debt 20,753 17,797
Total
current
liabilities 310,980 329,335
Long-
term
debt 290,066 300,186
Asset
retirement
obligations 242,432 230,304
Accrued
pension
benefits 5,476 16,147
Accrued
postretirement
benefits
other
than
pension 80,567 83,163
Accrued
workers'
compensation 215,599 174,303
Other
noncurrent
liabilities 82,100 48,801
Total
liabilities 1,227,220 1,182,239
Stockholders' equity
Common
Stock 252 250
Paid-
in
capital 730,551 717,492
Retained
earnings 731,425 527,666
Treasury
stock,
at
cost (827,381) (583,883)
Accumulated
other
comprehensive
income 5,689 43,296
Total
stockholders'
equity 640,536 704,821
Total
liabilities
and
stockholders'
equity $1,867,756 $1,887,060
Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Twelve Months Ended
December 31,
2019 2018
---
(Unaudited)
Operating activities
Net income $233,799 $312,577
Adjustments to reconcile to cash provided by
operating activities:
Depreciation,
depletion and
amortization 112,055 119,563
Accretion on asset
retirement
obligations 20,548 27,970
Amortization of
sales contracts,
net (434) 11,107
Deferred income
taxes 13,501 18,701
Employee stock-
based
compensation
expense 21,989 17,519
Loss (Gain) on
disposals and
divestitures 8,304 (625)
Amortization
relating to
financing
activities 3,691 4,179
Preference Rights
Lease Application
settlement income (39,000)
Changes in:
Receivables 30,713 (22,903)
Inventories (15,251) 3,490
Accounts payable,
accrued expenses
and other current
liabilities (28,222) (14,208)
Income taxes, net 38,152 (46,970)
Other 19,869 (12,437)
Cash provided by
operating
activities 419,714 417,963
Investing activities
Capital
expenditures (266,356) (95,272)
Minimum royalty
payments (1,249) (584)
Proceeds from
disposals and
divestitures 6,135 1,083
Purchases of short
term investments (205,216) (143,328)
Proceeds from
sales of short
term investments 233,074 136,630
Investments in and
advances to
affiliates, net (5,499) (2,481)
---
Cash used in
investing
activities (239,111) (103,952)
Financing activities
Payments on term
loan due 2024 (3,000) (3,000)
Net payments on
other debt (5,373) (6,077)
Debt financing
costs - (1,257)
Dividends paid (30,220) (31,269)
Purchases of
treasury stock (244,998) (280,871)
Payments for taxes
related to net
share settlement
of equity awards (8,961)
Other 32 (202)
---
Cash used in
financing
activities (292,520) (322,676)
---
Decrease in cash
and cash
equivalents (111,917) (8,665)
Cash and cash
equivalents,
beginning of
period 264,937 273,602
---
Cash and cash
equivalents, end
of period $153,020 $264,937
===
Cash and cash equivalents, including restricted
cash, end of period
Cash and cash
equivalents $153,020 $264,937
Restricted cash -
---
$153,020 $264,937
===
Arch Coal, Inc. and Subsidiaries
Schedule of Consolidated Debt
(In thousands)
December 31, December 31,
2019 2018
(Unaudited)
Term loan due 2024
($291.8 million
face value) $290,825 $293,626
Other 25,007 30,449
Debt issuance
costs (5,013) (6,092)
310,819 317,983
Less: current
maturities of
debt 20,753 17,797
Long-term debt $290,066 $300,186
Calculation of net
debt
Total debt
(excluding debt
issuance costs) $315,832 $324,075
Less liquid
assets:
Cash and cash
equivalents 153,020 264,937
Short term
investments 135,667 162,797
288,687 427,734
Net debt $27,145 $(103,659)
Arch Coal, Inc. and Subsidiaries
Operational Performance
(In millions, except per ton data)
Three Months Ended Three Months Ended Three Months Ended
Decemnber 31, 2019 September 30, 2019 December 31, 2018
(Unaudited)
(Unaudited)
(Unaudited)
Powder River Basin
Tons Sold 18.1 22.2 19.5
Segment Sales $218.3 $12.07 $266.4 $12.02 $231.9 $11.88
Segment Cash Cost of
Sales 193.6 10.70 216.4 9.77 208.1 10.66
Segment Cash Margin 24.7 1.37 49.9 2.25 23.8 1.22
Metallurgical
Tons Sold 2.0 2.1 2.1
Segment Sales $181.0 $90.51 $206.1 $98.89 $253.8 $121.53
Segment Cash Cost of
Sales 140.0 70.02 135.2 64.89 156.3 74.84
Segment Cash Margin 41.0 20.49 70.9 34.00 97.5 46.69
Other Thermal
Tons Sold 2.1 2.0 2.3
Segment Sales $75.4 $35.41 $78.5 $39.52 $81.6 $34.89
Segment Cash Cost of
Sales 67.7 31.81 61.9 31.16 67.3 28.76
Segment Cash Margin 7.7 3.60 16.6 8.36 14.3 6.13
Total Segment Cash
Margin $73.4 $137.4 $135.6
Selling, general and
administrative
expenses (21.9) (24.6) (26.7)
Other (7.8) (6.2) 13.7
Adjusted EBITDA $43.7 $106.6 $122.6
Arch Coal, Inc. and Subsidiaries
Reconciliation of NON-GAAP Measures
(In thousands, except per ton data)
Included in the accompanying release, we have disclosed certain non-GAAP measures as defined by Regulation G.
The following reconciles these items to the most directly comparable GAAP measure.
Non-GAAP Segment coal sales per ton sold
Non-GAAP Segment coal sales per ton sold is calculated as segment coal sales revenues divided by segment tons sold. Segment coal sales revenues are adjusted for transportation costs, and may be adjusted for other items that, due to generally
accepted accounting principles, are classified in "other income" on the consolidated
income statements, but relate to price protection on the sale of coal. Segment coal sales per ton sold is not a measure of financial performance in
accordance with
generally accepted accounting principles. We believe segment coal sales per ton sold provides useful information to investors as it better reflects our revenue for the
quality of coal sold and our operating
results by including all income from coal sales. The adjustments made to arrive at these measures are significant in understanding
and assessing our financial condition. Therefore, segment coal sales revenues should not be considered
in isolation, nor as an alternative to coal sales revenues under
generally accepted accounting principles.
Quarter ended
December 31, 2019
Powder River
Metallurgical
Other Thermal
Idle and Other
Consolidated
Basin
---
(In thousands)
GAAP Revenues in the
consolidated income
statements $222,904 $221,551 $98,967 $6,058 $549,480
Less: Adjustments to reconcile to Non-GAAP Segment coal sales
revenue
Coal risk management
derivative
settlements
classified in "other
income" - (616) (3,258) (3,874)
Coal sales revenues
from idled or
otherwise disposed
operations not
included in segments - 6,026 6,026
Transportation costs 4,567 41,165 26,849 32 72,613
Non-GAAP Segment
coal sales revenues $218,337 $181,002 $75,376
$ - $474,715
---
Tons sold 18,086 2,000 2,129
Coal sales per ton
sold $12.07 $90.51 $35.41
Quarter ended
September 30, 2019
Powder River
Metallurgical
Other Thermal
Idle and Other
Consolidated
Basin
---
(In thousands)
GAAP Revenues in the
consolidated income
statements $269,968 $254,493 $94,052 $954 $619,467
Less: Adjustments to reconcile to Non-GAAP Segment coal sales
revenue
Coal risk management
derivative
settlements
classified in "other
income" - (506) (4,533) (5,039)
Coal sales revenues
from idled or
otherwise disposed
operations not
included in segments - 954 954
Transportation costs 3,581 48,925 20,080 72,586
Non-GAAP Segment
coal sales revenues $266,387 $206,074 $78,505
$ - $550,966
---
Tons sold 22,156 2,084 1,986
Coal sales per ton
sold $12.02 $98.89 $39.52
Quarter ended
December 31, 2018
Powder River
Metallurgical
Other Thermal
Idle and Other
Consolidated
Basin
---
(In thousands)
GAAP Revenues in the
consolidated income
statements $236,014 $302,916 $106,887 $5,146 $650,963
Less: Adjustments to reconcile to Non-GAAP Segment coal sales
revenue
Coal risk management
derivative
settlements
classified in "other
income" - 3,516 3,516
Coal sales revenues
from idled or
otherwise disposed
operations not
included in segments - 5,146 5,146
Transportation costs 4,142 49,077 21,732 74,951
Non-GAAP Segment
coal sales revenues $231,872 $253,839 $81,639
$ - $567,350
---
Tons sold 19,521 2,089 2,340
Coal sales per ton
sold $11.88 $121.53 $34.89
Arch Coal, Inc. and Subsidiaries
Reconciliation of NON-GAAP Measures
(In thousands, except per ton data)
Non-GAAP Segment cash cost per ton sold
Non-GAAP Segment cash cost per ton sold is calculated as segment cash cost of coal sales divided by segment tons sold. Segment cash cost of coal sales is
adjusted for transportation costs, and may be
adjusted for other items that, due to generally accepted accounting principles, are classified in "other income" on the
consolidated income statements, but relate directly to the costs incurred to produce
coal. Segment cash cost per ton sold is not a measure of financial performance in
accordance with generally accepted accounting principles. We believe segment cash cost per ton sold better reflects our
controllable costs and our operating results by
including all costs incurred to produce coal. The adjustments made to arrive at these measures are significant in understanding and assessing our financial
condition.
Therefore, segment cash cost of coal sales should not be considered in isolation, nor as an alternative to cost of sales under generally accepted accounting principles.
Quarter ended
December 31, 2019
Powder River
Metallurgical
Other Thermal
Idle and Other
Consolidated
Basin
---
(In thousands)
GAAP Cost of sales in
the consolidated
income statements $197,434 $181,192 $94,565 $19,263 $492,454
Less: Adjustments to reconcile to Non-GAAP Segment cash
cost of coal sales
Diesel fuel risk
management
derivative
settlements
classified in "other
income" (728) (728)
Transportation costs 4,567 41,165 26,849 32 72,613
Cost of coal sales
from idled or
otherwise disposed
operations not
included in segments - 16,023 16,023
Other (operating
overhead, certain
actuarial, etc.) - 3,208 3,208
Non-GAAP Segment
cash cost of coal
sales $193,595 $140,027 $67,716
$ - $401,338
===
Tons sold 18,086 2,000 2,129
Cash cost per ton
sold $10.70 $70.02 $31.81
Quarter ended
September 30, 2019
Powder River
Metallurgical
Other Thermal
Idle and Other
Consolidated
Basin
---
(In thousands)
GAAP Cost of sales in
the consolidated
income statements $218,966 $184,149 $81,976 $5,913 $491,004
Less: Adjustments to reconcile to Non-GAAP Segment cash
cost of coal sales
Diesel fuel risk
management
derivative
settlements
classified in "other
income" (1,057) (1,057)
Transportation costs 3,581 48,925 20,080 72,586
Cost of coal sales
from idled or
otherwise disposed
operations not
included in segments - 3,871 3,871
Other (operating
overhead, certain
actuarial, etc.) - 2,042 2,042
Non-GAAP Segment
cash cost of coal
sales $216,442 $135,224 $61,896
$ - $413,562
===
Tons sold 22,156 2,084 1,986
Cash cost per ton
sold $9.77 $64.89 $31.16
Quarter ended
December 31, 2018
Powder River
Metallurgical
Other Thermal
Idle and Other
Consolidated
Basin
---
(In thousands)
GAAP Cost of sales in
the consolidated
income statements $212,434 $205,390 $89,040 $7,141 $514,005
Less: Adjustments to reconcile to Non-GAAP Segment cash
cost of coal sales
Diesel fuel risk
management
derivative
settlements
classified in "other
income" 120 120
Transportation costs 4,142 49,077 21,732 74,951
Cost of coal sales
from idled or
otherwise disposed
operations not
included in segments - 4,746 4,746
Other (operating
overhead, certain
actuarial, etc.) - 2,395 2,395
Non-GAAP Segment
cash cost of coal
sales $208,172 $156,313 $67,308
$ - $431,793
===
Tons sold 19,521 2,089 2,340
Cash cost per ton
sold $10.66 $74.84 $28.76
Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands)
Adjusted EBITDA
Adjusted EBITDA 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 nonoperating
expenses.
Adjusted EBITDA 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 EBITDA is not a measure of financial performance in accordance with generally accepted accounting principles, and items excluded
from Adjusted EBITDA are significant in understanding and assessing our financial condition. Therefore, Adjusted EBITDA 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
EBITDA 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 EBITDA may not be comparable to similarly titled
measures used by other companies. The table below
shows how we calculate Adjusted EBITDA.
Three Months Ended Twelve Months Ended
December 31, December 31,
---
2019 2018 2019 2018
---
(Unaudited) (Unaudited)
Net income (loss) $(8,551) $86,094 $233,799 $312,577
Provision for (benefit
from) income taxes (260) (3,351) 248 (52,476)
Interest expense, net 1,878 2,691 6,794 13,689
Depreciation, depletion
and amortization 29,856 27,536 112,055 119,563
Accretion on asset
retirement obligations 5,137 6,993 20,548 27,970
Amortization of sales
contracts, net (357) 1,567 (434) 11,107
Costs related to proposed
joint venture with
Peabody Energy 7,044 13,816 -
Loss on sale of Coal-Mac
LLC 9,008 9,008 -
Loss on sale of Lone
Mountain Processing LLC 4,304 -
Preference Rights Lease
Application settlement
income (39,000) -
Non-service related
pension and
postretirement benefit
costs (74) 996 2,053 3,202
Net loss resulting from
early retirement of debt
and debt restructuring 485
Reorganization items, net 47 60 (24) 1,661
---
Adjusted EBITDA $43,728 $122,586 $363,167 $437,778
EBITDA from idled or
otherwise disposed
operations 9,775 (1,527) 12,926 2,492
Selling, general and
administrative expenses 21,917 26,687 95,781 100,300
Other (1,450) (10,075) (14,488) 4,099
---
Segment Adjusted EBITDA
from coal operations $73,970 $137,671 $457,386 $544,669
===
Segment Adjusted EBITDA
Powder River Basin $25,095 $23,886 $110,528 $126,525
Metallurgical 41,079 97,875 305,363 349,524
Other Thermal 7,796 15,910 41,495 68,620
---
Total Segment Adjusted
EBITDA $73,970 $137,671 $457,386 $544,669
===
Arch Coal, Inc. and Subsidiaries
Reconciliation of NON-GAAP Measures
(In thousands, except per ton data)
During the fourth quarter 2019 earnings release, the Company discusses its' Metallurgical coal segment performance for the quarter ended December
31, 2019 excluding
the impact of its' Mountain Laurel operation. Management chose to display this metric as Mountain Laurel executed a
major operational transition during the quarter from
longwall mining to room-and-pillar mining. Management believes this metric is
more comparable to prior results and indicative of future results. Below is the reconciliation
of those amounts:
Non-GAAP Segment coal sales per ton sold
Quarter ended
December 31, 2019
Metallurgical
Mountain Laurel
Metallurgical
excluding
Mountain Laurel
---
(In thousands)
GAAP Revenues in the
consolidated income
statements $221,551 $28,568 $192,983
Less: Adjustments to reconcile to Non-GAAP Segment coal
sales revenue
Coal risk management
derivative
settlements
classified in "other
income" (616) (616) -
Coal sales revenues
from idled or
otherwise disposed
operations not
included in segments -
Transportation costs 41,165 4,850 36,315
Non-GAAP Segment
coal sales revenues $181,002 $24,334 $156,668
===
Tons sold 2,000 276 1,723
Coal sales per ton
sold (a) $90.51 $88.08 $90.90
Non-GAAP Segment cash cost per ton sold
Quarter ended
December 31, 2019
Metallurgical
Mountain Laurel
Metallurgical
excluding
Mountain Laurel
---
(In thousands)
GAAP Cost of sales in
the consolidated
income statements $181,192 $44,073 $137,119
Less: Adjustments to reconcile to Non-GAAP Segment cash
cost of coal sales
Diesel fuel risk
management
derivative
settlements
classified in "other
income" -
Transportation costs 41,165 4,850 36,315
Cost of coal sales
from idled or
otherwise disposed
operations not
included in segments -
Other (operating
overhead, certain
actuarial, etc.) -
Non-GAAP Segment
cash cost of coal
sales $140,027 $39,223 $100,804
===
Tons sold 2,000 276 1,723
Cash cost per ton
sold (b) $70.02 $141.97 $58.49
Cash margin per ton
sold (a)-(b) $20.49 $(53.89) $32.41
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SOURCE Arch Coal, Inc.
