Arch Coal, Inc. Reports First Quarter 2020 Results

ST. LOUIS, April 23, 2020 /PRNewswire/ -- Arch Coal, Inc. (NYSE: ARCH) today reported a net loss of $25.3 million, or $1.67 per diluted share, in the first quarter of 2020, compared with net income of $72.7 million, or $3.91 per diluted share, in the prior-year period. 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 $12.9 million in the first quarter of 2020, which includes a $0.7 million non-cash mark-to-market loss associated with the company's coal-hedging activities and excludes a $9.0 million gain associated with initial insurance proceeds from a previously disclosed equipment loss. This compares to $107.3 million of adjusted EBITDA recorded in the first quarter of 2019, which included a $13.0 million non-cash mark-to-market gain associated with the company's coal-hedging activities. Revenues totaled $405.2 million for the three months ended March 31, 2020, versus $555.2 million in the prior-year quarter.

"Our top priority - now and always - is the health and well-being of our employees," said Paul A. Lang, Arch's incoming chief executive officer. "During the current health crisis, we are using the Center for Disease Control and Prevention guidance to protect our people while doing our part to limit the spread of the virus. At the same time, we recognize and embrace our role as an essential service provider, and we are tremendously proud of the Arch team's efforts to keep the country safe and functioning."

"In the first quarter of 2020, Arch achieved another strong cost performance in its metallurgical segment, made significant progress in the build-out of the Leer South mine, and took steps to fortify our liquidity in the face of a rapidly weakening global economy," Lang continued. "While our thermal segments struggled due to low natural gas prices and historically weak power markets, we are moving quickly to align our cost structure with the softening demand outlook. In short, we are successfully managing through the current crisis while protecting our strong financial footing and pressing forward with our world-class growth project at Leer South."

Financial and liquidity update

During the first quarter, Arch bolstered its already solid liquidity position with the completion of a four-year, $54 million equipment financing facility.

"With the addition of this facility, we were able to fortify our already strong cash position in a proactive and opportunistic way - and at an attractive average interest rate of 6.3 percent," said Matthew C. Giljum, Arch's incoming chief financial officer. "We view this transaction as prudent and well-timed given the significant uncertainties in today's macroeconomic environment. Moreover, the facility carries an amortization schedule that fits well with the planned start-up of Leer South, which is expected to boost our cash-generating capabilities significantly."

The company ended the first quarter with $323 million of liquidity, including $234 million of cash. Looking ahead, Arch expects to augment 2020 cash flows with approximately $100 million related to receipts from the previously disclosed federal land settlement and additional insurance proceeds from an equipment loss, along with accelerated alternative minimum tax recoveries and the deferral of certain payroll taxes associated with the federal CARES Act initiatives.

In light of the ongoing uncertainty around the coronavirus pandemic, Arch's board has elected to suspend the quarterly dividend in order to preserve Arch's financial flexibility. "While the board views this step as judicious in the current macroeconomic environment, we currently expect the suspension of the dividend to be temporary," Giljum said. "The board continues to view a sustainable, recurring dividend as an important component of Arch's long-term value proposition."

Cost reduction efforts

During the quarter, Arch conducted a voluntary separation program in an effort to better align its corporate support structure with its current operating profile and long-term strategic direction. Initiated in late February, the program will result in a 30-percent reduction in corporate staffing levels, and should translate into annual cost savings of approximately $6 million in 2020 and between $12 million and $15 million in 2021. The company took a one-time, $5.8 million charge in the first quarter related to the program.

"While it is always difficult to say goodbye to friends and colleagues, we were pleased that we could make the necessary adjustments in our corporate staffing levels in a manner that served both the company's needs and the personal interests of our employees," Lang said.

Operating results

"Our metallurgical segment continued to operate at a high level during the first quarter, even as we took numerous steps to protect the health of our employees in the face of the current global health crisis," said John T. Drexler, Arch's incoming chief operating officer. "Led by another strong contribution from the Leer mine, we again demonstrated the value of our first-quartile cost structure - delivering solid margins in a weakening market environment."



                                                                                                                                            
       
       Metallurgical


                                                                                                    
            
              1Q20                  
       
         4Q19             
     
     1Q19






     
              Tons sold (in millions)                                                                                    1.8                                      2.0              1.8



     
                       Coking                                                                                            1.5                                      1.8              1.5



     
                      Thermal                                                                                            0.2                                      0.2              0.3



     
              Coal sales per ton sold                                                                                 $82.35                                   $90.51          $118.22



     
                       Coking                                                                                         $92.53                                   $97.39          $133.22



     
                      Thermal                                                                                         $18.93                                   $33.25           $34.66



     Cash cost per ton sold                                                                                             $58.42                                   $70.02           $67.27



     
              Cash margin per ton                                                                                     $23.93                                   $20.49           $50.95





     
              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.



Arch's metallurgical segment shipped 1.5 million tons of coking coal and achieved per-ton costs of $58.42 - near the bottom end of the company's cost guidance. That strong cost performance drove a 17-percent increase in cash margin per ton when compared to the previous quarter, despite appreciably lower sales realizations stemming from a weakening market environment.

While the ongoing health crisis makes forecasting exceptionally difficult, Arch has had ongoing constructive conversations with its customers and currently expects metallurgical shipments in the second quarter of 2020 to approximate those achieved in the first quarter.



                                                                                                                 
              
                Powder River Basin


                                                                                                      
              
                1Q20                          
     
     4Q19     
     
     1Q19






       Tons sold (in millions)                                                                                                  14.2                               18.1          17.1



       Coal sales per ton sold                                                                                                $12.32                             $12.07        $12.18



       Cash cost per ton sold                                                                                                 $12.45                             $10.70        $10.98



       
                Cash margin per ton                                                                                      ($0.13)                             $1.37         $1.20





       
                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.

    ---

Powder River Basin shipments declined significantly in the first quarter due to low natural gas prices and weak economic conditions, resulting in a negative cash margin of $0.13 per ton for the segment. While the company expects low volumes and elevated cash costs per ton sold to continue in the second quarter, the Powder River Basin segment is working diligently to adjust its costs to match the reduced demand outlook and currently expects a better performance in the year's second half. Given the current macro environment, the company is not providing specific volume guidance beyond its already committed book of 58.4 million tons for 2020, but assumes there will be limited incremental sales opportunities for the balance of the year.



                                                                                                                     
              
                Other Thermal


                                                                                                        
              
                1Q20                       
     
     4Q19     
     
     1Q19






       Tons sold (in millions)                                                                                                     0.7                             2.1           1.7



       Coal sales per ton sold                                                                                                  $34.32                          $35.41        $38.58



       Cash cost per ton sold                                                                                                   $36.61                          $31.81        $35.28



       
                Cash margin per ton                                                                                        ($2.29)                          $3.60         $3.30





       
                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. Coal-Mac is included through



       
                December 13, 2019, the date of divestiture.

    ---

The reduced volume level for the Other Thermal segment was attributable in part to the December 2019 sale of the Coal-Mac mine. Rapidly weakening thermal coal demand and a major plant outage for a baseload customer of the Viper mine led to a negative cash margin of $2.29 per ton in the Other Thermal segment. The company expects the weak performance from the Other Thermal segment to continue in the second quarter of 2020, but expects improvement in the year's second half as the company continues to align its cost structure with projected lower volume levels.

Continuing progress at Leer South

During the first quarter, Arch invested $62.1 million in the continued build-out of Leer South, bringing the capital expended on the project to $165.0 million since its launch in February 2019. Arch reaffirmed that it expects to invest a total of $360 million to $390 million in the project, including $220 million during full year 2020.

"We are making strong and consistent progress and maintaining tight capital discipline in the development of Leer South, which we view as the industry's premier growth project," Drexler said. "We are achieving excellent rates of advance in the development of the first longwall panel, which is more than two miles long, and we remain on track for the commencement of longwall production in the third quarter of 2021."

With the addition of Leer South, Arch expects to increase its annual High-Vol A output to around 8 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 coal globally.

Market conditions

After holding up reasonably well for much of the first quarter, steel markets have weakened considerably in recent weeks. Major steel producers in most regions have announced plans to curtail output and idle capacity, and those developments are exerting downward pressure on global metallurgical markets. At present, the assessed price of High-Vol A coal on the U.S. East Coast is $123 per metric ton, versus an average of $174 per metric ton during full year 2019.

While Arch has commitments in place for most of its projected second quarter output, it is working closely with customers to maintain planned shipping schedules.

"While we have a realistic view of the potential future impact of the global economic slowdown, we are continuing to execute - with solid metallurgical commitments in place for the second quarter, strong ongoing cost control at the operations, and the ability to step into the breach to meet customer needs should other suppliers confront obstacles," Drexler said.

U.S. thermal markets, which started the year in a weakened state, have come under even more intense pressure of late in the face of the economic disruption and historically low natural gas pricing. Having entered the year with a solid book of business, Arch is working to adjust its thermal output - as well as its thermal cost structure - to match this reduced demand profile.

Outlook

"Arch is navigating through the current environment in a precise and careful way - working diligently to protect our people, doing our part to limit the spread of the virus, and executing in every phase of the business over which we have control," Lang said. "With our low-cost assets, fortified balance sheet, solid book of business and skilled workforce, we believe we are well-equipped for even a protracted period of market weakness. At the same time, we plan to be ready to respond to improving market conditions as the global economy stabilizes and rebounds."

Given the current market uncertainty, Arch is suspending volume and cost guidance but providing current sales commitments and general corporate projections. Included in these projections, Arch is now forecasting a reduction in 2020 capital spending of $20 million, the majority of which is related to its thermal operations.

                                                                              2020



                                                       
              Tons   
     $ per ton





                                    Metallurgical (in
                                     millions of tons)

    ---

        Committed, Priced
         Coking North
         American                                                                      1.8  $107.05


        Committed, Unpriced
         Coking North
         American


        Committed, Priced
         Coking Seaborne                                                               1.6   $87.73


                     Committed, Unpriced
                      Coking Seaborne                                                  2.5

    ---

        Total Committed
         Coking                                                                        5.9




        Committed, Priced
         Thermal Byproduct                                                             0.5   $18.17


                     Committed, Unpriced
                      Thermal Byproduct                                                0.4

    ---

        Total Committed
         Thermal Byproduct                                                             0.9






                                    Powder River Basin
                                     (in millions of
                                     tons)

    ---

        Committed, Priced                                                             57.2   $12.39


                     Committed, Unpriced                                               1.2

    ---

        Total Committed                                                               58.4






                                    Other Thermal (in
                                     millions of tons)

    ---

        Committed, Priced                                                              3.5   $32.32


                     Committed, Unpriced                                               0.3

    ---

        Total Committed                                                                3.8




                                    Corporate (in $
                                     millions)

    ---


       D,D&A                                                     $120.0             $125.0


        ARO Accretion                                              $18.0              $20.0


        S,G&A -cash                                                $66.0              $70.0


        S,G&A - non-cash                                           $17.0              $19.0


        Net Interest Expense                                       $10.0              $12.0


        Capital Expenditures                                      $280.0             $300.0


        Tax Provision (%)                              Approximately 0%

    ---

A conference call regarding Arch's first quarter 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 the COVID-19 pandemic, including its adverse effects on businesses, economies, and financial markets worldwide; 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 March 31,



                                                                                                                             2020               2019

                                                                                                                                                ---

                                                                                                                      
              (Unaudited)





     
                Revenues                                                                                              $405,232           $555,183





     
                Costs, expenses and other operating



     Cost of sales (exclusive of items shown separately below)                                                           374,999            438,471



     Depreciation, depletion and amortization                                                                             31,308             25,273



     Accretion on asset retirement obligations                                                                             5,006              5,137



     Amortization of sales contracts, net                                                                                      -                65



     Change in fair value of coal derivatives and coal trading activities, net                                               743           (12,981)



     Selling, general and administrative expenses                                                                         22,745             24,089



     Costs related to proposed joint venture with Peabody Energy                                                           3,664



     Severance costs related to voluntary separation plan                                                                  5,828



     Gain on property insurance recovery related to Mountain Laurel longwall                                             (9,000)



     Other operating income, net                                                                                         (6,170)           (1,650)

                                                                                                                                                ---

                                                                                                                          429,123            478,404

                                                                                                                                                ---




     Income (loss) from operations                                                                                      (23,891)            76,779





     
                Interest expense, net



     Interest expense                                                                                                    (3,388)           (4,432)



     Interest and investment income                                                                                        1,259              2,143


                                                                                                                          (2,129)           (2,289)

                                                                                                                                                ---




     Income (loss) before nonoperating expenses                                                                         (26,020)            74,490





     
                Nonoperating (expenses) income



     Non-service related pension and postretirement benefit costs                                                        (1,096)           (1,766)



     Reorganization items, net                                                                                                26                 87

                                                                                                                                                ---

                                                                                                                          (1,070)           (1,679)

                                                                                                                                                ---




     Income (loss) before income taxes                                                                                  (27,090)            72,811



     Provision for (benefit from) income taxes                                                                           (1,791)                70

                                                                                                                                                ---




     
                Net income (loss)                                                                                    $(25,299)           $72,741

                                                                                                                                                ===




     
                Net income (loss) per common share



     Basic EPS                                                                                                           $(1.67)             $4.16

                                                                                                                                                ===


     Diluted EPS                                                                                                         $(1.67)             $3.91

                                                                                                                                                ===




     
                Weighted average shares outstanding



     Basic weighted average shares outstanding                                                                            15,139             17,494

                                                                                                                                                ===


     Diluted weighted average shares outstanding                                                                          15,139             18,599

                                                                                                                                                ===




     Dividends declared per common share                                                                                   $0.50              $0.45

                                                                                                                                                ===




     
                Adjusted EBITDA (A)                                                                                    $12,915           $107,254

                                                                                                                                                ===


               (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)






                                                                                                                March 31, 
     
     December 31,


                                                                                                                     2020               2019



                                                                                                      
      (Unaudited)



     
                Assets



     
                Current assets



     Cash and cash equivalents                                                                                  $105,157           $153,020



     Short-term investments                                                                                      129,057            135,667



     Trade accounts receivable                                                                                   149,225            168,125



     Other receivables                                                                                            19,016             21,143



     Inventories                                                                                                 149,986            130,898



     Other current assets                                                                                         87,096             97,894




     Total current assets                                                                                        639,537            706,747





     
                Property, plant and equipment, net                                                           1,035,776            984,509





     
                Other assets



     Equity investments                                                                                          106,535            105,588



     Other noncurrent assets                                                                                      75,658             70,912




     Total other assets                                                                                          182,193            176,500




     Total assets                                                                                             $1,857,506         $1,867,756






     
                Liabilities and Stockholders' Equity



     
                  Current liabilities



     Accounts payable                                                                                           $108,972           $133,060



     Accrued expenses and other current liabilities                                                              143,054            157,167



     Current maturities of debt                                                                                   28,456             20,753




     Total current liabilities                                                                                   280,482            310,980



     Long-term debt                                                                                              330,036            290,066



     Asset retirement obligations                                                                                239,969            242,432



     Accrued pension benefits                                                                                     18,897              5,476



     Accrued postretirement benefits other than pension                                                           80,069             80,567



     Accrued workers' compensation                                                                               218,626            215,599



     Other noncurrent liabilities                                                                                 95,663             82,100




     Total liabilities                                                                                         1,263,742          1,227,220





     
                Stockholders' equity



     Common Stock                                                                                                    252                252



     Paid-in capital                                                                                             734,315            730,551



     Retained earnings                                                                                           698,292            731,425



     Treasury stock, at cost                                                                                   (827,381)         (827,381)



     Accumulated other comprehensive income (loss)                                                              (11,714)             5,689




     Total stockholders' equity                                                                                  593,764            640,536




     Total liabilities and stockholders' equity                                                               $1,857,506         $1,867,756


                                                     
              
                Arch Coal, Inc. and Subsidiaries


                                              
              
                Condensed Consolidated Statements of Cash Flows


                                                              
              
                (In thousands)






                                                                                                                                          Three Months Ended March 31,



                                                                                                                             2020              2019

                                                                                                                                               ---

                                                                                                                      
              (Unaudited)



     
                Operating activities



     Net income (loss)                                                                                                 $(25,299)          $72,741



     Adjustments to reconcile to cash from operating activities:



     Depreciation, depletion and amortization                                                                             31,308            25,273



     Accretion on asset retirement obligations                                                                             5,006             5,137



     Employee stock-based compensation expense                                                                             3,962             5,651



     Gain on disposals and divestitures                                                                                    (214)            (475)



     Amortization relating to financing activities                                                                           971               907



     Gain on property insurance recovery related to Mountain Laurel longwall                                             (9,000)



     Changes in:



     Receivables                                                                                                          23,728             7,410



     Inventories                                                                                                        (19,088)         (20,137)



     Accounts payable, accrued expenses and other current liabilities                                                   (39,201)         (17,861)



     Income taxes, net                                                                                                   (1,073)               76



     Other                                                                                                                16,865             6,262



     Cash provided by (used in) operating activities                                                                    (12,035)           84,984





     
                Investing activities



     Capital expenditures                                                                                               (87,690)         (39,147)



     Minimum royalty payments                                                                                               (62)             (63)



     Proceeds from disposals and divestitures                                                                                233               608



     Purchases of short term investments                                                                                (17,196)         (27,902)



     Proceeds from sales of short term investments                                                                        23,221            26,500



     Investments in and advances to affiliates, net                                                                        (739)          (2,196)



     Gain on property insurance recovery related to Mountain Laurel longwall                                               7,353

                                                                                                                                               ---


     Cash used in investing activities                                                                                  (74,880)         (42,200)





     
                Financing activities



     Payments on term loan due 2024                                                                                        (750)            (750)



     Proceeds from equipment financing                                                                                    53,611



     Net payments on other debt                                                                                          (5,544)          (4,633)



     Debt financing costs                                                                                                  (422)



     Dividends paid                                                                                                      (7,645)          (7,839)



     Purchases of treasury stock                                                                                               -         (75,749)



     Payments for taxes related to net share settlement of equity awards                                                   (198)

                                                                                                                                               ---


     Cash provided by (used in) financing activities                                                                      39,052          (88,971)

                                                                                                                                               ---




     Decrease in cash and cash equivalents                                                                              (47,863)         (46,187)



     Cash and cash equivalents, beginning of period                                                                      153,020           264,937

                                                                                                                                               ---




     Cash and cash equivalents, end of period                                                                           $105,157          $218,750

                                                                                                                                               ===




     
                Cash and cash equivalents, including restricted cash, end of period



     Cash and cash equivalents                                                                                          $105,157          $218,750



     Restricted cash                                                                                                           -

                                                                                                                                               ---



                                                                                                                         $105,157          $218,750

                                                                                                                                               ===

                                                     
         
         Arch Coal, Inc. and Subsidiaries


                                                       
         
         Schedule of Consolidated Debt


                                                         
         
              (In thousands)




                                                                                                           March 31, 
     
     December 31,


                                                                                                                2020              2019



                                                                                                  
     (Unaudited)





     Term loan due 2024 ($291.0 million face value)                                                        $290,126          $290,825



     Other                                                                                                   73,104            25,007



     Debt issuance costs                                                                                    (4,738)          (5,013)



                                                                                                             358,492           310,819



     Less: current maturities of debt                                                                        28,456            20,753



     Long-term debt                                                                                        $330,036          $290,066






     Calculation of net debt



     Total debt (excluding debt issuance costs)                                                            $363,230          $315,832



     Less liquid assets:



     Cash and cash equivalents                                                                              105,157           153,020



     Short term investments                                                                                 129,057           135,667



                                                                                                             234,214           288,687



     Net debt                                                                                              $129,016           $27,145


                                                                             
           
           Arch Coal, Inc. and Subsidiaries


                                                                                  
        
              Operational Performance


                                                                            
           
           (In millions, except per ton data)






                                                               Three Months Ended                   Three Months Ended                     Three Months Ended
                                                     March 31, 2020                      December 31, 2019                       March 31, 2019



                                                   
            (Unaudited)                                                        
            (Unaudited)                    
     (Unaudited)



     Powder River Basin



     Tons Sold                                                              14.2                                                                         18.1                        17.1





     Segment Sales                                                        $174.5                                $12.32                                  $218.3 $12.07                $208.7  $12.18



     Segment Cash Cost of Sales                                            176.4                                 12.45                                   193.6  10.70                 188.3   10.98




     Segment Cash Margin                                                   (1.8)                               (0.13)                                   24.7   1.37                  20.4    1.20





     Metallurgical



     Tons Sold                                                               1.8                                                                          2.0                         1.8





     Segment Sales                                                        $146.5                                $82.35                                  $181.0 $90.51                $212.0 $118.22



     Segment Cash Cost of Sales                                            103.9                                 58.42                                   140.0  70.02                 120.6   67.27




     Segment Cash Margin                                                    42.6                                 23.93                                    41.0  20.49                  91.4   50.95





     Other Thermal



     Tons Sold                                                               0.7                                                                          2.1                         1.7





     Segment Sales                                                         $25.5                                $34.32                                   $75.4 $35.41                 $65.1  $38.58



     Segment Cash Cost of Sales                                             27.2                                 36.61                                    67.7  31.81                  59.5   35.28




     Segment Cash Margin                                                   (1.7)                               (2.29)                                    7.7   3.60                   5.6    3.30





     Total Segment Cash Margin                                             $39.0                                                                        $73.4                      $117.4




      Selling, general and administrative expenses                         (22.7)                                                                      (21.9)                     (24.1)



     Other                                                                 (3.4)                                                                       (7.8)                       14.0






     Adjusted EBITDA                                                       $12.9                                                                        $43.7                      $107.3


                                                                                                    
              
                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 March 31, 2020      
              
                Powder River    
              
                Metallurgical     
              
                Other Thermal     
              
                Idle and Other     
     
     Consolidated
                                                                                   Basin

                                                                                                                                                                                                                                                         ---


     (In thousands)


      GAAP Revenues in the
       consolidated income
       statements                                                                                $178,460                                 $182,654                                     $31,736                                     $12,382              $405,232


      Less:  Adjustments to reconcile to Non-GAAP Segment coal sales
       revenue


      Coal risk management
       derivative settlements
       classified in "other income"                                                                     -                                   (261)                                    (1,328)                                                         (1,589)


      Coal sales revenues from
       idled or otherwise disposed
       operations not included in
       segments                                                                                         -                                                                                                                        12,349                12,349


      Transportation costs                                                                          3,918                                   36,388                                       7,555                                          33                47,894


      Non-GAAP Segment coal sales
       revenues                                                                                  $174,542                                 $146,527                                     $25,509            
              $                   -             $346,578

                                                                                                                                                                                                                                                         ---


     Tons sold                                                                                    14,172                                    1,779                                         743


      Coal sales per ton sold                                                                      $12.32                                   $82.35                                      $34.32






                                  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 March 31, 2019      
              
                Powder River    
              
                Metallurgical     
              
                Other Thermal     
              
                Idle and Other     
     
     Consolidated
                                                                                   Basin

                                                                                                                                                                                                                                                         ---


     (In thousands)


      GAAP Revenues in the
       consolidated income
       statements                                                                                $212,729                                 $253,262                                     $85,978                                      $3,214              $555,183


      Less:  Adjustments to reconcile to Non-GAAP Segment coal sales
       revenue


      Coal risk management
       derivative settlements
       classified in "other income"                                                                     -                                                                              2,044                                                            2,044


      Coal sales revenues from
       idled or otherwise disposed
       operations not included in
       segments                                                                                         -                                                                                                                         3,214                 3,214


      Transportation costs                                                                          4,006                                   41,298                                      18,882                                                           64,186


      Non-GAAP Segment coal sales
       revenues                                                                                  $208,723                                 $211,964                                     $65,052            
              $                   -             $485,739

                                                                                                                                                                                                                                                         ---


     Tons sold                                                                                    17,141                                    1,793                                       1,686


      Coal sales per ton sold                                                                      $12.18                                  $118.22                                      $38.58

                                                                                                
              
                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 March
                                   31, 2020                
              
                Powder River    
              
                Metallurgical     
              
                Other Thermal     
              
                Idle and Other     
     
     Consolidated
                                                                          Basin

                                                                                                                                                                                                                                                ---


     (In thousands)


      GAAP Cost of sales in
       the consolidated
       income statements                                                                $179,617                                 $140,331                                     $34,770                                     $20,281              $374,999


      Less:  Adjustments to reconcile to Non-GAAP Segment cash
       cost of coal sales


      Diesel fuel risk
       management
       derivative
       settlements
       classified in "other
       income"                                                                             (686)                                                                                                                                              (686)


      Transportation costs                                                                 3,918                                   36,388                                       7,555                                          33                47,894


      Cost of coal sales
       from idled or
       otherwise disposed
       operations not
       included in segments                                                                    -                                                                                                                        17,885                17,885


      Other (operating
       overhead, certain
       actuarial, etc.)                                                                        -                                                                                                                         2,363                 2,363


      Non-GAAP Segment
       cash cost of coal
       sales                                                                            $176,385                                 $103,943                                     $27,215            
              $                   -             $307,543

                                                                                                                                                                                                                                                ===


     Tons sold                                                                           14,172                                    1,779                                         743


      Cash cost per ton
       sold                                                                               $12.45                                   $58.42                                      $36.61






                                  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 March
                                   31, 2019                
              
                Powder River    
              
                Metallurgical     
              
                Other Thermal     
              
                Idle and Other     
     
     Consolidated
                                                                          Basin

                                                                                                                                                                                                                                                ---


     (In thousands)


      GAAP Cost of sales in
       the consolidated
       income statements                                                                $191,648                                 $161,911                                     $78,366                                      $6,546              $438,471


      Less:  Adjustments to reconcile to Non-GAAP Segment cash
       cost of coal sales


      Diesel fuel risk
       management
       derivative
       settlements
       classified in "other
       income"                                                                             (638)                                                                                                                                              (638)


      Transportation costs                                                                 4,006                                   41,298                                      18,882                                                           64,186


      Cost of coal sales
       from idled or
       otherwise disposed
       operations not
       included in segments                                                                    -                                                                                                                         4,239                 4,239


      Other (operating
       overhead, certain
       actuarial, etc.)                                                                        -                                                                                                                         2,307                 2,307


      Non-GAAP Segment
       cash cost of coal
       sales                                                                            $188,280                                 $120,613                                     $59,484            
              $                   -             $368,377

                                                                                                                                                                                                                                                ===


     Tons sold                                                                           17,141                                    1,793                                       1,686


      Cash cost per ton
       sold                                                                               $10.98                                   $67.27                                      $35.28

                                                       
              
                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 March 31,



                                                                                                                                                                      2020               2019

                                                                                                                                                                                         ---

                                                                                                                                                                
              (Unaudited)



     Net income (loss)                                                                                                                                          $(25,299)           $72,741



     Provision for (benefit from) income taxes                                                                                                                    (1,791)                70



     Interest expense, net                                                                                                                                          2,129              2,289



     Depreciation, depletion and amortization                                                                                                                      31,308             25,273



     Accretion on asset retirement obligations                                                                                                                      5,006              5,137



     Amortization of sales contracts, net                                                                                                                               -                65



     Costs related to proposed joint venture with Peabody Energy                                                                                                    3,664



     Severance costs related to voluntary separation plan                                                                                                           5,828



     Gain on property insurance recovery related to Mountain Laurel longwall                                                                                      (9,000)



     Non-service related pension and postretirement benefit costs                                                                                                   1,096              1,766



     Reorganization items, net                                                                                                                                       (26)              (87)

                                                                                                                                                                                         ---




     Adjusted EBITDA                                                                                                                                              $12,915           $107,254



     EBITDA from idled or otherwise disposed operations                                                                                                             5,099              (906)



     Selling, general and administrative expenses                                                                                                                  22,745             24,089



     Other                                                                                                                                                             59           (12,201)

                                                                                                                                                                                         ---




     Segment Adjusted EBITDA from coal operations                                                                                                                 $40,818           $118,236

                                                                                                                                                                                         ===




     Segment Adjusted EBITDA



     Powder River Basin                                                                                                                                            $(582)           $20,583



     Metallurgical                                                                                                                                                 42,720             91,534



     Other Thermal                                                                                                                                                (1,320)             6,119

                                                                                                                                                                                         ---




     Total Segment Adjusted EBITDA                                                                                                                                $40,818           $118,236

                                                                                                                                                                                         ===

View original content to download multimedia:http://www.prnewswire.com/news-releases/arch-coal-inc-reports-first-quarter-2020-results-301045706.html

SOURCE Arch Coal, Inc.