Document and Entity Information
Document and Entity Information (USD $) | |||
In Billions, except Share data | 3 Months Ended
Mar. 31, 2010 | May. 05, 2010
| Jun. 30, 2009
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | ARCH COAL INC | ||
Entity Central Index Key | 0001037676 | ||
Document Type | 10-Q | ||
Document Period End Date | 2010-03-31 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2,010 | ||
Document Fiscal Period Focus | Q1 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | 2.2 | ||
Entity Common Stock, Shares Outstanding | 162,475,801 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
REVENUES | ||
Coal sales | $711,874 | $681,040 |
COSTS, EXPENSES AND OTHER | ||
Cost of coal sales | 550,750 | 547,126 |
Depreciation, depletion and amortization | 88,519 | 73,269 |
Amortization of acquired sales contracts, net | 10,753 | (228) |
Selling, general and administrative expenses | 27,166 | 25,114 |
Change in fair value of coal derivatives and coal trading activities, net | 5,877 | (528) |
Costs related to acquisition of Jacobs Ranch | 3,350 | |
Other operating income, net | (3,391) | (5,635) |
Total operating expenses | 679,674 | 642,468 |
Income from operations | 32,200 | 38,572 |
Interest expense, net: | ||
Interest expense | (35,083) | (20,018) |
Interest income | 338 | 6,468 |
Interest expense, net | (34,745) | (13,550) |
Income (loss) before income taxes | (2,545) | 25,022 |
Benefit from income taxes | (775) | (5,550) |
Net income (loss) | (1,770) | 30,572 |
Less: Net (income) loss attributable to noncontrolling interest | (26) | 7 |
Net income (loss) attributable to Arch Coal, Inc. | ($1,796) | $30,579 |
EARNINGS (LOSS) PER COMMON SHARE | ||
Basic earnings (loss) per common share | -0.01 | 0.21 |
Diluted earnings (loss) per common share | -0.01 | 0.21 |
Basic weighted average shares outstanding | 162,372 | 142,789 |
Diluted weighted average shares outstanding | 162,372 | 142,848 |
Dividends declared per common share | 0.09 | 0.09 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (USD $) | ||
In Thousands | Mar. 31, 2010
| Dec. 31, 2009
|
Current assets: | ||
Cash and cash equivalents | $50,374 | $61,138 |
Trade accounts receivable | 238,770 | 190,738 |
Other receivables | 31,178 | 40,632 |
Inventories | 243,158 | 240,776 |
Prepaid royalties | 42,090 | 21,085 |
Deferred income taxes | 3,265 | 0 |
Coal derivative assets | 14,801 | 18,807 |
Other | 106,776 | 113,606 |
Total current assets | 730,412 | 686,782 |
Property, plant and equipment, net | 3,306,175 | 3,366,186 |
Other assets: | ||
Prepaid royalties | 82,358 | 86,622 |
Goodwill | 113,701 | 113,701 |
Deferred income taxes | 344,040 | 354,869 |
Equity investments | 99,924 | 87,268 |
Other | 136,676 | 145,168 |
Total other assets | 776,699 | 787,628 |
Total assets | 4,813,286 | 4,840,596 |
Current liabilities: | ||
Accounts payable | 149,243 | 128,402 |
Coal derivative liabilities | 2,820 | 2,244 |
Deferred income taxes | 0 | 5,901 |
Accrued expenses and other current liabilities | 196,177 | 227,716 |
Current maturities of debt and short-term borrowings | 243,398 | 267,464 |
Total current liabilities | 591,638 | 631,727 |
Long-term debt | 1,540,289 | 1,540,223 |
Asset retirement obligations | 311,130 | 305,094 |
Accrued pension benefits | 69,277 | 68,266 |
Accrued postretirement benefits other than pension | 45,095 | 43,865 |
Accrued workers' compensation | 27,990 | 29,110 |
Other noncurrent liabilities | 113,735 | 98,243 |
Total liabilities | 2,699,154 | 2,716,528 |
Redeemable noncontrolling interest | 8,990 | 8,962 |
Stockholders' equity: | ||
Common stock, $0.01 par value, authorized 260,000 shares, issued 163,960 and 163,953 shares, respectively | 1,643 | 1,643 |
Paid-in capital | 1,724,999 | 1,721,230 |
Treasury stock, 1,512 shares at March 31, 2010 and December 31, 2009, at cost | (53,848) | (53,848) |
Retained earnings | 449,515 | 465,934 |
Accumulated other comprehensive loss | (17,167) | (19,853) |
Total stockholders' equity | 2,105,142 | 2,115,106 |
Total liabilities and stockholders' equity | $4,813,286 | $4,840,596 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) | ||
Share data in Thousands | Mar. 31, 2010
| Dec. 31, 2009
|
Stockholders' equity: | ||
Common stock, par value | 0.01 | 0.01 |
Common stock, shares authorized | 260,000 | 260,000 |
Common stock, shares issued | 163,960 | 163,953 |
Treasury stock, shares | 1,512 | 1,512 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
OPERATING ACTIVITIES | ||
Net income (loss) | ($1,770) | $30,572 |
Adjustments to reconcile net income to cash provided by operating activities: | ||
Depreciation, depletion and amortization | 88,519 | 73,269 |
Amortization of acquired sales contracts, net | 10,753 | (228) |
Prepaid royalties expensed | 6,599 | 9,461 |
Loss (gain) on dispositions of property, plant and equipment | 17 | (54) |
Employee stock-based compensation | 3,684 | 3,520 |
Changes in: | ||
Receivables | (37,013) | (9,005) |
Inventories | (2,382) | (14,202) |
Coal derivative assets and liabilities | 5,547 | 11,298 |
Accounts payable, accrued expenses and other current liabilities | (6,844) | (37,891) |
Deferred income taxes | 150 | (14,440) |
Other | 26,071 | 4,827 |
Cash provided by operating activities | 93,331 | 57,127 |
INVESTING ACTIVITIES | ||
Capital expenditures | (31,975) | (191,886) |
Proceeds from dispositions of property, plant and equipment | 95 | 214 |
Purchases of investments and advances to affiliates | (10,071) | (5,881) |
Additions to prepaid royalties | (23,340) | (20,315) |
Reimbursement of deposit on equipment | 3,209 | |
Cash used in investing activities | (65,291) | (214,659) |
FINANCING ACTIVITIES | ||
Net increase (decrease) in borrowings under lines of credit and commercial paper program | (19,324) | 137,265 |
Net payments on other debt | (4,742) | (5,363) |
Debt financing costs | (200) | (4,449) |
Dividends paid | (14,623) | (12,862) |
Issuance of common stock under incentive plans | 85 | 58 |
Cash provided by (used in) financing activities | (38,804) | 114,649 |
Decrease in cash and cash equivalents | (10,764) | (42,883) |
Cash and cash equivalents, beginning of period | 61,138 | 70,649 |
Cash and cash equivalents, end of period | $50,374 | $27,766 |
Basis of Accounting
Basis of Accounting | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Accounting [Abstract] | |
Basis of Accounting | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Coal, Inc. and its subsidiaries and controlled entities (the Company). The Companys primary business is the production of steam and metallurgical coal from surface and underground mines located throughout the United States, for sale to utility, industrial and export markets. The Companys mines are located in southern West Virginia, eastern Kentucky, Virginia, Wyoming, Colorado and Utah. All subsidiaries (except as noted below) are wholly-owned. Intercompany transactions and accounts have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three month period ended March31, 2010 are not necessarily indicative of results to be expected for the year ending December31, 2010. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December31, 2009 included in the Companys Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission. The Company owns a 99% membership interest in a joint venture named Arch Western Resources, LLC (Arch Western) which operates coal mines in Wyoming, Colorado and Utah. The Company also acts as the managing member of Arch Western. |
Accounting Policies
Accounting Policies | |
3 Months Ended
Mar. 31, 2010 | |
Accounting Policies [Abstract] | |
Accounting Policies | 2. Accounting Policies There are no new accounting pronouncements whose adoption is expected to have a material impact on the Companys consolidated financial statements. |
Property Transactions
Property Transactions | |
3 Months Ended
Mar. 31, 2010 | |
Property Transactions [Abstract] | |
Property Transactions | 3. Property Transactions On March18, 2010, the Company was awarded a Montana state coal lease for the Otter Creek tracts for a price of $85.8million. Arch now controls approximately 1.5billion tons of coal reserves in Montanas Otter Creek area, including a coal lease secured in November2009. The Company believes these Northern PRB reserves will help the Company competitively serve U.S. power producers, supply additional coal for export to Asian markets or potentially house the site of a future coal-conversion facility. The Company has entered into other non-cancelable royalty lease agreements and federal lease bonus payments under which future minimum payments are due. These payments under such agreements are capitalized as a cost of the underlying mineral reserves. Annual payments under these arrangements, including the payment under the new Otter Creek lease due in April2010, will be $109.2million in 2010 and $23.4million in 2011, 2012, 2013 and 2014. |
Healthcare Reform Legislation
Healthcare Reform Legislation | |
3 Months Ended
Mar. 31, 2010 | |
Healthcare Reform Legislation [Abstract] | |
Healthcare Reform Legislation | 4. Healthcare Reform Legislation On March23,2010, the Patient Protection and Affordable Care Act (PPACA)and a companion bill, the Health Care and Education Reconciliation Act of 2010, (collectively, the Acts) were signed into law which requires a minimum level of health care coverage for individuals and requires that employers provide a minimum level of coverage for full-time employees or pay penalties. Some of the plan coverage requirements that will have an impact on the Companys costs include bans on exclusions for pre-existing conditions, extension of dependent coverage through age 26, mandatory coverage of preventative services and the elimination of lifetime dollar limits for covered individuals. The Acts also provide for an excise tax of 40% on high-cost health care plans. The Acts also addressed workers compensation programs for pneumoconiosis (occupational disease), extending the period of time during which miners can file claims and providing benefit payments to surviving spouses. Certain coverage provisions do not go into effect until 2014, and the excise tax will begin in 2018, but there are a number of dependent coverage and insurance market reforms that will take effect immediately. Full implementation of the Acts will run through 2020. The Company is currently evaluating the Acts to determine whether there are changes that will be required to be made to its employee benefit plans. The Company expects that federal agencies will continue to develop guidance for complying with Acts. We dont believe that the coverage standards will have a significant impact on future healthcare benefits that the Company provides for eligible active and retired employees or on projected occupational disease benefits, however, until further implementation guidance is provided, it is not reasonably possible to estimate the full extent of the Acts. |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | 5. Fair Value Measurements The hierarchy of fair value measurements prioritizes the inputs to valuation techniques used to measure fair value. The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale equity securities and coal futures that are submitted for clearing on the New York Mercantile Exchange. Level 2 is defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Companys level 2 assets and liabilities include commodity contracts (coal and heating oil) with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. These include the Companys commodity option contracts (primarily coal and heating oil) valued using modeling techniques, such as Black-Scholes, that require the use of inputs, particularly volatility, that are not observable. The table below sets forth, by level, the Companys financial assets and liabilities that are accounted for at fair value: Fair Value at March 31, 2010 Total Level 1 Level 2 Level 3 (In thousands) Assets: Investments in equity securities $ 3,404 $ 3,355 $ $ 49 Derivatives 30,952 21,325 9,627 Total assets $ 34,356 $ 3,355 $ 21,325 $ 9,676 Liabilities: Derivatives $ 2,820 $ 2,300 $ 538 $ (18 ) The Companys contracts with certain of its counterparties allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. For classification purposes, the Company records the net fair value of all the positions with these counterparties as a net asset or liability. Each level in the table above displays the underlying contracts according to their classification in the accompanying condensed consolidated balance sheet, based on this counterparty netting. The following table summarizes the change in the fair values of financial instruments categorized as level 3. Three Months Ended March 31, 2010 (In thousands) Beginning balance $ 8,217 Realized and unrealized losses recognized in earnings (2,212 ) Realized and unrealized losses recognized in other comprehensive income |
Derivatives
Derivatives | |
3 Months Ended
Mar. 31, 2010 | |
Derivatives [Abstract] | |
Derivatives | 6. Derivatives The Company generally utilizes derivative financial instruments to manage exposures to commodity prices. Additionally, the Company may hold certain coal derivative financial instruments for trading purposes. All derivative financial instruments are recognized in the balance sheet at fair value. In a fair value hedge, the Company hedges the risk of changes in the fair value of a firm commitment, typically a fixed-price coal sales contract. Changes in both the hedged firm commitment and the fair value of a derivative used as a hedge instrument in a fair value hedge are recorded in earnings. In a cash flow hedge, the Company hedges the risk of changes in future cash flows related to a forecasted purchase or sale. Changes in the fair value of the derivative instrument used as a hedge instrument in a cash flow hedge are recorded in other comprehensive income. Amounts in other comprehensive income are reclassified to earnings when the hedged transaction affects earnings and are classified in a manner consistent with the transaction being hedged. The Company formally documents the relationships between hedging instruments and the respective hedged items, as well as its risk management objectives for hedge transactions. The Company evaluates the effectiveness of its hedging relationships both at the hedges inception and on an ongoing basis. Any ineffective portion of the change in fair value of a derivative instrument used as a hedge instrument in a fair value or cash flow hedge is recognized immediately in earnings. The ineffective portion is based on the extent to which exact offset is not achieved between the change in fair value of the hedge instrument and the cumulative change in expected future cash flows on the hedged transaction from inception of the hedge in a cash flow hedge or the change in the fair value of the firm commitment in a fair value hedge. Diesel fuel price risk management The Company is exposed to price risk with respect to diesel fuel purchased for use in its operations. The Company purchases approximately 50 to 60million gallons of diesel fuel annually in its operations. To reduce the volatility in the price of diesel fuel for its operations, the Company uses forward physical diesel purchase contracts, as well as heating oil swaps and purchased call options. At March31, 2010, the Company had protected the price of approximately 64% of its expected purchases for fiscal year 2010 and 30% for fiscal year 2011. Since the changes in the price of heating oil highly correlate to changes in the price of the hedged diesel fuel purchases, the heating oil swaps and purchased call options qualify for cash flow hedge accounting. The Company held heating oil swaps and purchased call options for approximately 41.0million gallons as of March31, 2010. Coal risk management positions The Company may sell or purchase forward contracts and options in the over-the-counter coal market in order to manage its exposure to coal prices. The Company has exposure to the risk of fluctuating coal prices related to forecasted sales or purchases of coal or to the risk of changes in the fair value of a fixed price physi |
Inventories
Inventories | |
3 Months Ended
Mar. 31, 2010 | |
Inventories [Abstract] | |
Inventories | 7. Inventories Inventories consist of the following: March 31, December 31, 2010 2009 (In thousands) Coal $ 109,768 $ 99,161 Repair parts and supplies, net of allowance 133,390 141,615 $ 243,158 $ 240,776 The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $13.8million at March31, 2010, and $13.4million at December31, 2009. |
Debt
Debt | |
3 Months Ended
Mar. 31, 2010 | |
Debt [Abstract] | |
Debt | 8. Debt March 31, December 31, 2010 2009 (In thousands) Commercial paper $ 53,229 $ 49,453 Indebtedness to banks under credit facilities 180,900 204,000 6.75% senior notes ($950.0million face value) due July1, 2013 954,440 954,782 8.75% senior notes ($600.0million face value) due August1, 2016 585,848 585,441 Other 9,270 14,011 1,783,687 1,807,687 Less current maturities of debt and short-term borrowings 243,398 267,464 Long-term debt $ 1,540,289 $ 1,540,223 The current maturities of debt and short-term borrowings includes amounts borrowed that are supported by credit facilities that have a term of less than one year and amounts borrowed under credit facilities with terms longer than one year that the Company does not intend to refinance on a long-term basis, based on cash projections and managements plans. Amendments to agreements On February24, 2010, the Company entered into an amendment to its accounts receivable securitization program revising certain terms to expand the pool of receivables included in the program. The credit facility supporting the borrowings under the program was also renewed and now expires on February23, 2011. The size of the program continues to allow for aggregate borrowings and letters of credit of up to $175.0million, as limited by eligible accounts receivable. On March19, 2010 the Company entered into an amendment to our $860.0million secured revolving credit facility. The amendment enables Arch Coal to make certain intercompany loans to its subsidiary, Arch Western Resources LLC (AWR), without repaying the existing loan from AWR to Arch Coal. On March25, 2010, the Company entered into an amendment to its commercial paper program which decreased the maximum aggregate principal amount of the program to $75million from $100million. The commercial paper program is supported by a line of credit that has been renewed and expires on April30, 2011. Availability As of March31, 2010 and December31, 2009, the Company had $90.0million and $120.0million of borrowings outstanding under the revolving credit facility, respectively. At March31, 2010, the Company had availability of approximately $728.0million under the revolving credit facility. The Company had borrowings under the accounts receivable securitization program of $90.9million at March31, 2010 and $84.0million at December31, 2009. The Company also had letters of credit outstanding under the securitization program of $64.0million as of March31, 2010. At March31, 2010, the Company had availability of $8.0million under the accounts receivable securitization program. |
Stock-Based Compensation
Stock-Based Compensation | |
3 Months Ended
Mar. 31, 2010 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | 9. Stock-Based Compensation During the three months ended March31, 2010, the Company granted options to purchase approximately 0.8million shares of common stock with a weighted average exercise price of $22.65 per share and a weighted average grant-date fair value of $9.42 per share. The options fair value was determined using the Black-Scholes option pricing model, using a weighted average risk-free rate of 2.18%, a weighted average dividend yield of 2.00% and a weighted average volatility of 57.10%. The options expected life is 4.43years and the options vest ratably over four years. The options provide for the continuation of vesting for retirement-eligible recipients that meet certain criteria. The expense for these options will be recognized through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn part or all of the award. The Company recognized stock-based compensation expense from all plans of $3.7million and $3.5million for the three months ended March31, 2010 and 2009, respectively. This expense is primarily included in selling, general and administrative expenses in the accompanying condensed consolidated statements of income. |
Workers Compensation Expense
Workers Compensation Expense | |
3 Months Ended
Mar. 31, 2010 | |
Workers' Compensation Expense [Abstract] | |
Workers' Compensation Expense | 10. Workers Compensation Expense The following table details the components of workers compensation expense: Three Months Ended March 31 2010 2009 (In thousands) Self-insured occupational disease benefits: Service cost $ 155 $ 120 Interest cost 144 112 Net amortization (548 ) (971 ) Total occupational disease (249 ) (739 ) Traumatic injury claims and assessments 1,676 1,505 Total workers compensation expense $ 1,427 $ 766 |
Employee Benefit Plans
Employee Benefit Plans | |
3 Months Ended
Mar. 31, 2010 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | 11. Employee Benefit Plans The following table details the components of pension benefit costs: Three Months Ended March 31 2010 2009 (In thousands) Service cost $ 3,873 $ 3,229 Interest cost 4,121 3,659 Expected return on plan assets (4,166 ) (4,483 ) Amortization of prior service cost (credit) 43 (53 ) Amortization of other actuarial losses 2,405 803 Net benefit cost $ 6,276 $ 3,155 The following table details the components of other postretirement benefit costs: Three Months Ended March 31 2010 2009 (In thousands) Service cost $ 446 $ 734 Interest cost 648 929 Amortization of prior service cost (credit) (503 ) 864 Amortization of other actuarial gains (470 ) (911 ) Net benefit cost $ 121 $ 1,616 |
Comprehensive Income
Comprehensive Income | |
3 Months Ended
Mar. 31, 2010 | |
Comprehensive Income [Abstract] | |
Comprehensive Income | 12. Comprehensive Income Comprehensive income consists of net income and other comprehensive income. Other comprehensive income items are transactions recorded in stockholders equity during the year, excluding net income and transactions with stockholders. The following table presents the components of comprehensive income: Three Months Ended March 31 2010 2009 (In thousands) Net income (loss)attributable to Arch Coal, Inc. $ (1,796 ) $ 30,579 Other comprehensive income, net of income taxes: Pension, postretirement and other post-employment benefits, reclassifications into net income 592 (171 ) Unrealized gains on available-for-sale securities 9 (38 ) Unrealized gains and losses on derivatives, net of reclassifications into net income: Unrealized gains (losses)on derivatives 362 (5,432 ) Reclassifications of losses into net income 1,723 9,728 Total comprehensive income $ 890 $ 34,666 |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings per Share [Abstract] | |
Earnings per Share | 13. Earnings per Share The following table provides the basis for earnings per share calculations by presenting the income available to common stockholders of the Company and by reconciling basic and diluted weighted average shares outstanding: Three Months Ended March 31 2010 2009 (In thousands) Income (loss)for basic earnings per share calculation: Income (loss)allocated to common stockholders $ (1,794 ) $ 30,546 Weighted average shares outstanding: Basic weighted average shares outstanding 162,372 142,789 Effect of common stock equivalents under incentive plans 59 Diluted weighted average shares outstanding 162,372 142,848 The effect of options to purchase 2.4million and 1.7million shares of common stock were excluded from the calculation of diluted weighted average shares outstanding for the three months ended March31, 2010 and 2009, respectively, because the exercise price of these options exceeded the average market price of the Companys common stock for these periods. The additional dilutive effect of options, restricted stock and restricted stock units totaling 0.7million shares of common stock were excluded from the calculation of diluted weighted average shares outstanding for the three months ended March31, 2010 because of the net loss for the quarter. |
Guarantees
Guarantees | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees [Abstract] | |
Guarantees | 14. Guarantees The Company has agreed to continue to provide surety bonds and letters of credit for the reclamation and retiree healthcare obligations of Magnum Coal Company (Magnum) related to the properties the Company sold to Magnum on December31, 2005. The purchase agreement requires Magnum to reimburse the Company for costs related to the surety bonds and letters of credit and to use commercially reasonable efforts to replace the obligations. If the surety bonds and letters of credit related to the reclamation obligations are not replaced by Magnum within a specified period of time, Magnum must post a letter of credit in favor of the Company in the amounts of the reclamation obligations. At March31, 2010, the Company had approximately $91.6million of surety bonds related to properties sold to Magnum. As a result of Magnums purchase by Patriot Coal Corporation, Magnum will be required to post letters of credit in the Companys favor for the full amount of the reclamation obligation on or before February2011. Magnum also acquired certain coal supply contracts with customers who have not consented to the contracts assignment from the Company to Magnum. The Company has committed to purchase coal from Magnum to sell to those customers at the same price it is charging the customers for the sale. In addition, certain contracts were assigned to Magnum, but the Company has guaranteed Magnums performance under the contracts. The longest of the coal supply contracts extends to the year 2017. If Magnum is unable to supply the coal for these coal sales contracts then the Company would be required to purchase coal on the open market or supply contracts from its existing operations. At market prices effective at March31, 2010, the cost of purchasing 12.7million tons of coal to supply the contracts that have not been assigned over their duration would exceed the sales price under the contracts by approximately $330.7million, and the cost of purchasing 2.4million tons of coal to supply the assigned and guaranteed contracts over their duration would exceed the sales price under the contracts by approximately $49.1million. The Company has also guaranteed Magnums performance under certain operating leases, the longest of which extends through 2011. If the Company were required to perform under its guarantees of the operating lease agreements, it would be required to make $2.1million of lease payments. As the Company does not believe that it is probable that it would have to purchase replacement coal or fulfill its obligations under the lease guarantees, no losses have been recorded in the condensed consolidated financial statements as of March31, 2010. However, if the Company would have to perform under these guarantees, it could potentially have a material adverse effect on the business, results of operations and financial condition of the Company. In connection with the Companys acquisition of the coal operations of Atlantic Richfield Company (ARCO)and the simultaneous combination of the acquired ARCO operations and the Companys Wyoming operations into the Arch Western joint venture, the Company agreed to indemnify the other member of Arch We |
Contingencies
Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Contingencies [Abstract] | |
Contingencies | 15. Contingencies The Company is a party to numerous claims and lawsuits with respect to various matters. The Company provides for costs related to contingencies when a loss is probable and the amount is reasonably estimable. After conferring with counsel, it is the opinion of management that the ultimate resolution of pending claims will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company. |
Segment Information
Segment Information | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information [Abstract] | |
Segment Information | 16. Segment Information The Company has three reportable business segments, which are based on the major low-sulfur coal basins in which the Company operates. Each of these reportable business segments includes a number of mine complexes. The Company manages its coal sales by coal basin, not by individual mine complex. Geology, coal transportation routes to customers, regulatory environments and coal quality are generally consistent within a basin. Accordingly, market and contract pricing have developed by coal basin. Mine operations are evaluated based on their per-ton operating costs (defined as including all mining costs but excluding pass-through transportation expenses), as well as on other non-financial measures, such as safety and environmental performance. The Companys reportable segments are the Powder River Basin (PRB)segment, with operations in Wyoming; the Western Bituminous (WBIT)segment, with operations in Utah, Colorado and southern Wyoming; and the Central Appalachia (CAPP)segment, with operations in southern West Virginia, eastern Kentucky and Virginia. Operating segment results for the three months ended March31, 2010 and 2009 are presented below. Results for the operating segments include all direct costs of mining, including all depreciation, depletion and amortization related to the mining operations, even if the assets are not recorded at the operating segment level. See discussion of segment assets below. Corporate, Other and Eliminations includes the change in fair value of coal derivatives and coal trading activities, net; corporate overhead; land management; other support functions; and the elimination of intercompany transactions. The asset amounts below represent an allocation of assets used in the segments cash-generating activities. The amounts in Corporate, Other and Eliminations represent primarily corporate assets (cash, receivables, investments, plant, property and equipment) as well as goodwill, unassigned coal reserves, above-market acquired sales contracts and other unassigned assets. Corporate, Other and PRB WBIT CAPP Eliminations Consolidated (In thousands) Three months ended March31, 2010 Coal sales $ 359,415 $ 132,713 $ 219,746 $ $ 711,874 Income (loss)from operations 16,561 12,430 37,593 (34,384 ) 32,200 Total assets 2,358,957 683,124 740,401 1,030,804 4,813,286 Depreciation, depletion and amortization 44,621 20,370 23,174 354 88,519 Amortization of acquired sales contracts, net 10,753 10,753 Capital expenditures 725 13,101 11,637 6,512 31,975 Three months ended March31, 2009 Coal sales $ 311,242 $ 122,557 $ 247,241 $ $ 681,040 Income (loss)from operations 31,214 (7,655 ) 43,551 (28,538 ) 38,572 Total assets 1,679,614 688,254 797,215 |
Supplemental Condensed Consolid
Supplemental Condensed Consolidating Financial Information | |
3 Months Ended
Mar. 31, 2010 | |
Supplemental Condensed Consolidating Financial Information [Abstract] | |
Supplemental Condensed Consolidating Financial Information | 17. Supplemental Condensed Consolidating Financial Information Pursuant to the indenture governing the 8.75% senior notes, certain wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes on a joint and several basis. The following tables present unaudited condensed consolidating financial information for (i)the issuer of the notes (Arch Coal), (ii)the guarantors under the notes, and (iii)the entities which are not guarantors under the notes: CONDENSED CONSOLIDATING STATEMENT OF INCOME Three Months Ended March31, 2010 (in thousands) Guarantor Non-Guarantor Parent/Issuer Subsidiaries Subsidiaries Eliminations Consolidated Revenue Coal Sales $ $ 239,027 $ 472,847 $ $ 711,874 Costs, expenses and other Cost of coal sales 2,829 168,718 397,509 (18,306 ) 550,750 Depreciation, depletion and amortization 752 43,717 44,050 88,519 Amortization of acquired sales contracts, net 10,753 10,753 Selling, general and administrative expenses 18,643 1,806 8,403 (1,686 ) 27,166 Change in fair value of coal derivatives 5,877 5,877 Other operating (income)expense, net (1,961 ) (22,722 ) 1,300 19,992 (3,391 ) 20,263 197,396 462,015 679,674 Income from investment in subsidiaries 47,267 (47,267 ) Income from operations 27,004 41,631 10,832 (47,267 ) 32,200 Interest expense, net: Interest expense (31,432 ) (579 ) (18,115 ) 15,043 (35,083 ) Interest income 1,883 89 13,409 (15,043 ) 338 (29,549 ) (490 ) (4,706 ) (34,745 ) Income (loss)before income taxes (2,545 ) 41,141 6,126 (47,267 ) (2,545 ) Benefit from income taxes (775 ) (775 ) Net income (loss) (1,770 ) 41,141 6,126 (47,267 ) (1,770 ) Less: Net income attributable to noncontrolling interest (26 ) (26 ) Net income (loss)attributable to Arch Coal $ (1,796 ) $ 41,141 $ 6,126 $ (47,267 ) $ (1,796 ) CONDENSED CONSOLIDATING STATEMENT OF INCOME Three Months Ended March31, 2009 (in thousands) Guarantor Non-Guarantor Parent/Issuer Subsidiaries Subsidiaries Eliminations Consolidated Revenue |