UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2008
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to .
Commission file number: 333-107569-03
Arch Western Resources, LLC
(Exact name of registrant as specified in its charter)
Delaware | 43-1811130 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
One CityPlace Drive, Suite 300, St. Louis, Missouri | 63141 | |
(Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including area code: (314) 994-2700
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filero | Accelerated filero | Non-accelerated filerþ | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ
At December 5, 2008, the registrant’s common equity consisted solely of undenominated membership interests, 99.5% of which were held by Arch Western Acquisition Corporation and 0.5% of which were held by a subsidiary of BP p.l.c.
Explanatory Note
This Amendment No. 1 to the Quarterly Report on Form 10-Q for the period ended September 30, 2008 is being filed to include the unaudited condensed consolidating financial information for Arch Western Resources, LLC and its issuer, guarantor and non-guarantor subsidiaries that was inadvertently omitted from Note 10 to the unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q filed by the registrant with the Securities and Exchange Commission on November 14, 2008 (the “Original Report”).
In addition, pursuant to the rules of the Securities and Exchange Commission, Item 6 of Part II to the Original Report has been updated to include currently dated certifications from our principal executive officer and principal financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
Except as described above, this Form 10-Q/A does not amend, update or change any other items or disclosures included in the Original Report.
PART I
FINANCIAL INFORMATION
FINANCIAL INFORMATION
Item 1. Financial Statements.
Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands)
Condensed Consolidated Statements of Income
(In thousands)
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(unaudited) | ||||||||||||||||
REVENUES | ||||||||||||||||
Coal sales | $ | 440,718 | $ | 405,055 | $ | 1,337,880 | $ | 1,161,610 | ||||||||
COSTS, EXPENSES AND OTHER | ||||||||||||||||
Cost of coal sales | 363,500 | 317,541 | 1,059,349 | 908,879 | ||||||||||||
Depreciation, depletion and amortization | 37,243 | 35,200 | 114,769 | 100,658 | ||||||||||||
Selling, general and administrative expenses allocated from Arch Coal, Inc. | 5,391 | 6,258 | 22,281 | 19,196 | ||||||||||||
Other operating income, net | (1,048 | ) | (808 | ) | (3,168 | ) | (8,794 | ) | ||||||||
405,086 | 358,191 | 1,193,231 | 1,019,939 | |||||||||||||
Income from operations | 35,632 | 46,864 | 144,649 | 141,671 | ||||||||||||
Interest income, net: | ||||||||||||||||
Interest expense | (15,237 | ) | (18,119 | ) | (48,819 | ) | (53,818 | ) | ||||||||
Interest income, primarily from Arch Coal, Inc. | 19,065 | 26,429 | 59,064 | 73,640 | ||||||||||||
3,828 | 8,310 | 10,245 | 19,822 | |||||||||||||
Non-operating expense | — | (607 | ) | — | (3,146 | ) | ||||||||||
Income before minority interest | 39,460 | 54,567 | 154,894 | 158,347 | ||||||||||||
Minority interest | (3,722 | ) | (4,460 | ) | (9,475 | ) | (14,024 | ) | ||||||||
Net income | $ | 35,738 | $ | 50,107 | $ | 145,419 | $ | 144,323 | ||||||||
Net income attributable to redeemable membership interest | $ | 179 | $ | 251 | $ | 727 | $ | 722 | ||||||||
Net income attributable to non-redeemable membership interest | $ | 35,559 | $ | 49,856 | $ | 144,692 | $ | 143,601 |
The accompanying notes are an integral part of the condensed consolidated financial statements.
1
Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
Condensed Consolidated Balance Sheets
(In thousands)
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 5,419 | $ | 248 | ||||
Receivables | 3,249 | 3,559 | ||||||
Inventories | 123,134 | 141,626 | ||||||
Other | 20,418 | 27,128 | ||||||
Total current assets | 152,220 | 172,561 | ||||||
Property, plant and equipment, net | 1,338,556 | 1,225,993 | ||||||
Other assets: | ||||||||
Receivable from Arch Coal, Inc. | 1,549,172 | 1,427,833 | ||||||
Other | 25,052 | 25,800 | ||||||
Total other assets | 1,574,224 | 1,453,633 | ||||||
Total assets | $ | 3,065,000 | $ | 2,852,187 | ||||
LIABILITIES AND MEMBERSHIP INTERESTS | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 103,130 | $ | 82,254 | ||||
Accrued expenses | 111,090 | 128,754 | ||||||
Commercial paper | 98,060 | 74,959 | ||||||
Total current liabilities | 312,280 | 285,967 | ||||||
Long-term debt | 956,490 | 957,514 | ||||||
Asset retirement obligations | 206,043 | 194,190 | ||||||
Accrued postretirement benefits other than pension | 39,032 | 36,805 | ||||||
Accrued workers’ compensation | 8,920 | 8,784 | ||||||
Other noncurrent liabilities | 49,369 | 30,725 | ||||||
Total liabilities | 1,572,134 | 1,513,985 | ||||||
Redeemable membership interest | 8,723 | 8,000 | ||||||
Minority interest | 192,493 | 183,018 | ||||||
Non-redeemable membership interest | 1,291,650 | 1,147,184 | ||||||
Total liabilities and membership interests | $ | 3,065,000 | $ | 2,852,187 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
Arch Western Resources, LLC and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
Condensed Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended September 30 | ||||||||
2008 | 2007 | |||||||
(unaudited) | ||||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 145,419 | $ | 144,323 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation, depletion and amortization | 114,769 | 100,658 | ||||||
Prepaid royalties expensed | 95 | 3,440 | ||||||
Net gain on dispositions of property, plant and equipment | (336 | ) | (5,923 | ) | ||||
Minority interest | 9,475 | 14,024 | ||||||
Other non-operating expense | — | 3,146 | ||||||
Changes in: | ||||||||
Receivables | 310 | 12,673 | ||||||
Inventories | 18,492 | (9,851 | ) | |||||
Accounts payable and accrued expenses | 3,236 | (35,176 | ) | |||||
Other | 29,587 | 36,556 | ||||||
Cash provided by operating activities | 321,047 | 263,870 | ||||||
INVESTING ACTIVITIES | ||||||||
Capital expenditures | (230,829 | ) | (99,830 | ) | ||||
Increase in receivable from Arch Coal, Inc. | (110,791 | ) | (238,297 | ) | ||||
Proceeds from dispositions of property, plant and equipment | 378 | 6,338 | ||||||
Additions to prepaid royalties | (200 | ) | (200 | ) | ||||
Reimbursement of deposits on equipment | 2,697 | 18,325 | ||||||
Cash used in investing activities | (338,745 | ) | (313,664 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from commercial paper | 23,102 | 49,992 | ||||||
Debt financing costs | (233 | ) | (139 | ) | ||||
Cash provided by financing activities | 22,869 | 49,853 | ||||||
Increase in cash and cash equivalents | 5,171 | 59 | ||||||
Cash and cash equivalents, beginning of period | 248 | 186 | ||||||
Cash and cash equivalents, end of period | $ | 5,419 | $ | 245 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
Arch Western Resources, LLC and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Western Resources, LLC and its subsidiaries and controlled entities (the “Company”). Arch Coal, Inc. (“Arch Coal”) has a 99.5% common membership interest in the Company, while BP p.l.c. has a 0.5% common membership interest and a 0.5% preferred membership interest in the Company. 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 and nine month periods ended September 30, 2008 are not necessarily indicative of results to be expected for the year ending December 31, 2008. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2007 included in Arch Western Resources, LLC’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission.
2. Accounting Policies
Accounting Pronouncements Adopted
On January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157,Fair Value Measurements(“Statement No. 157”). Statement No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements under other accounting pronouncements that require or permit fair value measurements. Statement No. 157 is effective prospectively for financial instruments recorded at fair value on a recurring basis. The FASB deferred the effective date of Statement No. 157 for one year for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis, which the Company will adopt effective January 1, 2009.
On January 1, 2008, Statement of Financial Accounting Standards No. 159,The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“Statement No. 159”) became effective. Statement No. 159 permits entities the choice to measure certain financial instruments and other items at fair value. The Company did not elect to measure any financial instruments or other items at fair value under Statement No. 159.
Accounting Standards Issued and Not Yet Adopted
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“Statement No. 160”). Statement No. 160 requires that a noncontrolling interest (minority interest) in a consolidated subsidiary be displayed in the consolidated balance sheet as a separate component of equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the consolidated statement of income. Statement No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. Statement No. 160 is effective for fiscal years beginning on or after December 15, 2008. Early adoption is not allowed. The Company does not expect that the adoption of Statement No. 160 will have a material impact on the Company’s financial position or results of operations.
In October 2008, the FASB issued Staff Position FAS 157-3Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active(“FSP FAS 157-3”), effective upon issuance. FSP FAS 157-3 clarifies the application of FASB Statement No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. The Company does not expect that the adoption of FSP FAS 157-3 will have a material impact on the Company’s financial position or results of operations.
4
3. Inventories
Inventories consist of the following:
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In thousands) | ||||||||
Coal | $ | 18,238 | $ | 42,942 | ||||
Repair parts and supplies, net of allowance | 104,896 | 98,684 | ||||||
$ | 123,134 | $ | 141,626 | |||||
4. Property Transactions
During the nine months ended September 30, 2007, the Company sold non-strategic reserves in the Powder River Basin and recognized a gain on the sale of $6.0 million, reflected in other operating income, net in the accompanying condensed consolidated statements of income.
5. Debt
On April 11, 2008, the Company amended its commercial paper placement program and the related revolving credit facility to increase the maximum aggregate principal amount outstanding to $100.0 million from $75.0 million.
6. Comprehensive Income
Comprehensive income consists of net income and other comprehensive income. Other comprehensive income items under Statement of Financial Accounting Standards No. 130,Reporting Comprehensive Income, are transactions recorded in membership interests during the year, excluding net income and transactions with members.
The following table details the components of comprehensive income:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 35,738 | $ | 50,107 | $ | 145,419 | $ | 144,323 | ||||||||
Other comprehensive income: | ||||||||||||||||
Net pension, postretirement and other post-employment benefits adjustments reclassified to income | (318 | ) | 371 | (158 | ) | 1,243 | ||||||||||
Net losses on derivatives reclassified to income | — | 607 | — | 3,146 | ||||||||||||
Total comprehensive income | $ | 35,420 | $ | 51,085 | $ | 145,261 | $ | 148,712 | ||||||||
7. Related Party Transactions
Transactions with Arch Coal may not be at arms length. If the transactions were negotiated with an unrelated party, the impact could be material to the Company’s results of operations.
The Company’s cash transactions are managed by Arch Coal. Cash paid to or from the Company that is not considered a distribution or a contribution is recorded in an Arch Coal receivable account. In addition, any amounts owed between the Company and Arch Coal are recorded in the account. At September 30, 2008 and December 31, 2007, the receivable from Arch Coal was $1.5 billion and $1.4 billion, respectively. This amount earns interest from Arch Coal at the prime interest rate. Interest earned on the note was $19.0 million and $26.3 million for the three months ended September 30, 2008 and 2007, respectively, and $58.9 million and $73.2 million for the nine months ended September 30, 2008 and 2007, respectively. The receivable is payable on demand by the Company; however, it is currently management’s intention to not demand payment of the receivable within the next year. Therefore, the receivable is classified on the accompanying condensed consolidated balance sheets as noncurrent.
5
On February 10, 2006, Arch Coal established an accounts receivable securitization program. Under the program, the Company sells its receivables to Arch Coal without recourse at a discount based on the prime rate and days sales outstanding. During the three months ended September 30, 2008 and 2007, the Company sold $420.1 million and $374.8 million, respectively, of trade accounts receivable to Arch Coal at a total discount of $1.6 million and $2.4 million, respectively. During the nine months ended September 30, 2008 and 2007, the Company sold $1.3 billion and $1.1 billion, respectively, of trade accounts receivable to Arch Coal at a total discount of $5.8 million and $7.5 million, respectively. These transactions are recorded through the Arch Coal receivable account.
For each of the three month periods ended September 30, 2008 and 2007, the Company incurred production royalties of $8.7 million payable to Arch Coal under sublease agreements. For each of the nine month periods ended September 30, 2008 and 2007, the Company incurred production royalties of $26.5 million payable to Arch Coal under sublease agreements.
The Company is charged selling, general and administrative services fees by Arch Coal. Expenses are allocated based on Arch Coal’s best estimates of proportional or incremental costs, whichever is more representative of costs incurred by Arch Coal on behalf of the Company. Amounts allocated to the Company by Arch Coal were $5.4 million and $6.3 million for the three months ended September 30, 2008 and 2007, respectively, and $22.3 million and $19.2 million for the nine months ended September 30, 2008 and 2007, respectively.
8. 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.
9. Segment Information
The Company has two reportable business segments, which are based on the major low-sulfur coal basins in which the Company operates. Both of these reportable business segments include 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 Company’s reportable segments are the Powder River Basin (PRB) segment, with operations in Wyoming, and the Western Bituminous (WBIT) segment, with operations in Utah, Colorado and southern Wyoming.
Operating segment results for the three and nine month periods ended September 30, 2008 and 2007 are presented below. Results for the operating segments include all direct costs of mining. Corporate, Other and Eliminations includes corporate overhead, other support functions, and the elimination of intercompany transactions.
6
Corporate, | ||||||||||||||||
Other and | ||||||||||||||||
PRB | WBIT | Eliminations | Consolidated | |||||||||||||
(In thousands) | ||||||||||||||||
Three months ended September 30, 2008 | ||||||||||||||||
Coal sales | $ | 280,365 | $ | 160,353 | $ | — | $ | 440,718 | ||||||||
Income (loss) from operations | 16,254 | 22,788 | (3,410 | ) | 35,632 | |||||||||||
Total assets | 1,798,793 | 2,049,686 | (783,479 | ) | 3,065,000 | |||||||||||
Depreciation, depletion and amortization | 19,132 | 18,111 | — | 37,243 | ||||||||||||
Capital expenditures | 29,432 | 30,017 | — | 59,449 | ||||||||||||
Three months ended September 30, 2007 | ||||||||||||||||
Coal sales | $ | 261,150 | $ | 143,905 | $ | — | $ | 405,055 | ||||||||
Income (loss) from operations | 29,226 | 23,228 | (5,590 | ) | 46,864 | |||||||||||
Total assets | 1,686,897 | 1,892,733 | (819,475 | ) | 2,760,155 | |||||||||||
Depreciation, depletion and amortization | 18,276 | 16,924 | — | 35,200 | ||||||||||||
Capital expenditures | 7,397 | 17,737 | — | 25,134 | ||||||||||||
Nine months ended September 30, 2008 | ||||||||||||||||
Coal sales | $ | 824,621 | $ | 513,259 | $ | — | $ | 1,337,880 | ||||||||
Income (loss) from operations | 65,303 | 101,391 | (22,045 | ) | 144,649 | |||||||||||
Depreciation, depletion and amortization | 55,481 | 59,288 | — | 114,769 | ||||||||||||
Capital expenditures | 105,994 | 124,835 | — | 230,829 | ||||||||||||
Nine months ended September 30, 2007 | ||||||||||||||||
Coal sales | $ | 750,566 | $ | 411,044 | $ | — | $ | 1,161,610 | ||||||||
Income (loss) from operations | 85,078 | 68,836 | (12,243 | ) | 141,671 | |||||||||||
Depreciation, depletion and amortization | 52,029 | 48,629 | — | 100,658 | ||||||||||||
Capital expenditures | 21,483 | 78,347 | — | 99,830 |
A reconciliation of segment income from operations to consolidated income before minority interest follows:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30 | September 30 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In thousands) | ||||||||||||||||
Income from operations | $ | 35,632 | $ | 46,864 | $ | 144,649 | $ | 141,671 | ||||||||
Interest expense | (15,237 | ) | (18,119 | ) | (48,819 | ) | (53,818 | ) | ||||||||
Interest income | 19,065 | 26,429 | 59,064 | 73,640 | ||||||||||||
Non-operating expense | — | (607 | ) | — | (3,146 | ) | ||||||||||
Income before minority interest | $ | 39,460 | $ | 54,567 | $ | 154,894 | $ | 158,347 | ||||||||
10. Supplemental Condensed Consolidating Financial Information
Pursuant to the indenture governing the Arch Western Finance 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 Company, (ii) the issuer of the senior notes (Arch Western Finance, LLC, a wholly-owned subsidiary of the Company), (iii) the Company’s wholly-owned subsidiaries (Thunder Basin Coal Company, L.L.C., Mountain Coal Company, L.L.C., and Arch of Wyoming, LLC), on a combined basis, which are guarantors under the Notes, and (iv) its majority owned subsidiary (Canyon Fuel Company, LLC) which is not a guarantor under the Notes:
7
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended September 30, 2008
(in thousands)
Three Months Ended September 30, 2008
(in thousands)
Non- | ||||||||||||||||||||||||
Parent | Guarantor | Guarantor | ||||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales | $ | — | $ | — | $ | 323,277 | $ | 117,441 | $ | — | $ | 440,718 | ||||||||||||
Cost of coal sales | (1,744 | ) | — | 274,979 | 90,965 | (700 | ) | 363,500 | ||||||||||||||||
Depreciation, depletion and amortization | — | — | 22,270 | 14,973 | — | 37,243 | ||||||||||||||||||
Selling, general and administrative expenses allocated from Arch Coal | 5,391 | — | — | — | — | 5,391 | ||||||||||||||||||
Other operating income, net | (237 | ) | — | (431 | ) | (1,080 | ) | 700 | (1,048 | ) | ||||||||||||||
3,410 | — | 296,818 | 104,858 | — | 405,086 | |||||||||||||||||||
Income from investment in subsidiaries | 42,187 | — | — | — | (42,187 | ) | — | |||||||||||||||||
Income from operations | 38,777 | — | 26,459 | 12,583 | (42,187 | ) | 35,632 | |||||||||||||||||
Interest expense | (18,069 | ) | (12,616 | ) | (117 | ) | (466 | ) | 16,031 | (15,237 | ) | |||||||||||||
Interest income, primarily from Arch Coal | 18,752 | 16,031 | 54 | 259 | (16,031 | ) | 19,065 | |||||||||||||||||
683 | 3,415 | (63 | ) | (207 | ) | — | 3,828 | |||||||||||||||||
Minority interest | (3,722 | ) | — | — | — | — | (3,722 | ) | ||||||||||||||||
Net income | $ | 35,738 | $ | 3,415 | $ | 26,396 | $ | 12,376 | $ | (42,187 | ) | $ | 35,738 | |||||||||||
8
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Three Months Ended September 30, 2007
(in thousands)
Three Months Ended September 30, 2007
(in thousands)
Non- | ||||||||||||||||||||||||
Parent | Guarantor | Guarantor | ||||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales revenues | $ | — | $ | — | $ | 299,503 | $ | 105,552 | $ | — | $ | 405,055 | ||||||||||||
Cost of coal sales | (618 | ) | — | 238,234 | 80,558 | (633 | ) | 317,541 | ||||||||||||||||
Depreciation, depletion and amortization | — | — | 23,534 | 11,666 | — | 35,200 | ||||||||||||||||||
Selling, general and administrative expenses allocated from Arch Coal | 6,258 | — | — | — | — | 6,258 | ||||||||||||||||||
Other operating income | (50 | ) | — | (565 | ) | (826 | ) | 633 | (808 | ) | ||||||||||||||
5,590 | — | 261,203 | 91,398 | — | 358,191 | |||||||||||||||||||
Income from investment in subsidiaries | 53,022 | — | — | — | (53,022 | ) | — | |||||||||||||||||
Income from operations | 47,432 | — | 38,300 | 14,154 | (53,022 | ) | 46,864 | |||||||||||||||||
Interest expense | (18,144 | ) | (15,311 | ) | (107 | ) | (587 | ) | 16,030 | (18,119 | ) | |||||||||||||
Interest income, primarily from Arch Coal | 25,886 | 16,030 | 115 | 428 | (16,030 | ) | 26,429 | |||||||||||||||||
7,742 | 719 | 8 | (159 | ) | — | 8,310 | ||||||||||||||||||
Non-operating expense | (607 | ) | — | — | — | — | (607 | ) | ||||||||||||||||
Minority interest | (4,460 | ) | — | — | — | — | (4,460 | ) | ||||||||||||||||
Net income | $ | 50,107 | $ | 719 | $ | 38,308 | $ | 13,995 | $ | (53,022 | ) | $ | 50,107 | |||||||||||
9
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Nine Months Ended September 30, 2008
(in thousands)
Nine Months Ended September 30, 2008
(in thousands)
Non- | ||||||||||||||||||||||||
Parent | Guarantor | Guarantor | ||||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales | $ | — | $ | — | $ | 1,015,659 | $ | 322,221 | $ | — | $ | 1,337,880 | ||||||||||||
Cost of coal sales | 78 | — | 813,546 | 247,547 | (1,822 | ) | 1,059,349 | |||||||||||||||||
Depreciation, depletion and amortization | — | — | 68,439 | 46,330 | — | 114,769 | ||||||||||||||||||
Selling, general and administrative expenses allocated from Arch Coal | 22,281 | — | — | — | — | 22,281 | ||||||||||||||||||
Other operating income, net | (314 | ) | — | (2,095 | ) | (2,581 | ) | 1,822 | (3,168 | ) | ||||||||||||||
22,045 | — | 879,890 | 291,296 | — | 1,193,231 | |||||||||||||||||||
Income from investment in subsidiaries | 174,019 | — | — | — | (174,019 | ) | — | |||||||||||||||||
Income from operations | 151,974 | — | 135,769 | 30,925 | (174,019 | ) | 144,649 | |||||||||||||||||
Interest expense | (55,141 | ) | (40,027 | ) | (393 | ) | (1,352 | ) | 48,094 | (48,819 | ) | |||||||||||||
Interest income, primarily from Arch Coal | 58,061 | 48,094 | 196 | 807 | (48,094 | ) | 59,064 | |||||||||||||||||
2,920 | 8,067 | (197 | ) | (545 | ) | — | 10,245 | |||||||||||||||||
Minority interest | (9,475 | ) | — | — | — | — | (9,475 | ) | ||||||||||||||||
Net income | $ | 145,419 | $ | 8,067 | $ | 135,572 | $ | 30,380 | $ | (174,019 | ) | $ | 145,419 | |||||||||||
10
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Nine Months Ended September 30, 2007
(in thousands)
Nine Months Ended September 30, 2007
(in thousands)
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Coal sales | $ | — | $ | — | $ | 870,193 | $ | 291,417 | $ | — | $ | 1,161,610 | ||||||||||||
Cost of coal sales | (838 | ) | — | 692,866 | 218,746 | (1,895 | ) | 908,879 | ||||||||||||||||
Depreciation, depletion and amortization | — | — | 67,362 | 33,296 | — | 100,658 | ||||||||||||||||||
Selling, general and administrative expenses allocated from Arch Coal | 19,196 | — | — | — | — | 19,196 | ||||||||||||||||||
Other operating (income) expense | (6,115 | ) | (1,912 | ) | (2,662 | ) | 1,895 | (8,794 | ) | |||||||||||||||
12,243 | — | 758,316 | 249,380 | — | 1,019,939 | |||||||||||||||||||
Income from investment in subsidiaries | 155,721 | — | — | — | (155,721 | ) | — | |||||||||||||||||
Income from operations | 143,478 | — | 111,877 | 42,037 | (155,721 | ) | 141,671 | |||||||||||||||||
Interest expense | (54,065 | ) | (45,747 | ) | (311 | ) | (1,776 | ) | 48,081 | (53,818 | ) | |||||||||||||
Interest income, primarily from Arch Coal | 72,080 | 48,081 | 351 | 1,209 | (48,081 | ) | 73,640 | |||||||||||||||||
18,015 | 2,334 | 40 | (567 | ) | — | 19,822 | ||||||||||||||||||
Non-operating expense | (3,146 | ) | — | — | — | — | (3,146 | ) | ||||||||||||||||
Minority interest | (14,024 | ) | — | — | — | — | (14,024 | ) | ||||||||||||||||
Net income (loss) | $ | 144,323 | $ | 2,334 | $ | 111,917 | $ | 41,470 | $ | (155,721 | ) | $ | 144,323 | |||||||||||
11
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2008
(in thousands)
September 30, 2008
(in thousands)
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents | $ | 5,327 | $ | — | $ | 26 | $ | 66 | $ | — | $ | 5,419 | ||||||||||||
Receivables | 904 | — | 1,322 | 1,023 | — | 3,249 | ||||||||||||||||||
Inventories | — | — | 98,407 | 24,727 | — | 123,134 | ||||||||||||||||||
Other | 2,945 | 2,157 | 6,935 | 8,381 | — | 20,418 | ||||||||||||||||||
Total current assets | 9,176 | 2,157 | 106,690 | 34,197 | — | 152,220 | ||||||||||||||||||
Property, plant and equipment, net | — | — | 1,007,282 | 331,274 | — | 1,338,556 | ||||||||||||||||||
Investment in subsidiaries | 2,317,081 | — | — | — | (2,317,081 | ) | — | |||||||||||||||||
Receivable from Arch Coal, Inc. | 1,512,419 | — | — | 36,753 | — | 1,549,172 | ||||||||||||||||||
Intercompanies | (2,209,985 | ) | 973,976 | 1,101,979 | 134,030 | — | — | |||||||||||||||||
Other | 960 | 8,007 | 11,517 | 4,568 | — | 25,052 | ||||||||||||||||||
Total other assets | 1,620,475 | 981,983 | 1,113,496 | 175,351 | (2,317,081 | ) | 1,574,224 | |||||||||||||||||
Total assets | $ | 1,629,651 | $ | 984,140 | $ | 2,227,468 | $ | 540,822 | $ | (2,317,081 | ) | $ | 3,065,000 | |||||||||||
Accounts payable | $ | 2,272 | $ | — | $ | 83,095 | $ | 17,763 | $ | — | $ | 103,130 | ||||||||||||
Accrued expenses | 3,843 | 16,031 | 81,081 | 10,135 | — | 111,090 | ||||||||||||||||||
Commercial paper | 98,060 | — | — | — | — | 98,060 | ||||||||||||||||||
Total current liabilities | 104,175 | 16,031 | 164,176 | 27,898 | — | 312,280 | ||||||||||||||||||
Long-term debt | — | 956,490 | — | — | — | 956,490 | ||||||||||||||||||
Accrued postretirement benefits other than pension | 25,608 | — | 2,486 | 10,938 | — | 39,032 | ||||||||||||||||||
Asset retirement obligations | — | — | 193,120 | 12,923 | — | 206,043 | ||||||||||||||||||
Accrued workers’ compensation | 4,232 | — | 643 | 4,045 | — | 8,920 | ||||||||||||||||||
Other noncurrent liabilities | 2,770 | — | 40,389 | 6,210 | — | 49,369 | ||||||||||||||||||
Total liabilities | 136,785 | 972,521 | 400,814 | 62,014 | — | 1,572,134 | ||||||||||||||||||
Redeemable membership interest | 8,723 | — | — | — | — | 8,723 | ||||||||||||||||||
Minority interest | 192,493 | — | — | — | — | 192,493 | ||||||||||||||||||
Non-redeemable membership interest | 1,291,650 | 11,619 | 1,826,654 | 478,808 | (2,317,081 | ) | 1,291,650 | |||||||||||||||||
Total liabilities and membership interests | $ | 1,629,651 | $ | 984,140 | $ | 2,227,468 | $ | 540,822 | $ | (2,317,081 | ) | $ | 3,065,000 | |||||||||||
12
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2007
(in thousands)
December 31, 2007
(in thousands)
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents | $ | 78 | $ | — | $ | 16 | $ | 154 | $ | — | $ | 248 | ||||||||||||
Receivables | 1,145 | — | 1,224 | 1,190 | — | 3,559 | ||||||||||||||||||
Inventories | — | — | 98,638 | 42,988 | — | 141,626 | ||||||||||||||||||
Other | 11,342 | 2,153 | 5,868 | 7,765 | — | 27,128 | ||||||||||||||||||
Total current assets | 12,565 | 2,153 | 105,746 | 52,097 | — | 172,561 | ||||||||||||||||||
Property, plant and equipment, net | — | — | 864,575 | 361,418 | — | 1,225,993 | ||||||||||||||||||
Investment in subsidiaries | 2,140,722 | — | — | — | (2,140,722 | ) | — | |||||||||||||||||
Receivable from Arch Coal, Inc. | 1,399,046 | — | (112 | ) | 28,899 | — | 1,427,833 | |||||||||||||||||
Intercompanies | (2,105,212 | ) | 981,359 | 1,064,385 | 59,468 | — | — | |||||||||||||||||
Other | 802 | 9,617 | 11,611 | 3,770 | — | 25,800 | ||||||||||||||||||
Total other assets | 1,435,358 | 990,976 | 1,075,884 | 92,137 | (2,140,722 | ) | 1,453,633 | |||||||||||||||||
Total assets | $ | 1,447,923 | $ | 993,129 | $ | 2,046,205 | $ | 505,652 | $ | (2,140,722 | ) | $ | 2,852,187 | |||||||||||
Accounts payable | $ | 3,434 | $ | — | $ | 62,504 | $ | 16,316 | $ | — | $ | 82,254 | ||||||||||||
Accrued expenses | 2,863 | 32,063 | 83,515 | 10,313 | — | 128,754 | ||||||||||||||||||
Commercial paper | 74,959 | — | — | — | — | 74,959 | ||||||||||||||||||
Total current liabilities | 81,256 | 32,063 | 146,019 | 26,629 | — | 285,967 | ||||||||||||||||||
Long-term debt | — | 957,514 | — | — | — | 957,514 | ||||||||||||||||||
Accrued postretirement benefits other than pension | 24,482 | — | 2,485 | 9,838 | — | 36,805 | ||||||||||||||||||
Asset retirement obligations | — | — | 182,101 | 12,089 | — | 194,190 | ||||||||||||||||||
Accrued workers’ compensation | 4,293 | — | 1,053 | 3,438 | — | 8,784 | ||||||||||||||||||
Other noncurrent liabilities | (310 | ) | — | 25,886 | 5,149 | — | 30,725 | |||||||||||||||||
Total liabilities | 109,721 | 989,577 | 357,544 | 57,143 | — | 1,513,985 | ||||||||||||||||||
Redeemable membership interest | 8,000 | — | — | — | — | 8,000 | ||||||||||||||||||
Minority interest | 183,018 | — | — | — | — | 183,018 | ||||||||||||||||||
Non-redeemable membership interest | 1,147,184 | 3,552 | 1,688,661 | 448,509 | (2,140,722 | ) | 1,147,184 | |||||||||||||||||
Total liabilities and membership interests | $ | 1,447,923 | $ | 993,129 | $ | 2,046,205 | $ | 505,652 | $ | (2,140,722 | ) | $ | 2,852,187 | |||||||||||
13
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2008
(in thousands)
Nine Months Ended September 30, 2008
(in thousands)
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||||||
Cash provided by (used in) operating activities | $ | (19,582 | ) | $ | (7,369 | ) | $ | 282,710 | $ | 65,288 | $ | 321,047 | ||||||||
Investing Activities | ||||||||||||||||||||
Capital expenditures | — | — | (248,046 | ) | 17,217 | (230,829 | ) | |||||||||||||
Increase in receivable from Arch Coal | (102,825 | ) | — | (112 | ) | (7,854 | ) | (110,791 | ) | |||||||||||
Proceeds from dispositions of property, plant and equipment | — | — | 355 | 23 | 378 | |||||||||||||||
Additions to prepaid royalties | — | — | — | (200 | ) | (200 | ) | |||||||||||||
Reimbursement of deposits on equipment | — | — | 2,697 | — | 2,697 | |||||||||||||||
Cash used in investing activities | (102,825 | ) | — | (245,106 | ) | 9,186 | (338,745 | ) | ||||||||||||
Financing Activities | ||||||||||||||||||||
Net proceeds from commercial paper | 23,102 | — | — | — | 23,102 | |||||||||||||||
Debt financing costs | (219 | ) | (14 | ) | — | — | (233 | ) | ||||||||||||
Transactions with affiliates, net | 104,773 | 7,383 | (37,594 | ) | (74,562 | ) | — | |||||||||||||
Cash provided by (used in) financing activities | 127,656 | 7,369 | (37,594 | ) | (74,562 | ) | 22,869 | |||||||||||||
Increase (decrease) in cash and cash equivalents | 5,249 | — | 10 | (88 | ) | 5,171 | ||||||||||||||
Cash and cash equivalents, beginning of period | 78 | — | 16 | 154 | 248 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 5,327 | $ | — | $ | 26 | $ | 66 | $ | 5,419 | ||||||||||
14
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2007
(in thousands)
Nine Months Ended September 30, 2007
(in thousands)
Parent | Guarantor | Non-Guarantor | ||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Consolidated | ||||||||||||||||
Cash provided by (used in) operating activities | $ | (2,464 | ) | $ | (13,114 | ) | $ | 189,338 | $ | 90,110 | $ | 263,870 | ||||||||
Investing Activities | ||||||||||||||||||||
Capital expenditures | — | — | (50,431 | ) | (49,399 | ) | (99,830 | ) | ||||||||||||
Increase in receivable from Arch Coal | (237,675 | ) | — | (2 | ) | (620 | ) | (238,297 | ) | |||||||||||
Proceeds from dispositions of property, plant and equipment | 6,000 | — | 259 | 79 | 6,338 | |||||||||||||||
Additions to prepaid royalties | — | — | — | (200 | ) | (200 | ) | |||||||||||||
Reimbursement of deposits on equipment | — | — | 18,325 | — | 18,325 | |||||||||||||||
Cash used in investing activities | (231,675 | ) | — | (31,849 | ) | (50,140 | ) | (313,664 | ) | |||||||||||
Financing Activities | ||||||||||||||||||||
Net proceeds from commercial paper | 49,992 | — | — | — | 49,992 | |||||||||||||||
Debt financing costs | (139 | ) | — | — | — | (139 | ) | |||||||||||||
Transactions with affiliates, net | 184,424 | 13,114 | (157,616 | ) | (39,922 | ) | — | |||||||||||||
Cash provided by (used in) financing activities | 234,277 | 13,114 | (157,616 | ) | (39,922 | ) | 49,853 | |||||||||||||
Decrease in cash and cash equivalents | 138 | — | (127 | ) | 48 | 59 | ||||||||||||||
Cash and cash equivalents, beginning of period | — | — | 161 | 25 | 186 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 138 | $ | — | $ | 34 | $ | 73 | $ | 245 | ||||||||||
15
PART II
OTHER INFORMATION
OTHER INFORMATION
Item 6. Exhibits.
Exhibits filed as part of this Quarterly Report on Form 10-Q/A are as follows:
Exhibit | Description | |
3.1 | Certificate of Formation (incorporated herein by reference to Exhibit 3.3 to the Form S-4 (File No. 333-107569) filed on August 1, 2003 by Arch Western Finance, LLC, Arch Western Resources, LLC, Arch of Wyoming, LLC, Mountain Coal Company, L.L.C., and Thunder Basin Coal Company, L.L.C.). | |
3.2 | Limited Liability Company Agreement (incorporated herein by reference to Exhibit 3.4 to the Form S-4 (File No. 333-107569) filed on August 1, 2003 by Arch Western Finance, LLC, Arch Western Resources, LLC, Arch of Wyoming, LLC, Mountain Coal Company, L.L.C., and Thunder Basin Coal Company, L.L.C.). | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Paul A. Lang. | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of John T. Drexler. | |
32.1 | Section 1350 Certification of Paul A. Lang. | |
32.2 | Section 1350 Certification of John T. Drexler. |
23