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Title of each class of securities | Amount to be | Proposed maximum | Maximum aggregate | Amount of | ||||||||
to be registered | registered | offering price | offering price | registration fee(1)(2) | ||||||||
8.250% Senior Notes due 2018 | $250,000,000 | 99.279% | $248,197,500 | $17,697 | ||||||||
Guarantee of 8.250% Senior Notes due 2018 | — | — | — | — | ||||||||
(1) | Calculated in accordance with Rule 457(r) of the Securities Act of 1933, as amended. |
(2) | Pursuant to Rule 457(n) of the Securities Act, no separate fee is payable with respect to guarantees of the notes being registered. |
Per Note | Total | |||||||
Public Offering Price | 99.279 | % | $ | 248,197,500 | ||||
Underwriting Discount | 2.500 | % | $ | 6,250,000 | ||||
Proceeds to Patriot Coal (before expenses) | 96.779 | % | $ | 241,947,500 |
Citi | BofA Merrill Lynch | Barclays Capital |
Natixis Bleichroeder LLC | Fifth Third Securities, Inc. | SOCIETE GENERALE | Santander | PNC Capital Markets LLC |
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Prospectus | ||||
About This Prospectus | 1 | |||
The Company | 2 | |||
The Guarantors | 3 | |||
Where You Can Find More Information | 4 | |||
Special Note on Forward-Looking Statements | 4 | |||
Risk Factors | 6 | |||
Ratio of Earnings to Fixed Charges | 24 | |||
Use of Proceeds | 25 | |||
Description of Capital Stock | 26 | |||
Description of Preferred Stock | 33 | |||
Description of Warrants | 33 | |||
Description of Purchase Contracts | 33 | |||
Description of Units | 34 | |||
Description of Debt Securities | 34 | |||
Forms of Securities | 40 | |||
Plan of Distribution | 42 | |||
Validity of Securities | 44 | |||
Experts | 44 |
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• | price volatility and demand, particularly in higher margin products; | |
• | geologic, equipment and operational risks associated with mining; | |
• | changes in general economic conditions, including coal, power and steel market conditions; | |
• | availability and costs of competing energy resources; | |
• | regulatory and court decisions including, but not limited to, those impacting permits issued pursuant to the Clean Water Act; | |
• | environmental laws and regulations and changes in the interpretation or enforcement thereof, including those affecting our operations and those affecting our customers’ coal usage; | |
• | developments in greenhouse gas emission regulation and treatment, including any development of commercially successful carbon capture and storage techniques or market-based mechanisms, such as acap-and-trade system, for regulating greenhouse gas emissions; | |
• | coal mining laws and regulations; | |
• | labor availability and relations; | |
• | the outcome of pending or future litigation; | |
• | changes in the costs to provide healthcare to eligible active employees and certain retirees under postretirement benefit obligations; | |
• | changes to contribution requirements to multi-employer retiree healthcare and pension plans; | |
• | reductions of purchases or deferral of shipments by major customers; | |
• | availability and costs of credit, surety bonds and letters of credit; | |
• | customer performance and credit risks; |
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• | inflationary trends, including those impacting materials used in our business; | |
• | worldwide economic and political conditions; | |
• | downturns in consumer and company spending; | |
• | supplier and contract miner performance, and the availability and cost of key equipment and commodities; | |
• | availability and costs of transportation; | |
• | difficulty in implementing our business strategy; | |
• | our ability to replace proven and probable coal reserves; | |
• | the outcome of commercial negotiations involving sales contracts or other transactions; | |
• | our ability to respond to changing customer preferences; | |
• | our dependence on Peabody Energy Corporation (“Peabody”) for a significant portion of our revenues; | |
• | failure to comply with debt covenants; | |
• | the effects of mergers, acquisitions and divestitures, including our ability to successfully integrate mergers and acquisitions; | |
• | weather patterns affecting energy demand; | |
• | competition in our industry; | |
• | interest rate fluctuation; | |
• | wars and acts of terrorism or sabotage; | |
• | impact of pandemic illness; | |
• | our ability to close the amendment and restatement to our revolving credit facility; and | |
• | other factors, including those discussed under “Risk Factors” in this prospectus supplement and the accompanying prospectus and in “Legal Proceedings”, set forth in Part I, Item 3 of our Annual Report onForm 10-K for the year ended December 31, 2009 and in Part II, Item 1 of our Quarterly Report onForm 10-Q for the quarter ended March 31, 2010, both incorporated by reference herein. |
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• | We have a large and attractively located base of proven and probable coal reserves. We control approximately 1.8 billion tons of proven and probable coal reserves, making us one of the largest reserve holders in Appalachia and a major reserve holder in the Illinois Basin, based on publicly available information. Our proven and probable coal reserves are located within a 500 mile radius to the majority of U.S. electricity generating plants and steel producers. We believe our location and scale position us as an attractive supplier to existing and new coal-fueled power plants. |
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• | We are a leading United States producer of metallurgical coal. For the year ended December 31, 2009 and for the three months ended March 31, 2010, we sold 5.4 million tons and 1.6 million tons of metallurgical coal, or 17% and 22% of our total coal sales volume, respectively, to steel mills and independent coke producers. We are pursuing opportunities to further increase our sales of metallurgical coal, including the development of new metallurgical mines and additional sales of metallurgical coal from our Panther complex. In recent years, metallurgical coal has commanded a premium price to thermal coal. This premium is principally due to (i) metallurgical coal’s value as a raw material in the steelmaking process and (ii) the limited availability of coal reserves and production with the specifications needed to produce steelmaking coke. | |
• | We are a leading eastern United States coal producer, benefitting from our diverse mining operations. We are a leading producer in the eastern United States, based on publicly available information, and produce coal from mining operations in each of the major eastern United States coal basins: Central Appalachia, Northern Appalachia and the Illinois Basin, which accounted for 65%, 12% and 23% of our production in 2009, respectively, and 66%, 9% and 25% of our production in the three months ended March 31, 2010, respectively. We operate 30 mines, including contractor operations, within our 14 active mining complexes, of which no single mine accounted for more than 12% of our production in 2009. In addition, our mining methods are diverse with surface production, underground continuous miner production and underground longwall production methods accounting for 30%, 54% and 16% of our coal production in 2009, respectively, and 28%, 57% and 15% of our production in the three months ended March 31, 2010, respectively. | |
• | We believe our diversified product line and sourcing capabilities make us an attractive supplier to our customers. We produce medium andhigh-Btu coal, with low, medium and high sulfur content, from our operations in Appalachia and the Illinois Basin. We believe this product diversification positions us as an attractive supplier to utility customers with installed sulfur dioxide emissions control devices (scrubbers), as well as utilities that will continue to use lower sulfur coal as part of their means to meet emission standards. We utilize our large scale preparation plants to blend coal produced at our mines, as well as coal produced at contractor-operated mines and coal purchased from third parties. We also produce several different qualities of metallurgical coal, including high volatile A and high volatile B coals. We have the ability to ship coal to our customers by rail, barge or truck as they require and have the ability to ship our coal to international customers, who accounted for 65% of our metallurgical coal volume in 2009. Through our diverse sourcing alternatives, blending capabilities and transportation options, we are able to offer multiple delivered cost alternatives to our customers. | |
• | We have a well-trained, experienced and dedicated work force. We employ well-trained, experienced miners whose tenure averages 14 years with our company. Approximately 52% of our employees as of March 31, 2010 at company operations were members of the United Mine Workers of America (UMWA), most of whom are employed under a five-year labor contract that became effective January 1, 2007. As a critical component to recruit and retain a talented workforce, we operate a dedicated training center to educate new employees and our existing workforce in safety, current mining techniques, equipment operation and maintenance. We operate both union and non-union mines and we have a track record of good cooperation with our employees. | |
• | Our management team has a proven track record of success. Our management team has a proven track record of increasing productivity, developing and maintaining strong customer relationships, operating safe and profitable mining operations, making strategic acquisitions and effectively positioning us for future growth and cash flow generation. The six members of our executive management team have a combined 140 years of experience in the mining industry. |
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• | Safety. Safety is our highest operational priority and the cornerstone of our relationship with all of our employees. Our average incidence rate has improved more than 40% in the last five years, and we intend to continue employing best practices in emergency preparedness, communications, training, and behavior to drive world-class safety performance. We have received over 30 awards for safety since 2000, six of them related to 2009. Our focus on safety has resulted in 2009 being the safest year on record for our operations. | |
• | Productivity and cost management. We intend to build on our strong and focused underground and surface engineering capabilities to optimize planning and capital deployment, proactively driving sustainable cost control and continuous improvements in all aspects of the production process. We plan to meet production and cost targets by utilizing a combination of our experienced, productive workforce, process improvement initiatives and state-of-the-art equipment. We also will seek to enhance productivity and lower costs by working closely with suppliers and equipment manufacturers to develop new technologies to extract and process coal. | |
• | Environmental stewardship. We will continue to be good stewards of the land on which we operate. We believe our operations and their surrounding communities will benefit from our responsible, effective environmental practices. We intend to build on our track record of success that has resulted in over 15 awards for reclamation excellence and outstanding stewardship received since 2003. |
• | Profitability. We intend to grow our production and sales of metallurgical coal, which in recent years has commanded a premium price to thermal coal. In addition, we plan to continue to balance production with market demand, and maintain flexibility to idle operations or restart operations depending on market conditions to ensure profitability of those mines. | |
• | Stable and growing cash flow. We intend to layer in sales contracts for our coal to improve the stability and predictability of our cash flow. We currently have 32 million tons, 17 million tons and 7 million tons of our 2010, 2011 and 2012 coal sales, respectively, committed and sold at fixed or escalating prices. We intend to leverage our uncommitted coal sales, particularly for metallurgical coal, to take advantage of increasing prices for our products and to enter into higher priced thermal contracts to replace certain legacy lower priced thermal contracts as those contracts roll off by the end of 2012. | |
• | Liquidity and credit profile. We intend to maintain and improve our liquidity position to ensure adequate availability of funds to operate our business and protect against unforeseen operational or regulatory impacts on our business. We intend to improve our credit ratios through continued growth in profitability and in cash flow of our operations. |
• | Sourcing flexibility. We intend to utilize our production capabilities and efficient preparation facilities to process a diverse range of thermal and metallurgical coal products to satisfy our customers’ needs. Our multiple coal qualities, blending capabilities and transportation alternatives enhance our ability to reliably deliver product on time, within specifications and at competitive delivered costs. | |
• | Coal brokerage. As another means to meet certain customer requirements, we intend to use our sales contract portfolio, market presence, coal handling facilities and transportation flexibility to continue to expand purchase and resale of third-party coal. |
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• | Organic growth. We will evaluate opportunities to exploit previously untapped reserves through increased production from our large and diverse base of proven and probable coal reserves in Appalachia and the Illinois Basin. We will target metallurgical coal opportunities in close proximity to our existing preparation facilities where we believe we can generate appropriate profitability and return on capital investment. | |
• | Acquisitions, reserve transactions and joint ventures. We intend to pursue value-enhancing acquisition, reserve transaction and joint venture opportunities. Coal production in the United States is highly fragmented. Our proven and probable coal reserves and operations are contiguous or in close proximity to numerous small- and medium-sized operators, potentially creating acquisition and joint venture opportunities for us. |
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Issuer | Patriot Coal Corporation. | |
Securities Offered | $250,000,000 aggregate principal amount of 8.250% Senior Notes due 2018. | |
Maturity Date | April 30, 2018. | |
Interest | The notes will bear interest at a rate of 8.250% per annum, payable semi-annually in arrears on April 30 and October 30, beginning October 30, 2010. | |
Guarantees | The notes will be jointly and severally guaranteed, on a senior unsecured basis, by all of our existing and future subsidiaries that are guarantors under our revolving credit facility. See “Description of Notes — Note Guarantees.” | |
Optional Redemption | At any time prior to April 30, 2014, we may redeem some or all of the notes at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest and a “make-whole” premium. | |
At any time on or after April 30, 2014, we may redeem some or all of the notes at the redemption prices set forth under “Description of Notes — Optional Redemption.” | ||
In addition, we may on one or more occasions redeem up to 35% of the aggregate principal amount of the notes prior to April 30, 2013 at a redemption price equal to 108.250% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of certain equity offerings. | ||
Change of Control Offer | Upon the occurrence of certain change of control events, we may be required to offer to purchase each holder’s notes at a price equal to 101% of the principal amount, plus accrued and unpaid interest. For more details, see “Description of Notes — Repurchase of Notes upon a Change of Control.” | |
Certain Covenants | The indenture governing the notes will, among other things, limit our ability and the ability of our restricted subsidiaries to: | |
• incur additional indebtedness and issue preferred equity; | ||
• pay dividends or distributions; | ||
• repurchase equity or repay subordinated indebtedness; | ||
• make investments or certain other restricted payments; | ||
• create liens; | ||
• sell assets; | ||
• enter into agreements that restrict dividends, distributions or other payments from restricted subsidiaries; |
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• enter into transactions with affiliates; and | ||
• consolidate, merge or transfer all or substantially all of our assets and the assets of our restricted subsidiaries on a combined basis. | ||
These covenants are subject to a number of important qualifications and exceptions and certain of these covenants will be inapplicable at any time that the notes have an investment grade rating. See “Description of Notes — Certain Covenants” and “Description of Notes— Suspension of Covenants.” | ||
Ranking | The notes and the guarantees will be our and the guarantors’ senior unsecured obligations and will: | |
• rank equally in right of payment to our and the guarantors’ respective existing and future senior debt; | ||
• rank senior in right of payment to all of our and the guarantors’ respective existing and future subordinated debt; | ||
• be effectively subordinated to our and the guarantors’ existing and future secured debt to the extent of the value of the assets securing such debt; and | ||
• be structurally subordinated to all of the existing and future debt or other liabilities of any of our subsidiaries that do not guarantee the notes. | ||
After giving effect to the offering of the notes, at March 31, 2010 we and the guarantors would have had approximately $455.6 million of indebtedness outstanding on a pro forma basis. | ||
Use of Proceeds | We estimate that the net proceeds of this offering will be approximately $233.1 million, after deducting the underwriting discounts, estimated offering expenses payable by us and expenses related to the revolving credit facility amendment and restatement. We intend to use the net proceeds from this offering for general corporate purposes, which could include capital expenditures for development of additional metallurgical coal production capacity, working capital, acquisitions, refinancing of other debt or other capital transactions. | |
Risk Factors | You should carefully consider all information in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference. In particular, you should evaluate the specific risks described in the section entitled “Risk Factors” in this prospectus supplement and the accompanying prospectus, for a discussion of risks relating to an investment in the notes. Please read these sections carefully before you decide whether to invest in the notes. |
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Year Ended | Three Months | Twelve Months Ended | ||||||||||||||||||||||
December 31, | Ended March 31, | March 31, | ||||||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | 2010 | |||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Results of Operations Data: | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Sales | $ | 1,069,316 | $ | 1,630,873 | $ | 1,995,667 | $ | 522,838 | $ | 464,208 | $ | 1,937,037 | ||||||||||||
Other revenues | 4,046 | 23,749 | 49,616 | 6,098 | 3,049 | 46,567 | ||||||||||||||||||
Total revenues | 1,073,362 | 1,654,622 | 2,045,283 | 528,936 | 467,257 | 1,983,604 | ||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||
Operating costs and expenses | 1,109,315 | 1,607,746 | 1,893,419 | 494,977 | 433,491 | 1,831,933 | ||||||||||||||||||
Depreciation, depletion and amortization | 85,640 | 125,356 | 205,339 | 54,979 | 49,612 | 199,972 | ||||||||||||||||||
Reclamation and remediation obligation expense | 20,144 | 19,260 | 35,116 | 6,451 | 10,846 | 39,511 | ||||||||||||||||||
Sales contract accretion | — | (279,402 | ) | (298,572 | ) | (77,807 | ) | (25,308 | ) | (246,073 | ) | |||||||||||||
Restructuring and impairment charge | — | — | 20,157 | — | — | 20,157 | ||||||||||||||||||
Selling and administrative expenses | 45,137 | 38,607 | 48,732 | 12,886 | 12,774 | 48,620 | ||||||||||||||||||
Other operating (income) expense: | ||||||||||||||||||||||||
Net gain on disposal or exchange of assets(1) | (81,458 | ) | (7,004 | ) | (7,215 | ) | (30 | ) | (23,796 | ) | (30,981 | ) | ||||||||||||
Loss (income) from equity affiliates | (63 | ) | 915 | (398 | ) | 231 | (448 | ) | (1,077 | ) | ||||||||||||||
Operating profit (loss) | (105,353 | ) | 149,144 | 148,705 | 37,249 | 10,086 | 121,542 | |||||||||||||||||
Interest expense | 8,337 | 23,648 | 38,108 | 8,593 | 9,032 | 38,547 | ||||||||||||||||||
Interest income | (11,543 | ) | (17,232 | ) | (16,646 | ) | (3,487 | ) | (3,442 | ) | (16,601 | ) | ||||||||||||
Income (loss) before income taxes | (102,147 | ) | 142,728 | 127,243 | 32,143 | 4,496 | 99,596 | |||||||||||||||||
Income tax provision | — | — | — | — | 235 | 235 | ||||||||||||||||||
Net income (loss) | (102,147 | ) | 142,728 | 127,243 | 32,143 | 4,261 | 99,361 | |||||||||||||||||
Net income attributable to noncontrolling interest | 4,721 | — | — | — | — | — | ||||||||||||||||||
Net income (loss) attributable to Patriot | (106,868 | ) | 142,728 | 127,243 | 32,143 | 4,261 | 99,361 | |||||||||||||||||
Effect of noncontrolling interest purchase arrangement | (15,667 | ) | — | — | — | — | — | |||||||||||||||||
Net income (loss) attributable to common stockholders | $ | (122,535 | ) | $ | 142,728 | $ | 127,243 | $ | 32,143 | $ | 4,261 | $ | 99,361 | |||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||
Total assets | $ | 1,199,837 | $ | 3,622,320 | $ | 3,618,163 | $ | 3,643,965 | $ | 3,615,223 | $ | 3,615,223 | ||||||||||||
Total liabilities | 1,117,521 | 2,782,139 | 2,682,669 | 2,764,284 | 2,671,459 | 2,671,459 | ||||||||||||||||||
Total long-term debt, less current maturities | 11,438 | 176,123 | 197,951 | 175,901 | 198,415 | 198,415 | ||||||||||||||||||
Total stockholders’ equity | 82,316 | 840,181 | 935,494 | 879,681 | 943,764 | 943,764 |
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Year Ended | Three Months | Twelve Months Ended | ||||||||||||||||||||||
December 31, | Ended March 31, | March 31, | ||||||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | 2010 | |||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Statement of Cash Flow Data: | ||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||
Operating activities | $ | (79,699 | ) | $ | 63,426 | $ | 39,611 | $ | (19,196 | ) | $ | 32,110 | $ | 90,917 | ||||||||||
Investing activities | 54,721 | (138,665 | ) | (77,593 | ) | (18,119 | ) | (30,407 | ) | (89,881 | ) | |||||||||||||
Financing activities | 30,563 | 72,128 | 62,208 | 40,643 | (2,312 | ) | 19,253 | |||||||||||||||||
Additions to property, plant, equipment and mine development | 55,594 | 121,388 | 78,263 | 19,042 | 35,130 | 94,351 | ||||||||||||||||||
Acquisitions, net | 47,733 | 9,566 | — | — | — | — | ||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
Adjusted EBITDA(2) (unaudited) | 431 | 44,238 | 110,745 | 21,872 | 45,236 | 134,109 | ||||||||||||||||||
Past mining obligation payments(3) (unaudited) | 144,811 | 101,746 | 129,060 | 30,810 | 33,724 | 131,974 | ||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||
Tons sold: | ||||||||||||||||||||||||
Appalachia | 14,432 | 20,654 | 25,850 | 6,639 | 5,849 | 25,060 | ||||||||||||||||||
Illinois Basin | 7,711 | 7,866 | 6,986 | 1,819 | 1,746 | 6,913 | ||||||||||||||||||
Total Tons Sold | 22,143 | 28,520 | 32,836 | 8,458 | 7,595 | 31,973 | ||||||||||||||||||
Average sales price per ton sold: | ||||||||||||||||||||||||
Appalachia | $ | 56.62 | $ | 65.23 | $ | 66.79 | $ | 68.30 | $ | 66.74 | $ | 66.38 | ||||||||||||
Illinois Basin | 32.71 | 36.06 | 38.52 | 38.14 | 42.28 | 39.57 | ||||||||||||||||||
As Adjusted Financial Data:(4) | ||||||||||||||||||||||||
Total debt (at period end) | $ | 455,993 | $ | 455,571 | ||||||||||||||||||||
Net debt (at period end)(5) | 195,795 | 195,982 | ||||||||||||||||||||||
Pro forma interest expense | 62,876 | 63,315 | ||||||||||||||||||||||
Ratio of Total debt to Adjusted EBITDA | 4.1x | 3.4x | ||||||||||||||||||||||
Ratio of Net debt to Adjusted EBITDA | 1.8x | 1.5x | ||||||||||||||||||||||
Ratio of Adjusted EBITDA to Pro forma interest expense | 1.8x | 2.1x |
(1) | Net gain on disposal or exchange of assets included gains of $78.5 million from the sales of coal reserves and surface land in 2007. | |
(2) | Adjusted EBITDA is defined as net income (loss) before deducting net interest income and expense; income taxes; reclamation and remediation obligation expense; depreciation, depletion and amortization; restructuring and impairment charge; and net sales contract accretion. Net sales contract accretion represents contract accretion excluding back-to-back coal purchase and sales contracts. The contract accretion on the back-to-back coal purchase and sales contracts reflects the accretion related to certain coal purchase and sales contracts existing prior to July 23, 2008, whereby Magnum purchased coal from third parties to fulfill tonnage commitments on sales contracts. Adjusted EBITDA is used by management to measure operating performance, and management also believes it is a useful indicator of our ability to meet debt service and capital expenditure requirements. We believe that in our industry such information is a relevant measurement of a company’s operating financial performance. The term Adjusted EBITDA does not purport to be an alternative to operating income, net income or cash flows from operating activities as determined in accordance with generally accepted accounting principles as a measure of profitability or liquidity. Because Adjusted EBITDA is not calculated identically by all companies, our calculation may not be comparable to similarly titled measures of other companies. |
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(3) | Past mining obligation payments represents cash payments relating to our postretirement benefit plans, work-related injuries and illnesses obligations and multi-employer retiree healthcare and pension plans. | |
(4) | As Adjusted financial data includes pro forma adjustments to reflect the 2018 Senior Notes offered hereby and the amendment and restatement to our revolving credit facility. Our revolving credit facility will be amended and restated concurrently with the closing of this offering to, among other things, extend the maturity date and adjust borrowing capacity under the facility. See “Description of Material Indebtedness — Revolving Credit Facility.” Pro forma interest expense includes assumed interest on the 2018 Senior Notes and amortization of deferred financing costs related to the 2018 Senior Notes and the revolving credit facility amendment and restatement. | |
(5) | Net debt is defined as total short andlong-term debt less cash and cash equivalents and is regarded as a useful measure of our outstanding debt obligations. Our use of the term “net debt” shall not be understood to mean that we will use any cash on hand to repay debt. Net debt is not a recognized term under U.S. generally accepted accounting principles. |
Twelve Months Ended | ||||||||||||||||||||||||
Year Ended December 31, | Three Months Ended March 31, | March 31, | ||||||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | 2010 | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Net income (loss) | $ | (102,147 | ) | $ | 142,728 | $ | 127,243 | $ | 32,143 | $ | 4,261 | $ | 99,361 | |||||||||||
Depreciation, depletion and amortization | 85,640 | 125,356 | 205,339 | 54,979 | 49,612 | 199,972 | ||||||||||||||||||
Sales contract accretion, net(a) | — | (249,522 | ) | (298,572 | ) | (76,807 | ) | (25,308 | ) | (247,073 | ) | |||||||||||||
Reclamation and remediation obligation expense | 20,144 | 19,260 | 35,116 | 6,451 | 10,846 | 39,511 | ||||||||||||||||||
Restructuring and impairment | — | — | 20,157 | — | — | 20,157 | ||||||||||||||||||
Interest expense | 8,337 | 23,648 | 38,108 | 8,593 | 9,032 | 38,547 | ||||||||||||||||||
Interest income | (11,543 | ) | (17,232 | ) | (16,646 | ) | (3,487 | ) | (3,442 | ) | (16,601 | ) | ||||||||||||
Income tax provision | — | — | — | — | 235 | 235 | ||||||||||||||||||
Adjusted EBITDA | $ | 431 | $ | 44,238 | $ | 110,745 | $ | 21,872 | $ | 45,236 | $ | 134,109 | ||||||||||||
(a) | Net sales contract accretion resulted from the below market coal sales and purchase contracts acquired in the Magnum acquisition that were recorded at fair value in purchase accounting. The net liability generated from applying fair value to these contracts is being accreted over the life of the contracts as the coal is shipped. |
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• | make it more difficult for us to satisfy our obligations under our indebtedness, including the notes offered hereby; | |
• | limit our ability to borrow money to fund growth, such as mergers and acquisitions or other business opportunities, working capital, capital expenditures, debt service or other business requirements; | |
• | require us to dedicate a substantial portion of our cash flow to payments on our indebtedness, which would reduce the amount of cash flow available to fund working capital, capital expenditures and other business requirements; | |
• | cause us to need to sell assets and properties at an inopportune time; | |
• | limit our ability to compete with companies that are not as leveraged and that may be better positioned to withstand economic downturns; | |
• | limit our ability to acquire new coal reserves or plant and equipment needed to conduct operations; | |
• | limit our flexibility in planning for, or reacting to, and increase our vulnerability to, changes in our business, the industry in which we operate and general economic and market conditions; and | |
• | subject us to financial and other restrictive covenants, the failure of which to satisfy could result in a default under our indebtedness. |
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• | such subsidiary guarantor was insolvent or rendered insolvent by reason of issuing the guarantee; | |
• | payment of the consideration left such subsidiary guarantor with an unreasonably small amount of capital to carry on its business; or | |
• | such subsidiary guarantor intended to, or believed that it would, incur debts beyond its ability to pay as they mature. |
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• | the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets; | |
• | the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts and liabilities, including contingent liabilities, as they become absolute and mature; or | |
• | it could not pay its debts as they become due. |
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• | incur or guarantee additional debt; | |
• | pay dividends and make other restricted payments; | |
• | create or incur certain liens; | |
• | engage in sales of assets and subsidiary stock; | |
• | enter into transactions with affiliates; | |
• | sell or dispose of our assets or enter into merger or consolidation transactions; | |
• | make investments, including acquisitions; | |
• | enter into lines of businesses which are not reasonably related to those businesses in which we are engaged; | |
• | enter into contracts containing restrictions on granting liens or making distributions, loans or transferring assets to us or any guarantor; or | |
• | repay indebtedness (including the notes) prior to stated maturities. |
• | could elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable; | |
• | may have the ability to require us to apply all of our available cash to repay these borrowings; or | |
• | may prevent us from making debt service payments under our other agreements, including the indenture governing the notes, any of which could result in an event of default under the notes. |
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As of March 31, 2010 | ||||||||
Actual | As adjusted | |||||||
(Dollars in thousands, unaudited) | ||||||||
Cash and cash equivalents | $ | 26,489 | $ | 259,589 | ||||
Revolving credit facility(1)(2) | $ | — | $ | — | ||||
Accounts receivable securitization facility(3) | — | — | ||||||
3.25% Convertible Senior Notes due 2013(4) | 169,573 | 169,573 | ||||||
8.250% Senior Notes offered hereby | — | 250,000 | ||||||
Other long-term debt (including a current portion of $7,156) | 35,998 | 35,998 | ||||||
Total debt | 205,571 | 455,571 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 909 | 909 | ||||||
Additionalpaid-in-capital | 952,690 | 952,690 | ||||||
Retained earnings | 240,869 | 240,869 | ||||||
Accumulated other comprehensive loss | (250,704 | ) | (250,704 | ) | ||||
Total stockholders’ equity | $ | 943,764 | $ | 943,764 | ||||
Total capitalization | $ | 1,149,335 | $ | 1,399,335 | ||||
(1) | Our current $522.5 million revolving credit facility will be amended and restated concurrently with the closing of this offering to, among other things, extend the maturity date and adjust borrowing capacity under the facility. See “Description of Material Indebtedness — Revolving Credit Facility.” | |
(2) | As of March 31, 2010, the balance of outstanding letters of credit issued against the revolving credit facility totaled $359.5 million. | |
(3) | In April 2010, the borrowing capacity on our accounts receivable securitization facility was expanded by $50 million, bringing our total capacity to $125 million. As of March 31, 2010, there were no outstanding letters of credit issued or direct borrowings under the accounts receivable securitization facility. The scheduled termination date of our accounts receivable securitization program is March 2, 2013 unless extended. | |
(4) | The face value of the 3.25% Convertible Senior Notes due 2013 is $200 million. The balance as of March 31, 2010 reflects the fair value excluding the conversion feature at inception. The difference between the fair value and face value is being amortized over the contractual life of the notes. |
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OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2010
• | Appalachia. In southern West Virginia, we have ten mining complexes located in Boone, Clay, Lincoln, Logan and Kanawha counties, and in northern West Virginia, we have one complex located in Monongalia County. In Appalachia, we sold 5.9 million and 25.8 million tons of coal in the three months ended March 31, 2010 and the year ended December 31, 2009, respectively. As of December 31, 2009, we controlled 1.2 billion tons of proven and probable coal reserves in Appalachia, of which 488 million tons were assigned to current operations. | |
• | Illinois Basin. In the Illinois Basin, we have three complexes located in Union and Henderson counties in western Kentucky. In the Illinois Basin, we sold 1.7 million and 7.0 million tons of coal in the three months ended March 31, 2010 and the year ended December 31, 2009, respectively. As of December 31, 2009, we controlled 646 million tons of proven and probable coal reserves in the Illinois Basin, of which 126 million tons were assigned to current operations. |
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Three Months Ended March 31, | Increase (Decrease) | |||||||||||||||
2010 | 2009 | Tons/$ | % | |||||||||||||
(Dollars and tons in thousands, except per ton amounts) | ||||||||||||||||
Tons Sold | ||||||||||||||||
Appalachia Mining Operations | 5,849 | 6,639 | (790 | ) | (11.9 | )% | ||||||||||
Illinois Basin Mining Operations | 1,746 | 1,819 | (73 | ) | (4.0 | )% | ||||||||||
Total Tons Sold | 7,595 | 8,458 | (863 | ) | (10.2 | )% | ||||||||||
Average sales price per ton sold | ||||||||||||||||
Appalachia Mining Operations | $ | 66.74 | $ | 68.30 | $ | (1.56 | ) | (2.3 | )% | |||||||
Illinois Basin Mining Operations | 42.28 | 38.14 | 4.14 | 10.9 | % | |||||||||||
Revenue | ||||||||||||||||
Appalachia Mining Operations | $ | 390,380 | $ | 453,456 | $ | (63,076 | ) | (13.9 | )% | |||||||
Illinois Basin Mining Operations | 73,828 | 69,382 | 4,446 | 6.4 | % | |||||||||||
Appalachia Other | 3,049 | 6,098 | (3,049 | ) | (50.0 | )% | ||||||||||
Total Revenues | $ | 467,257 | $ | 528,936 | $ | (61,679 | ) | (11.7 | )% | |||||||
Segment Operating Costs and Expenses(1) | ||||||||||||||||
Appalachia Mining Operations and Other | $ | 322,566 | $ | 390,067 | $ | (67,501 | ) | (17.3 | )% | |||||||
Illinois Basin Mining Operations | 67,011 | 66,341 | 670 | 1.0 | % | |||||||||||
Total Segment Operating Costs and Expenses | $ | 389,577 | $ | 456,408 | $ | (66,831 | ) | (14.6 | )% | |||||||
Segment Adjusted EBITDA | ||||||||||||||||
Appalachia Mining Operations and Other | $ | 70,863 | $ | 69,487 | $ | 1,376 | 2.0 | % | ||||||||
Illinois Basin Mining Operations | 6,817 | 3,041 | 3,776 | 124.2 | % | |||||||||||
Total Segment Adjusted EBITDA | $ | 77,680 | $ | 72,528 | $ | 5,152 | 7.1 | % | ||||||||
(1) | Segment Operating Costs and Expenses represent consolidated operating costs and expenses of $433.0 million and $495.2 million less past mining operations of $43.4 million and $37.8 million for the three months ended March 31, 2010 and 2009, respectively, as described below, and less back-to-back contract accretion of $1.0 million for the three months ended March 31, 2009. |
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Three Months Ended March 31, | Favorable (Unfavorable) | |||||||||||||||
2010 | 2009 | $ | % | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Segment Adjusted EBITDA | $ | 77,680 | $ | 72,528 | $ | 5,152 | 7.1 | % | ||||||||
Corporate and Other: | ||||||||||||||||
Past mining obligation expense | (43,466 | ) | (37,800 | ) | (5,666 | ) | (15.0 | )% | ||||||||
Net gain on disposal or exchange of assets | 23,796 | 30 | 23,766 | N/A | ||||||||||||
Selling and administrative expenses | (12,774 | ) | (12,886 | ) | 112 | 0.9 | % | |||||||||
Total Corporate and Other | (32,444 | ) | (50,656 | ) | 18,212 | 36.0 | % | |||||||||
Depreciation, depletion and amortization | (49,612 | ) | (54,979 | ) | 5,367 | 9.8 | % | |||||||||
Reclamation and remediation obligation expense | (10,846 | ) | (6,451 | ) | (4,395 | ) | (68.1 | )% | ||||||||
Sales contract accretion, net | 25,308 | 76,807 | (51,499 | ) | (67.0 | )% | ||||||||||
Interest expense | (9,032 | ) | (8,593 | ) | (439 | ) | (5.1 | )% | ||||||||
Interest income | 3,442 | 3,487 | (45 | ) | (1.3 | )% | ||||||||||
Income before income taxes | 4,496 | 32,143 | (27,647 | ) | (86.0 | )% | ||||||||||
Income tax provision | (235 | ) | — | (235 | ) | N/A | ||||||||||
Net income | $ | 4,261 | $ | 32,143 | $ | (27,882 | ) | (86.7 | )% | |||||||
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RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2009
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Year Ended December 31, | Increase (Decrease) | |||||||||||||||
2009 | 2008 | Tons/$ | % | |||||||||||||
(Dollars and tons in thousands, except per ton amounts) | ||||||||||||||||
Tons Sold | ||||||||||||||||
Appalachia | 25,850 | 20,654 | 5,196 | 25.2 | % | |||||||||||
Illinois Basin | 6,986 | 7,866 | (880 | ) | (11.2 | )% | ||||||||||
Total Tons Sold | 32,836 | 28,520 | 4,316 | 15.1 | % | |||||||||||
Average sales price per ton sold | ||||||||||||||||
Appalachia | $ | 66.79 | $ | 65.23 | $ | 1.56 | 2.4 | % | ||||||||
Illinois Basin | 38.52 | 36.06 | 2.46 | 6.8 | % | |||||||||||
Revenue | ||||||||||||||||
Appalachia Mining Operations | $ | 1,726,588 | $ | 1,347,230 | $ | 379,358 | 28.2 | % | ||||||||
Illinois Basin Mining Operations | 269,079 | 283,643 | (14,564 | ) | (5.1 | )% | ||||||||||
Appalachia Other | 49,616 | 23,749 | 25,867 | 108.9 | % | |||||||||||
Total Revenues | $ | 2,045,283 | $ | 1,654,622 | $ | 390,661 | 23.6 | % | ||||||||
Segment Operating Costs and Expenses(1) | ||||||||||||||||
Appalachia Mining Operations and Other | $ | 1,481,831 | $ | 1,197,985 | $ | 283,846 | 23.7 | % | ||||||||
Illinois Basin Mining Operations | 260,529 | 270,488 | (9,959 | ) | (3.7 | )% | ||||||||||
Total Segment Operating Costs and Expenses | $ | 1,742,360 | $ | 1,468,473 | $ | 273,887 | 18.7 | % | ||||||||
Segment Adjusted EBITDA | ||||||||||||||||
Appalachia Mining Operations and Other | $ | 294,373 | $ | 172,994 | $ | 121,379 | 70.2 | % | ||||||||
Illinois Basin Mining Operations | 8,550 | 13,155 | (4,605 | ) | (35.0 | )% | ||||||||||
Total Segment Adjusted EBITDA | $ | 302,923 | $ | 186,149 | $ | 116,774 | 62.7 | % | ||||||||
(1) | Segment Operating Costs and Expenses represent consolidated operating costs and expenses of $1,893.0 million and $1,608.7 million less past mining obligation expense of $150.7 million and $110.3 million for the years ended December 31, 2009 and 2008, respectively, as described below, and less back-to-back contract accretion of $29.9 million for the year ended December 31, 2008. |
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Year Ended December 31, | Increase (Decrease) to Income | |||||||||||||||
2009 | 2008 | $ | % | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Segment Adjusted EBITDA | $ | 302,923 | $ | 186,149 | $ | 116,774 | 62.7 | % | ||||||||
Corporate and Other: | ||||||||||||||||
Past mining obligation expense | (150,661 | ) | (110,308 | ) | (40,353 | ) | (36.6 | )% | ||||||||
Net gain on disposal or exchange of assets | 7,215 | 7,004 | 211 | 3.0 | % | |||||||||||
Selling and administrative expenses | (48,732 | ) | (38,607 | ) | (10,125 | ) | (26.2 | )% | ||||||||
Total Corporate and Other | (192,178 | ) | (141,911 | ) | (50,267 | ) | (35.4 | )% | ||||||||
Depreciation, depletion and amortization | (205,339 | ) | (125,356 | ) | (79,983 | ) | (63.8 | )% | ||||||||
Reclamation and remediation obligation expense | (35,116 | ) | (19,260 | ) | (15,856 | ) | (82.3 | )% | ||||||||
Sales contract accretion, net | 298,572 | 249,522 | 49,050 | 19.7 | % | |||||||||||
Restructuring and impairment charge | (20,157 | ) | — | (20,157 | ) | N/A | ||||||||||
Interest expense | (38,108 | ) | (23,648 | ) | (14,460 | ) | (61.1 | )% | ||||||||
Interest income | 16,646 | 17,232 | (586 | ) | (3.4 | )% | ||||||||||
Net income | $ | 127,243 | $ | 142,728 | $ | (15,485 | ) | (10.8 | )% | |||||||
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Year Ended December 31, | Increase (Decrease) | |||||||||||||||
2008 | 2007 | Tons/$ | % | |||||||||||||
(Dollars and tons in thousands, except per ton amounts) | ||||||||||||||||
Tons Sold | ||||||||||||||||
Appalachia | 20,654 | 14,432 | 6,222 | 43.1 | % | |||||||||||
Illinois Basin | 7,866 | 7,711 | 155 | 2.0 | % | |||||||||||
Total Tons Sold | 28,520 | 22,143 | 6,377 | 28.8 | % | |||||||||||
Average sales price per ton sold | ||||||||||||||||
Appalachia | $ | 65.23 | $ | 56.62 | $ | 8.61 | 15.2 | % | ||||||||
Illinois Basin | 36.06 | 32.71 | 3.35 | 10.2 | % | |||||||||||
Revenue | ||||||||||||||||
Appalachia Mining Operations | $ | 1,347,230 | $ | 817,070 | $ | 530,160 | 64.9 | % | ||||||||
Illinois Basin Mining Operations | 283,643 | 252,246 | 31,397 | 12.4 | % | |||||||||||
Appalachia Other | 23,749 | 4,046 | 19,703 | 487.0 | % | |||||||||||
Total Revenues | $ | 1,654,622 | $ | 1,073,362 | $ | 581,260 | 54.2 | % | ||||||||
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Year Ended December 31, | Increase (Decrease) | |||||||||||||||
2008 | 2007 | Tons/$ | % | |||||||||||||
(Dollars and tons in thousands, except per ton amounts) | ||||||||||||||||
Segment Operating Costs and Expenses(1) | ||||||||||||||||
Appalachia Mining Operations and Other | $ | 1,197,985 | $ | 731,266 | $ | 466,719 | 63.8 | % | ||||||||
Illinois Basin Mining Operations | 270,488 | 240,384 | 30,104 | 12.5 | % | |||||||||||
Total Segment Operating Costs and Expenses | $ | 1,468,473 | $ | 971,650 | $ | 496,823 | 51.1 | % | ||||||||
Segment Adjusted EBITDA | ||||||||||||||||
Appalachia Mining Operations and Other | $ | 172,994 | $ | 89,850 | $ | 83,144 | 92.5 | % | ||||||||
Illinois Basin Mining Operations | 13,155 | 11,862 | 1,293 | 10.9 | % | |||||||||||
Total Segment Adjusted EBITDA | $ | 186,149 | $ | 101,712 | $ | 84,437 | 83.0 | % | ||||||||
(1) | Segment Operating Costs and Expenses represent consolidated operating costs and expenses of $1,608.7 million and $1,109.3 million less past mining obligation expense of $110.3 million and $137.6 million for the years ended December 31, 2008 and 2007, respectively, as described below, and less back-to-back contract accretion of $29.9 million for the year ended December 31, 2008. |
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Year Ended December 31, | Increase (Decrease) to Income | |||||||||||||||
2008 | 2007 | $ | % | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Segment Adjusted EBITDA | $ | 186,149 | $ | 101,712 | $ | 84,437 | 83.0 | % | ||||||||
Corporate and Other: | ||||||||||||||||
Past mining obligation expense | (110,308 | ) | (137,602 | ) | 27,294 | 19.8 | % | |||||||||
Net gain on disposal or exchange of assets | 7,004 | 81,458 | (74,454 | ) | (91.4 | )% | ||||||||||
Selling and administrative expenses | (38,607 | ) | (45,137 | ) | 6,530 | 14.5 | % | |||||||||
Total corporate and Other | (141,911 | ) | (101,281 | ) | (40,630 | ) | (40.1 | )% | ||||||||
Depreciation, depletion and amortization | (125,356 | ) | (85,640 | ) | (39,716 | ) | (46.4 | )% | ||||||||
Sales contract accretion, net | 249,522 | — | 249,522 | N/A | ||||||||||||
Reclamation and remediation obligation expense | (19,260 | ) | (20,144 | ) | 884 | 4.4 | % | |||||||||
Interest expense: | ||||||||||||||||
Peabody | �� | — | (4,969 | ) | 4,969 | N/A | ||||||||||
Third-party | (23,648 | ) | (3,368 | ) | (20,280 | ) | (602.1 | )% | ||||||||
Interest income | 17,232 | 11,543 | 5,689 | 49.3 | % | |||||||||||
Net income (loss) | 142,728 | (102,147 | ) | 244,875 | 239.7 | % | ||||||||||
Net income attributable to noncontrolling interest | — | (4,721 | ) | 4,721 | N/A | |||||||||||
Net income (loss) attributable to Patriot | 142,728 | (106,868 | ) | 249,596 | 233.6 | % | ||||||||||
Effect of noncontrolling interest purchase arrangement | — | 15,667 | (15,667 | ) | N/A | |||||||||||
Net income (loss) attributable to common stockholders | $ | 142,728 | $ | (122,535 | ) | $ | 265,263 | 216.5 | % | |||||||
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+1.0% | -1.0% | |||||||
(Dollars in thousands) | ||||||||
Effect on total service and interest cost components | $ | 9,306 | $ | (7,758) | ||||
Effect on (gain)/loss amortization component | 30,011 | (25,951) | ||||||
Effect on total postretirement benefit obligation | 160,756 | (138,189) |
+0.5% | -0.5% | |||||||
(Dollars in thousands) | ||||||||
Effect on total service and interest cost components | $ | 898 | $ | (1,193) | ||||
Effect on (gain)/loss amortization component | (7,672) | 7,829 | ||||||
Effect on total postretirement benefit obligation | (76,052) | 81,034 |
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Payments Due by Year as of December 31, 2009 | ||||||||||||||||
Within 1 Year | 2-3 Years | 4-5 Years | After 5 Years | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Long-term debt obligations (principal and cash interest) | $ | 17,468 | $ | 24,159 | $ | 213,850 | $ | 20,700 | ||||||||
Operating lease obligations | 40,443 | 59,218 | 18,630 | 419 | ||||||||||||
Coal reserve lease and royalty obligations | 28,191 | 43,612 | 36,984 | 145,283 | ||||||||||||
Other long-term liabilities(1) | 122,467 | 294,201 | 277,839 | 1,392,335 | ||||||||||||
Total contractual cash obligations | $ | 208,569 | $ | 421,190 | $ | 547,303 | $ | 1,558,737 | ||||||||
(1) | Represents long-term liabilities relating to our postretirement benefit plans, work-related injuries and illnesses and mine reclamation and remediation and end-of-mine closure costs. |
Workers’ | ||||||||||||||||||||||||
Reclamation | Lease | Compensation | Retiree Health | |||||||||||||||||||||
Obligations | Obligations | Obligations | Obligations | Other(1) | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Surety bonds | $ | 135,986 | $ | — | $ | 44 | $ | — | $ | 16,786 | $ | 152,816 | ||||||||||||
Letters of credit | 85,184 | 10,287 | 201,034 | 50,487 | 5,142 | 352,134 | ||||||||||||||||||
Third Party guarantees | — | — | — | — | 1,819 | 1,819 | ||||||||||||||||||
$ | 221,170 | $ | 10,287 | $ | 201,078 | $ | 50,487 | $ | 23,747 | $ | 506,769 | |||||||||||||
(1) | Includes collateral for surety companies and bank guarantees, road maintenance and performance guarantees. |
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• | Appalachia. In southern West Virginia, we have ten mining complexes located in Boone, Clay, Lincoln, Logan and Kanawha counties, and in northern West Virginia, we have one complex located in Monongalia County. As part of a comprehensive strategic review of operations upon the acquisition of Magnum, we idled operations at our Jupiter mining complex (December 2008) and our Remington mining complex (March 2009). Additionally, in response to the weakened coal markets, we announced the idling of our Black Oak mine (January 2009), the deferral of the opening of our Blue Creek mining complex, and the suspension of our Samples surface mine (August 2009). In Appalachia, we sold 25.8 million tons of coal in the year ended December 31, 2009. As of December 31, 2009, we controlled 1.2 billion tons of proven and probable coal reserves in Appalachia, of which 488 million tons were assigned to current operations. | |
• | Illinois Basin. In the Illinois Basin, we have three complexes located in Union and Henderson counties in western Kentucky. In the Illinois Basin, we sold 7.0 million tons of coal in the year ended December 31, 2009. As of December 31, 2009, we controlled 646 million tons of proven and probable coal reserves in the Illinois Basin, of which 126 million tons were assigned to current operations. |
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Mining | 2009 Tons | |||||||||||
Location | Complex | Mine(s) | Method(1) | Met/Steam | Sold(2) | |||||||
Appalachia | Big Mountain | Big Mountain No. 16, Contractor | CM | Steam | 2,072 | |||||||
Blue Creek | Blue Creek No. 1, Blue Creek No. 2 | CM | Steam | 134 | ||||||||
Campbell’s Creek | Campbell’s Creek No. 6, Campbell’s Creek No. 7 | CM | Steam | 1,051 | ||||||||
Corridor G | Job 21, Hill Fork | TS, DL | Steam | 3,565 | ||||||||
Kanawha Eagle | Eagle, Coalburg No. 1, Coalburg No. 2 | CM | Met/Steam | 1,881 | ||||||||
Logan County | Guyan | TS | Steam | 2,500 | ||||||||
Paint Creek | Samples, Winchester | TS, HW, CM | Met/Steam | 2,071 | ||||||||
Panther | Panther | LW, CM | Met/Steam | 2,023 | ||||||||
Remington(3) | Stockburg No. 2, Deskins, Wildcat | CM, TS, HW | Steam | 182 | ||||||||
Rocklick | Harris No. 1, Black Oak, Contractor | TS, CM | Met/Steam | 1,658 | ||||||||
Wells | Rivers Edge, Contractor | CM | Met | 3,315 | ||||||||
Federal | Federal No. 2 | LW, CM | Steam | 3,522 | ||||||||
Purchased coal | N/A | N/A | N/A | 1,876 | ||||||||
Subtotal | 25,850 | |||||||||||
Illinois Basin | Bluegrass | Patriot, Freedom | TS, CM | Steam | 2,433 | |||||||
Dodge Hill | Dodge Hill No. 1 | CM | Steam | 888 | ||||||||
Highland | Highland No. 9 | CM | Steam | 3,665 | ||||||||
Subtotal | 6,986 | |||||||||||
Total | 32,836 | |||||||||||
(1) | LW = Longwall, CM = Continuous Miner, TS =Truck-and-Shovel, DL = Dragline, HW = Highwall. | |
(2) | Tons sold, presented in thousands, for each plant were the same as actual annual plant production in 2009, subject to stockpile variations. | |
(3) | The Remington mining complex was idled in March 2009. |
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Commitments as of December 31, 2009 | ||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 and Later | Total | ||||||||||||||||||||
Tons (in millions) | ||||||||||||||||||||||||
29.5 | 19.9 | 11.3 | 11.9 | 72.6 |
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Name | Age | Positions | ||||
Richard M. Whiting | 55 | Chief Executive Officer & Director | ||||
Irl F. Engelhardt | 63 | Chairman of the Board of Directors, Executive Advisor and Director | ||||
Paul H. Vining | 55 | President & Chief Operating Officer | ||||
Mark N. Schroeder | 53 | Senior Vice President & Chief Financial Officer | ||||
Charles A. Ebetino, Jr. | 57 | Senior Vice President — Corporate Development | ||||
Joseph W. Bean | 47 | Senior Vice President — Law & Administration, General Counsel & Corporate Secretary | ||||
Robert W. Bennett | 47 | Senior Vice President & Chief Marketing Officer |
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12-Month Period Commencing April 30 in Year | Percentage | |||
2014 | 104.125 | % | ||
2015 | 102.063 | % | ||
2016 and thereafter | 100.000 | % |
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• | declare or pay any dividend or make any distribution on its Equity Interests (other than dividends or distributions paid in the Company’s Qualified Equity Interests) held by Persons other than the Company or any of its Restricted Subsidiaries; | |
• | purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company held by Persons other than the Company or any of its Restricted Subsidiaries; | |
• | repay, redeem, repurchase, defease or otherwise acquire or retire for value, or make any payment on or with respect to, any Subordinated Debt (other than a payment of interest or principal at Stated Maturity thereof or the purchase, repurchase or other acquisition of any Subordinated Debt purchased in anticipation of satisfying a scheduled maturity sinking fund or amortization or other installment obligation, in each case due within one year of the date of acquisition); or | |
• | make any Investment other than a Permitted Investment; |
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• | consolidate with or merge with or into any Person, or | |
• | sell, convey, transfer, or otherwise dispose of all or substantially all of the Company’s assets (determined on a consolidated basis for the Company and its Restricted Subsidiaries), in one transaction or a series of related transactions, whether effected by the Companyand/or one or more of its Restricted Subsidiaries, to any Person |
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• | consolidate with or merge with or into any Person, or | |
• | sell, convey, transfer or dispose of all or substantially all of the Guarantor’s assets, in one transaction or a series of related transactions, to any Person, |
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• | they are purchased by those initial holders who purchase such notes at the “issue price,” which will equal the first price to the public (not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) at which a substantial amount of the notes is sold for money; and | |
• | they are held as capital assets. |
• | certain financial institutions; | |
• | insurance companies; | |
• | dealers in securities or foreign currencies; | |
• | persons holding notes as part of a hedge or other integrated transaction; | |
• | U.S. Holders (as defined below) whose functional currency is not the U.S. dollar; | |
• | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; and | |
• | persons subject to the alternative minimum tax. |
• | a citizen or resident of the United States; | |
• | a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof; or | |
• | an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source. |
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• | an individual who is classified as a nonresident alien for U.S. federal income tax purposes; | |
• | a foreign corporation; or | |
• | a foreign estate or trust. |
• | payments of principal, interest (including original issue discount, if any) and premium on the notes by the Company or any paying agent to anyNon-U.S. Holder will not be subject to U.S. federal withholding tax, provided that, in the case of interest, | |
• | the holder does not own, actually or constructively, 10 percent or more of the total combined voting power of all classes of stock of the Company entitled to vote and is not a controlled foreign corporation related, directly or indirectly, to the Company through stock ownership; and | |
• | the certification requirement described below has been fulfilled with respect to the beneficial owner, as discussed below; and | |
• | aNon-U.S. Holder of a note will not be subject to U.S. federal income tax on gain realized on the sale, exchange or other disposition of such note, unless the gain is effectively connected with the conduct by the holder of a trade or business in the United States, subject to an applicable income tax treaty providing otherwise. |
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Principal Amount | ||||
Underwriter | of Notes | |||
Citigroup Global Markets Inc. | $ | 96,000,000 | ||
Banc of America Securities LLC | 64,000,000 | |||
Barclays Capital Inc. | 40,000,000 | |||
Natixis Bleichroeder LLC | 10,000,000 | |||
Fifth Third Securities, Inc. | 10,000,000 | |||
SG Americas Securities, LLC | 10,000,000 | |||
Santander Investment Securities Inc. | 10,000,000 | |||
PNC Capital Markets LLC | 10,000,000 | |||
Total | $ | 250,000,000 |
Paid by Patriot | ||||
Coal | ||||
Per note | 2.500 | % |
• | Short sales involve secondary market sales by the underwriters of a greater number of notes than they are required to purchase in the offering. | |
• | Covering transactions involve purchases of notes in the open market after the distribution has been completed in order to cover short positions. |
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• | Stabilizing transactions involve bids to purchase notes so long as the stabilizing bids do not exceed a specified maximum. |
• | to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
• | to any legal entity that has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; | |
• | to fewer than 100 natural or legal persons (other than qualified investors as defined below) subject to obtaining the prior consent of the representatives for any such offer; or | |
• | in any other circumstances that do not require the publication of a prospectus pursuant to Article 3 of the Prospectus Directive. |
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• | released, issued, distributed or caused to be released, issued or distributed to the public in France; or | |
• | used in connection with any offer for subscription or sale of the notes to the public in France. |
• | to qualified investors (investisseurs qualifiés)and/or to a restricted circle of investors (cercle restreint d’investisseurs), in each case investing for their own account, all as defined in, and in accordance with,articles L.411-2, D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the FrenchCode monétaire et financier; | |
• | to investment services providers authorized to engage in portfolio management on behalf of third parties; or | |
• | in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the FrenchCode monétaire et financierandarticle 211-2 of the General Regulations (Règlement Général) of theAutorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne). |
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• | a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or | |
• | a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, |
• | to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; | |
• | where no consideration is or will be given for the transfer; or | |
• | where the transfer is by operation of law. |
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THREE MONTHS ENDED MARCH 31, 2010
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Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in thousands, except share and per share data) | ||||||||
Revenues | ||||||||
Sales | $ | 464,208 | $ | 522,838 | ||||
Other revenues | 3,049 | 6,098 | ||||||
Total revenues | 467,257 | 528,936 | ||||||
Costs and expenses | ||||||||
Operating costs and expenses | 433,043 | 495,208 | ||||||
Depreciation, depletion and amortization | 49,612 | 54,979 | ||||||
Reclamation and remediation obligation expense | 10,846 | 6,451 | ||||||
Sales contract accretion | (25,308 | ) | (77,807 | ) | ||||
Selling and administrative expenses | 12,774 | 12,886 | ||||||
Net gain on disposal or exchange of assets | (23,796 | ) | (30 | ) | ||||
Operating profit | 10,086 | 37,249 | ||||||
Interest expense | 9,032 | 8,593 | ||||||
Interest income | (3,442 | ) | (3,487 | ) | ||||
Income before income taxes | 4,496 | 32,143 | ||||||
Income tax provision | 235 | — | ||||||
Net income | $ | 4,261 | $ | 32,143 | ||||
Weighted average shares outstanding: | ||||||||
Basic | 90,835,561 | 77,906,152 | ||||||
Effect of dilutive securities | 1,331,396 | 93,095 | ||||||
Diluted | 92,166,957 | 77,999,247 | ||||||
Earnings per share, basic and diluted | $ | 0.05 | $ | 0.41 |
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(Unaudited) | ||||||||
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 26,489 | $ | 27,098 | ||||
Accounts receivable and other, net of allowance for doubtful accounts of $141 as of March 31, 2010 and December 31, 2009 | 157,179 | 188,897 | ||||||
Inventories | 95,518 | 81,188 | ||||||
Prepaid expenses and other current assets | 23,632 | 14,366 | ||||||
Total current assets | 302,818 | 311,549 | ||||||
Property, plant, equipment and mine development | ||||||||
Land and coal interests | 2,902,920 | 2,864,225 | ||||||
Buildings and improvements | 397,168 | 396,449 | ||||||
Machinery and equipment | 652,708 | 631,615 | ||||||
Less accumulated depreciation, depletion and amortization | (778,670 | ) | (731,035 | ) | ||||
Property, plant, equipment and mine development, net | 3,174,126 | 3,161,254 | ||||||
Notes receivable | 103,051 | 109,137 | ||||||
Investments and other assets | 35,228 | 36,223 | ||||||
Total assets | $ | 3,615,223 | $ | 3,618,163 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of debt | $ | 7,156 | $ | 8,042 | ||||
Trade accounts payable and accrued expenses | 408,169 | 406,351 | ||||||
Below market sales contracts acquired | 136,155 | 150,441 | ||||||
Total current liabilities | 551,480 | 564,834 | ||||||
Long-term debt, less current maturities | 198,415 | 197,951 | ||||||
Asset retirement obligations | 248,692 | 244,518 | ||||||
Workers’ compensation obligations | 207,095 | 193,719 | ||||||
Accrued postretirement benefit costs | 1,173,217 | 1,169,981 | ||||||
Obligation to industry fund | 41,325 | 42,197 | ||||||
Below market sales contracts acquired, noncurrent | 139,157 | 156,120 | ||||||
Other noncurrent liabilities | 112,078 | 113,349 | ||||||
Total liabilities | 2,671,459 | 2,682,669 | ||||||
Stockholders’ equity | ||||||||
Common stock ($0.01 par value; 100,000,000 shares authorized; 90,863,950 and 90,319,939 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively) | 909 | 903 | ||||||
Preferred stock ($0.01 par value; 10,000,000 shares authorized; no shares outstanding at March 31, 2010 and December 31, 2009) | — | — | ||||||
Series A Junior Participating preferred stock ($0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding at March 31, 2010 and December 31, 2009) | — | — | ||||||
Additional paid-in capital | 952,690 | 947,159 | ||||||
Retained earnings | 240,869 | 236,608 | ||||||
Accumulated other comprehensive loss | (250,704 | ) | (249,176 | ) | ||||
Total stockholders’ equity | 943,764 | 935,494 | ||||||
Total liabilities and stockholders’ equity | $ | 3,615,223 | $ | 3,618,163 | ||||
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Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Cash Flows From Operating Activities | ||||||||
Net income | $ | 4,261 | $ | 32,143 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation, depletion and amortization | 49,612 | 54,979 | ||||||
Sales contract accretion | (25,308 | ) | (77,807 | ) | ||||
Net gain on disposal or exchange of assets | (23,796 | ) | (30 | ) | ||||
Stock-based compensation expense | 4,455 | 2,734 | ||||||
Changes in current assets and liabilities: | ||||||||
Accounts receivable | 31,718 | (17,567 | ) | |||||
Inventories | (14,330 | ) | (15,333 | ) | ||||
Other current assets | (9,278 | ) | (5,260 | ) | ||||
Accounts payable and accrued expenses | (3,977 | ) | (1,336 | ) | ||||
Interest on notes receivable | (3,414 | ) | (3,409 | ) | ||||
Reclamation and remediation obligations | 6,813 | 2,060 | ||||||
Workers’ compensation obligations | 1,632 | 587 | ||||||
Accrued postretirement benefit costs | 12,236 | 8,435 | ||||||
Obligation to industry fund | (722 | ) | (802 | ) | ||||
Other, net | 2,208 | 1,410 | ||||||
Net cash provided by (used in) operating activities | 32,110 | (19,196 | ) | |||||
Cash Flows From Investing Activities | ||||||||
Additions to property, plant, equipment and mine development | (35,130 | ) | (19,042 | ) | ||||
Additions to advance mining royalties | (5,177 | ) | (3,101 | ) | ||||
Proceeds from disposal or exchange of assets | 400 | 3,958 | ||||||
Proceeds from notes receivable | 9,500 | — | ||||||
Other | — | 66 | ||||||
Net cash used in investing activities | (30,407 | ) | (18,119 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Long-term debt payments | (2,494 | ) | (2,024 | ) | ||||
Deferred financing costs | (900 | ) | — | |||||
Proceeds from employee stock purchases | 1,082 | 667 | ||||||
Short-term borrowings | — | 42,000 | ||||||
Net cash provided by (used in) financing activities | (2,312 | ) | 40,643 | |||||
Net increase (decrease) in cash and cash equivalents | (609 | ) | 3,328 | |||||
Cash and cash equivalents at beginning of period | 27,098 | 2,872 | ||||||
Cash and cash equivalents at end of period | $ | 26,489 | $ | 6,200 | ||||
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(1) | Basis of Presentation |
(2) | Newly Adopted Accounting Pronouncements |
(3) | Receivables Securitization |
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(4) | Net Gain on Disposal or Exchange of Assets and Other Commercial Transactions |
(5) | Income Tax Provision |
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(6) | Earnings per Share |
(7) | Fair Value of Financial Instruments |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Assets: | ||||||||
Fuel contracts, cash flow hedges | $ | 2,515 | $ | 2,021 | ||||
Liabilities: | ||||||||
Fuel contracts, cash flow hedges | 414 | 986 | ||||||
$200 million of 3.25% Convertible Senior Notes due 2013 | 170,735 | 163,617 |
(8) | Inventories |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Materials and supplies | $ | 40,579 | $ | 39,285 | ||||
Saleable coal | 36,156 | 28,255 | ||||||
Raw coal | 18,783 | 13,648 | ||||||
Total | $ | 95,518 | $ | 81,188 | ||||
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(9) | Comprehensive Income |
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Net income | $ | 4,261 | $ | 32,143 | ||||
Accumulated actuarial loss and prior service cost realized in net income | 8,906 | 3,816 | ||||||
Net change in fair value of diesel fuel hedge | 1,066 | 140 | ||||||
Comprehensive income | $ | 14,233 | $ | 36,099 | ||||
(10) | Postretirement Benefit Costs |
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Service cost for benefits earned | $ | 1,342 | $ | 1,022 | ||||
Interest cost on accumulated postretirement benefit obligation | 18,950 | 17,630 | ||||||
Amortization of actuarial loss | 9,138 | 4,591 | ||||||
Amortization of prior service cost | (138 | ) | (138 | ) | ||||
Net periodic postretirement benefit costs | $ | 29,292 | $ | 23,105 | ||||
(11) | Healthcare Legislation |
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(12) | Segment Information |
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Three Months Ended March 31, 2010 | ||||||||||||||||
Corporate | ||||||||||||||||
Appalachia | Illinois Basin | and Other | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | $ | 393,429 | $ | 73,828 | $ | — | $ | 467,257 | ||||||||
Adjusted EBITDA | 70,863 | 6,817 | (32,444 | ) | 45,236 | |||||||||||
Additions to property, plant, equipment and mine development | 23,642 | 11,410 | 78 | 35,130 |
Three Months Ended March 31, 2009 | ||||||||||||||||
Corporate | ||||||||||||||||
Appalachia | Illinois Basin | and Other | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | $ | 459,554 | $ | 69,382 | $ | — | $ | 528,936 | ||||||||
Adjusted EBITDA | 69,487 | 3,041 | (50,656 | ) | 21,872 | |||||||||||
Additions to property, plant, equipment and mine development | 17,290 | 1,543 | 209 | 19,042 |
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Total Adjusted EBITDA | $ | 45,236 | $ | 21,872 | ||||
Depreciation, depletion and amortization | (49,612 | ) | (54,979 | ) | ||||
Reclamation and remediation obligation expense | (10,846 | ) | (6,451 | ) | ||||
Sales contract accretion, net | 25,308 | 76,807 | ||||||
Interest expense | (9,032 | ) | (8,593 | ) | ||||
Interest income | 3,442 | 3,487 | ||||||
Income tax provision | (235 | ) | — | |||||
Net income | $ | 4,261 | $ | 32,143 | ||||
(13) | Derivatives |
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March 31, | December 31, | |||||||
2010 | 2009 | |||||||
(Dollars in thousands) | ||||||||
Fair value of current fuel contracts (Prepaid expenses and other current assets) | $ | 2,225 | $ | 2,021 | ||||
Fair value of noncurrent fuel contracts (Investments and other assets) | 290 | — | ||||||
Fair value of current fuel contracts (Trade accounts payable and accrued expenses) | 414 | 986 | ||||||
Net unrealized gains from fuel hedges, net of tax (Accumulated other comprehensive loss) | 2,101 | 1,035 |
(14) | Commitments and Contingencies |
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(15) | Guarantees |
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(16) | Related Party Transactions |
(17) | Subsequent Events |
(18) | Supplemental Guarantor/Non-Guarantor Financial Information |
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Three Months Ended March 31, 2010 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantor | Guarantor | ||||||||||||||||||
Company | Subsidiaries | Entity | Eliminations | Consolidated | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Sales | $ | — | $ | 464,208 | $ | — | $ | — | $ | 464,208 | ||||||||||
Other revenues | — | 3,049 | — | — | 3,049 | |||||||||||||||
Total revenues | — | 467,257 | — | — | 467,257 | |||||||||||||||
Costs and expenses | ||||||||||||||||||||
Operating costs and expenses | 93 | 433,398 | — | — | 433,491 | |||||||||||||||
Income from equity affiliates | (25,221 | ) | (448 | ) | — | 25,221 | (448 | ) | ||||||||||||
Depreciation, depletion and amortization | 544 | 49,068 | — | — | 49,612 | |||||||||||||||
Reclamation and remediation obligation expense | — | 10,846 | — | — | 10,846 | |||||||||||||||
Sales contract accretion | — | (25,308 | ) | — | — | (25,308 | ) | |||||||||||||
Selling and administrative expenses | 12,739 | 35 | — | — | 12,774 | |||||||||||||||
Net gain on disposal or exchange of assets | — | (23,796 | ) | — | — | (23,796 | ) | |||||||||||||
Operating profit | 11,845 | 23,462 | — | (25,221 | ) | 10,086 | ||||||||||||||
Interest expense | 7,586 | 1,446 | 75 | (75 | ) | 9,032 | ||||||||||||||
Interest income | (2 | ) | (3,440 | ) | (75 | ) | 75 | (3,442 | ) | |||||||||||
Income before income taxes | 4,261 | 25,456 | — | (25,221 | ) | 4,496 | ||||||||||||||
Income tax provision | — | 235 | — | — | 235 | |||||||||||||||
Net income | $ | 4,261 | $ | 25,221 | $ | — | $ | (25,221 | ) | $ | 4,261 | |||||||||
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Three Months Ended March 31, 2009 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | ||||||||||||||||
Sales | $ | — | $ | 522,838 | $ | — | $ | 522,838 | ||||||||
Other revenues | — | 6,098 | — | 6,098 | ||||||||||||
Total revenues | — | 528,936 | — | 528,936 | ||||||||||||
Costs and expenses | ||||||||||||||||
Operating costs and expenses | — | 494,977 | — | 494,977 | ||||||||||||
(Income) loss from equity affiliates | (52,055 | ) | 231 | 52,055 | 231 | |||||||||||
Depreciation, depletion and amortization | 549 | 54,430 | — | 54,979 | ||||||||||||
Reclamation and remediation obligation expense | — | 6,451 | — | 6,451 | ||||||||||||
Sales contract accretion | — | (77,807 | ) | — | (77,807 | ) | ||||||||||
Selling and administrative expenses | 11,784 | 1,102 | — | 12,886 | ||||||||||||
Net gain on disposal or exchange of assets | — | (30 | ) | — | (30 | ) | ||||||||||
Operating profit | 39,722 | 49,582 | (52,055 | ) | 37,249 | |||||||||||
Interest expense | 7,581 | 1,012 | — | 8,593 | ||||||||||||
Interest income | (2 | ) | (3,485 | ) | — | (3,487 | ) | |||||||||
Income before income taxes | 32,143 | 52,055 | (52,055 | ) | 32,143 | |||||||||||
Income tax provision | — | — | — | — | ||||||||||||
Net income | $ | 32,143 | $ | 52,055 | $ | (52,055 | ) | $ | 32,143 | |||||||
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March 31, 2010 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantor | Guarantor | ||||||||||||||||||
Company | Subsidiaries | Entity | Eliminations | Consolidated | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 26,017 | $ | 472 | $ | — | $ | — | $ | 26,489 | ||||||||||
Accounts receivable and other, net | 152 | 157,027 | 120,764 | (120,764 | ) | 157,179 | ||||||||||||||
Inventories | — | 95,518 | — | — | 95,518 | |||||||||||||||
Prepaid expenses and other current assets | 3,300 | 20,332 | — | — | 23,632 | |||||||||||||||
Total current assets | 29,469 | 273,349 | 120,764 | (120,764 | ) | 302,818 | ||||||||||||||
Property, plant, equipment and mine development | ||||||||||||||||||||
Land and coal interests | — | 2,902,920 | — | — | 2,902,920 | |||||||||||||||
Buildings and improvements | 1,737 | 395,431 | — | — | 397,168 | |||||||||||||||
Machinery and equipment | 16,434 | 636,274 | — | — | 652,708 | |||||||||||||||
Less accumulated depreciation, depletion and amortization | (12,631 | ) | (766,039 | ) | — | — | (778,670 | ) | ||||||||||||
Property, plant, equipment and mine development, net | 5,540 | 3,168,586 | — | — | 3,174,126 | |||||||||||||||
Notes receivable | — | 103,051 | — | — | 103,051 | |||||||||||||||
Investments, intercompany and other assets | 1,349,245 | (145,394 | ) | — | (1,168,623 | ) | 35,228 | |||||||||||||
Total assets | $ | 1,384,254 | $ | 3,399,592 | $ | 120,764 | $ | (1,289,387 | ) | $ | 3,615,223 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Current portion of debt | $ | — | $ | 7,156 | $ | — | $ | — | $ | 7,156 | ||||||||||
Trade accounts payable, accrued expenses and other | 15,388 | 392,781 | 120,764 | (120,764 | ) | 408,169 | ||||||||||||||
Below market sales contracts acquired | — | 136,155 | — | — | 136,155 | |||||||||||||||
Total current liabilities | 15,388 | 536,092 | 120,764 | (120,764 | ) | 551,480 | ||||||||||||||
Long-term debt, less current maturities | 169,573 | 28,842 | — | — | 198,415 | |||||||||||||||
Asset retirement obligations | — | 248,692 | — | — | 248,692 | |||||||||||||||
Workers’ compensation obligations | — | 207,095 | — | — | 207,095 | |||||||||||||||
Accrued postretirement benefit costs | 678 | 1,172,539 | — | — | 1,173,217 | |||||||||||||||
Obligation to industry fund | — | 41,325 | — | — | 41,325 | |||||||||||||||
Below market sales contracts acquired, noncurrent | — | 139,157 | — | — | 139,157 | |||||||||||||||
Other noncurrent liabilities | 1,738 | 110,340 | — | — | 112,078 | |||||||||||||||
Total liabilities | 187,377 | 2,484,082 | 120,764 | (120,764 | ) | 2,671,459 | ||||||||||||||
Stockholders’ equity | 1,196,877 | 915,510 | — | (1,168,623 | ) | 943,764 | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 1,384,254 | $ | 3,399,592 | $ | 120,764 | $ | (1,289,387 | ) | $ | 3,615,223 | |||||||||
F-20
Table of Contents
December 31, 2009 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 26,574 | $ | 524 | $ | — | $ | 27,098 | ||||||||
Accounts receivable and other, net | — | 188,897 | — | 188,897 | ||||||||||||
Inventories | — | 81,188 | — | 81,188 | ||||||||||||
Prepaid expenses and other current assets | 2,696 | 11,670 | — | 14,366 | ||||||||||||
Total current assets | 29,270 | 282,279 | — | 311,549 | ||||||||||||
Property, plant, equipment and mine development | ||||||||||||||||
Land and coal interests | — | 2,864,225 | — | 2,864,225 | ||||||||||||
Buildings and improvements | 1,737 | 394,712 | — | 396,449 | ||||||||||||
Machinery and equipment | 16,314 | 615,301 | — | 631,615 | ||||||||||||
Less accumulated depreciation,depletion and amortization | (12,045 | ) | (718,990 | ) | — | (731,035 | ) | |||||||||
Property, plant, equipment and mine development, net | 6,006 | 3,155,248 | — | 3,161,254 | ||||||||||||
Notes receivable | — | 109,137 | — | 109,137 | ||||||||||||
Investments, intercompany and other assets | 1,340,392 | (160,764 | ) | (1,143,405 | ) | 36,223 | ||||||||||
Total assets | $ | 1,375,668 | $ | 3,385,900 | $ | (1,143,405 | ) | $ | 3,618,163 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current portion of debt | $ | — | $ | 8,042 | $ | — | $ | 8,042 | ||||||||
Trade accounts payable and accrued expenses | 20,083 | 386,268 | — | 406,351 | ||||||||||||
Below market sales contracts acquired | — | 150,441 | — | 150,441 | ||||||||||||
Total current liabilities | 20,083 | 544,751 | — | 564,834 | ||||||||||||
Long-term debt, less current maturities | 167,501 | 30,450 | — | 197,951 | ||||||||||||
Asset retirement obligations | — | 244,518 | — | 244,518 | ||||||||||||
Workers’ compensation obligations | — | 193,719 | — | 193,719 | ||||||||||||
Accrued postretirement benefit costs | 564 | 1,169,417 | — | 1,169,981 | ||||||||||||
Obligation to industry fund | — | 42,197 | — | 42,197 | ||||||||||||
Below market sales contracts acquired, noncurrent | — | 156,120 | — | 156,120 | ||||||||||||
Other noncurrent liabilities | 1,536 | 111,813 | — | 113,349 | ||||||||||||
Total liabilities | 189,684 | 2,492,985 | — | 2,682,669 | ||||||||||||
Stockholders’ equity | 1,185,984 | 892,915 | (1,143,405 | ) | 935,494 | |||||||||||
Total liabilities and stockholders’ equity | $ | 1,375,668 | $ | 3,385,900 | $ | (1,143,405 | ) | $ | 3,618,163 | |||||||
F-21
Table of Contents
Three Months Ended March 31, 2010 | ||||||||||||||||||||
Non- | ||||||||||||||||||||
Parent | Guarantor | Guarantor | ||||||||||||||||||
Company | Subsidiaries | Entity | Eliminations | Consolidated | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (18,262 | ) | $ | 50,372 | $ | — | $ | — | $ | 32,110 | |||||||||
Cash Flows From Investing Activities | ||||||||||||||||||||
Additions to property, plant, equipment and mine development | (78 | ) | (35,052 | ) | — | — | (35,130 | ) | ||||||||||||
Additions to advance mining royalties | — | (5,177 | ) | — | — | (5,177 | ) | |||||||||||||
Proceeds from disposal or exchange of assets | — | 400 | — | — | 400 | |||||||||||||||
Proceeds from notes receivable | — | 9,500 | — | — | 9,500 | |||||||||||||||
Net cash used in investing activities | (78 | ) | (30,329 | ) | — | — | (30,407 | ) | ||||||||||||
Cash Flows From Financing Activities | ||||||||||||||||||||
Long-term debt payments | — | (2,494 | ) | — | — | (2,494 | ) | |||||||||||||
Deferred financing costs | (900 | ) | — | — | — | (900 | ) | |||||||||||||
Proceeds from employee stock purchases | 1,082 | — | — | — | 1,082 | |||||||||||||||
Intercompany transactions | 17,602 | (17,602 | ) | — | — | — | ||||||||||||||
Net cash provided by (used in) financing activities | 17,784 | (20,096 | ) | — | — | (2,312 | ) | |||||||||||||
Net decrease in cash and cash equivalents | (556 | ) | (53 | ) | — | — | (609 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 26,574 | 524 | — | — | 27,098 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 26,018 | $ | 471 | $ | — | $ | — | $ | 26,489 | ||||||||||
F-22
Table of Contents
Three Months Ended March 31, 2009 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net cash used in operating activities | $ | (14,288 | ) | $ | (4,908 | ) | $ | — | $ | (19,196 | ) | |||||
Cash Flows From Investing Activities | ||||||||||||||||
Additions to property, plant, equipment and mine development | (209 | ) | (18,833 | ) | — | (19,042 | ) | |||||||||
Additions to advance mining royalties | — | (3,101 | ) | — | (3,101 | ) | ||||||||||
Proceeds from disposal or exchange of assets | — | 3,958 | — | 3,958 | ||||||||||||
Other | — | 66 | — | 66 | ||||||||||||
Net cash used in investing activities | (209 | ) | (17,910 | ) | — | (18,119 | ) | |||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Long-term debt payments | — | (2,024 | ) | — | (2,024 | ) | ||||||||||
Proceeds from employee stock purchases | 667 | — | — | 667 | ||||||||||||
Short-term borrowings | 42,000 | — | — | 42,000 | ||||||||||||
Intercompany transactions | (24,603 | ) | 24,603 | — | — | |||||||||||
Net cash provided by financing activities | 18,064 | 22,579 | — | 40,643 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 3,567 | (239 | ) | — | 3,328 | |||||||||||
Cash and cash equivalents at beginning of period | 1,957 | 915 | — | 2,872 | ||||||||||||
Cash and cash equivalents at end of period | $ | 5,524 | $ | 676 | $ | — | $ | 6,200 | ||||||||
F-23
Table of Contents
YEAR ENDED DECEMBER 31, 2009
Page | ||||
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F-26 | ||||
F-27 | ||||
F-28 | ||||
F-29 | ||||
F-30 |
F-24
Table of Contents
F-25
Table of Contents
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands, except share and per share data) | ||||||||||||
Revenues | ||||||||||||
Sales | $ | 1,995,667 | $ | 1,630,873 | $ | 1,069,316 | ||||||
Other revenues | 49,616 | 23,749 | 4,046 | |||||||||
Total revenues | 2,045,283 | 1,654,622 | 1,073,362 | |||||||||
Costs and expenses | ||||||||||||
Operating costs and expenses | 1,893,021 | 1,608,661 | 1,109,252 | |||||||||
Depreciation, depletion and amortization | 205,339 | 125,356 | 85,640 | |||||||||
Reclamation and remediation obligation expense | 35,116 | 19,260 | 20,144 | |||||||||
Sales contract accretion | (298,572 | ) | (279,402 | ) | — | |||||||
Restructuring and impairment charge | 20,157 | — | — | |||||||||
Selling and administrative expenses | 48,732 | 38,607 | 45,137 | |||||||||
Net gain on disposal or exchange of assets | (7,215 | ) | (7,004 | ) | (81,458 | ) | ||||||
Operating profit (loss) | 148,705 | 149,144 | (105,353 | ) | ||||||||
Interest expense | 38,108 | 23,648 | 8,337 | |||||||||
Interest income | (16,646 | ) | (17,232 | ) | (11,543 | ) | ||||||
Net income (loss) | 127,243 | 142,728 | (102,147 | ) | ||||||||
Net income attributable to noncontrolling interest | — | — | 4,721 | |||||||||
Net income (loss) attributable to Patriot | 127,243 | 142,728 | (106,868 | ) | ||||||||
Effect of noncontrolling interest purchase arrangement | — | — | (15,667 | ) | ||||||||
Net income (loss) attributable to common stockholders | $ | 127,243 | $ | 142,728 | $ | (122,535 | ) | |||||
Weighted average shares outstanding: | ||||||||||||
Basic | 84,660,998 | 64,080,998 | 53,511,478 | |||||||||
Effect of dilutive securities | 763,504 | 544,913 | 34,638 | |||||||||
Diluted | 85,424,502 | 64,625,911 | 53,546,116 | |||||||||
Basic earnings per share: | ||||||||||||
Net income (loss) attributable to Patriot | $ | 1.50 | $ | 2.23 | $ | (2.00 | ) | |||||
Effect of noncontrolling interest purchase arrangement | — | — | (0.29 | ) | ||||||||
Net income (loss) attributable to common stockholders | $ | 1.50 | $ | 2.23 | $ | (2.29 | ) | |||||
Diluted earnings per share: | ||||||||||||
Net income (loss) attributable to Patriot | $ | 1.49 | $ | 2.21 | $ | (2.00 | ) | |||||
Effect of noncontrolling interest purchase arrangement | — | — | (0.29 | ) | ||||||||
Net income (loss) attributable to common stockholders | $ | 1.49 | $ | 2.21 | $ | (2.29 | ) | |||||
F-26
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands, except share data) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 27,098 | $ | 2,872 | ||||
Accounts receivable and other, net of allowance for doubtful accounts of $141 and $540 at December 31, 2009 and 2008, respectively | 188,897 | 163,556 | ||||||
Inventories | 81,188 | 80,953 | ||||||
Below market purchase contracts acquired | 694 | 8,543 | ||||||
Prepaid expenses and other current assets | 13,672 | 12,529 | ||||||
Total current assets | 311,549 | 268,453 | ||||||
Property, plant, equipment and mine development | ||||||||
Land and coal interests | 2,864,225 | 2,652,224 | ||||||
Buildings and improvements | 396,449 | 390,119 | ||||||
Machinery and equipment | 631,615 | 658,699 | ||||||
Less accumulated depreciation, depletion and amortization | (731,035 | ) | (540,366 | ) | ||||
Property, plant, equipment and mine development, net | 3,161,254 | 3,160,676 | ||||||
Notes receivable | 109,137 | 131,066 | ||||||
Investments and other assets | 36,223 | 62,125 | ||||||
Total assets | $ | 3,618,163 | $ | 3,622,320 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Current portion of debt | $ | 8,042 | $ | 28,170 | ||||
Trade accounts payable and accrued expenses | 406,351 | 413,790 | ||||||
Below market sales contracts acquired | 150,441 | 324,407 | ||||||
Total current liabilities | 564,834 | 766,367 | ||||||
Long-term debt, less current maturities | 197,951 | 176,123 | ||||||
Asset retirement obligations | 244,518 | 224,180 | ||||||
Workers’ compensation obligations | 193,719 | 188,180 | ||||||
Accrued postretirement benefit costs | 1,169,981 | 1,003,254 | ||||||
Obligation to industry fund | 42,197 | 42,571 | ||||||
Below market sales contracts acquired, noncurrent | 156,120 | 316,707 | ||||||
Other noncurrent liabilities | 113,349 | 64,757 | ||||||
Total liabilities | 2,682,669 | 2,782,139 | ||||||
Stockholders’ equity | ||||||||
Common stock ($0.01 par value; 100,000,000 shares authorized; 90,319,939 and 77,383,199 shares issued and outstanding at December 31, 2009 and 2008, respectively) | 903 | 774 | ||||||
Preferred stock ($0.01 par value; 10,000,000 shares authorized; no shares outstanding at December 31, 2009 and December 31, 2008) | — | — | ||||||
Series A Junior Participating Preferred Stock ($0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding at December 31, 2009 and 2008) | — | — | ||||||
Additional paid-in capital | 947,159 | 842,323 | ||||||
Retained earnings | 236,608 | 109,365 | ||||||
Accumulated other comprehensive loss | (249,176 | ) | (112,281 | ) | ||||
Total stockholders’ equity | 935,494 | 840,181 | ||||||
Total liabilities and stockholders’ equity | $ | 3,618,163 | $ | 3,622,320 | ||||
F-27
Table of Contents
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Cash Flows From Operating Activities | ||||||||||||
Net income (loss) | $ | 127,243 | $ | 142,728 | $ | (102,147 | ) | |||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation, depletion and amortization | 205,339 | 125,356 | 85,640 | |||||||||
Sales contract accretion | (298,572 | ) | (279,402 | ) | — | |||||||
Impairment charge | 12,949 | — | — | |||||||||
Net gain on disposal or exchange of assets | (7,215 | ) | (7,004 | ) | (81,458 | ) | ||||||
Stock-based compensation expense | 13,852 | 8,778 | 1,299 | |||||||||
Changes in current assets and liabilities: | ||||||||||||
Accounts receivable | (3,565 | ) | 60,699 | (19,058 | ) | |||||||
Inventories | (6,530 | ) | 3,693 | 3,655 | ||||||||
Other current assets | 903 | (1,498 | ) | 790 | ||||||||
Accounts payable and accrued expenses | (38,867 | ) | (5,697 | ) | 10,828 | |||||||
Interest on notes receivable | (14,030 | ) | (13,113 | ) | (10,013 | ) | ||||||
Reclamation and remediation obligations | 14,988 | 12,719 | 4,473 | |||||||||
Workers’ compensation obligations | 4,470 | (5,953 | ) | 6,654 | ||||||||
Accrued postretirement benefit costs | 26,248 | 15,577 | 22,264 | |||||||||
Obligation to industry fund | (3,019 | ) | (3,412 | ) | 7,286 | |||||||
Other, net | 5,417 | 9,955 | (9,912 | ) | ||||||||
Net cash provided by (used in) operating activities | 39,611 | 63,426 | (79,699 | ) | ||||||||
Cash Flows From Investing Activities | ||||||||||||
Additions to property, plant, equipment and mine development | (78,263 | ) | (121,388 | ) | (55,594 | ) | ||||||
Additions to advance mining royalties | (16,997 | ) | (11,981 | ) | (3,964 | ) | ||||||
Investment in joint ventures | — | (16,365 | ) | — | ||||||||
Cash acquired in business combination | — | 21,015 | — | |||||||||
Acquisitions | — | (9,566 | ) | (47,733 | ) | |||||||
Proceeds from notes receivable | 11,000 | — | — | |||||||||
Proceeds from disposal or exchange of assets | 5,513 | 2,077 | 29,426 | |||||||||
Net change in receivables from former affiliates | — | — | 132,586 | |||||||||
Other | 1,154 | (2,457 | ) | — | ||||||||
Net cash provided by (used in) investing activities | (77,593 | ) | (138,665 | ) | 54,721 | |||||||
Cash Flows From Financing Activities | ||||||||||||
Proceeds from equity offering, net of costs | 89,077 | — | — | |||||||||
Short-term debt borrowings (payments) | (23,000 | ) | 23,000 | — | ||||||||
Long-term debt payments | (5,905 | ) | (2,684 | ) | (8,358 | ) | ||||||
Convertible notes proceeds | — | 200,000 | — | |||||||||
Termination of Magnum debt facility | — | (136,816 | ) | — | ||||||||
Contribution from former Parent | — | — | 43,647 | |||||||||
Deferred financing costs | — | (10,906 | ) | (4,726 | ) | |||||||
Common stock issuance fees | — | (1,468 | ) | — | ||||||||
Proceeds from employee stock purchases | 2,036 | 1,002 | — | |||||||||
Net cash provided by financing activities | 62,208 | 72,128 | 30,563 | |||||||||
Net increase (decrease) in cash and cash equivalents | 24,226 | (3,111 | ) | 5,585 | ||||||||
Cash and cash equivalents at beginning of period | 2,872 | 5,983 | 398 | |||||||||
Cash and cash equivalents at end of period | $ | 27,098 | $ | 2,872 | $ | 5,983 | ||||||
F-28
Table of Contents
Accumulated | ||||||||||||||||||||||||||||
Additional | Retained | Other | Former | |||||||||||||||||||||||||
Common | Paid-in | Earnings | Comprehensive | Parent’s | Noncontrolling | |||||||||||||||||||||||
Stock | Capital | (Deficit) | Loss | Equity | Interest | Total | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
December 31, 2006 | $ | — | $ | — | $ | — | $ | (322,121 | ) | $ | (367,706 | ) | $ | 16,153 | $ | (673,674 | ) | |||||||||||
Net loss | — | — | (33,363 | ) | — | (73,505 | ) | 4,721 | (102,147 | ) | ||||||||||||||||||
Increase in investment in KE Ventures, LLC from 74% to 100% | — | — | — | — | — | (19,825 | ) | (19,825 | ) | |||||||||||||||||||
Dividends paid to noncontrolling interest in KE Ventures, LLC | — | — | — | — | — | (1,049 | ) | (1,049 | ) | |||||||||||||||||||
Postretirement plans and workers’ compensation obligations (net of taxes of $0): | ||||||||||||||||||||||||||||
Changes in accumulated actuarial loss | — | — | — | 91,709 | — | — | 91,709 | |||||||||||||||||||||
Changes in prior service cost | — | — | — | (8,962 | ) | — | — | (8,962 | ) | |||||||||||||||||||
Total comprehensive loss | (40,274 | ) | ||||||||||||||||||||||||||
Contributions from former Parent | — | — | — | — | 13,647 | — | 13,647 | |||||||||||||||||||||
Consummation of spin-off transaction on October 31, 2007 | 532 | 187,884 | — | 165,334 | 427,564 | — | 781,314 | |||||||||||||||||||||
Stock-based compensation | — | 1,299 | — | — | — | — | 1,299 | |||||||||||||||||||||
Stock grants to employees | 4 | — | — | — | — | — | 4 | |||||||||||||||||||||
December 31, 2007 | 536 | 189,183 | (33,363 | ) | (74,040 | ) | — | — | 82,316 | |||||||||||||||||||
Net income | — | — | 142,728 | — | — | — | 142,728 | |||||||||||||||||||||
Postretirement plans and workers’ compensation obligations (net of taxes of $0): | ||||||||||||||||||||||||||||
Changes in accumulated actuarial loss | — | — | — | (27,866 | ) | — | — | (27,866 | ) | |||||||||||||||||||
Changes in prior service cost | — | — | — | (680 | ) | — | — | (680 | ) | |||||||||||||||||||
Unrealized loss on diesel fuel hedge | — | — | — | (9,695 | ) | — | — | (9,695 | ) | |||||||||||||||||||
Total comprehensive income | 104,487 | |||||||||||||||||||||||||||
Retrospective accounting adjustment: | ||||||||||||||||||||||||||||
Convertible note discount | — | 44,656 | — | — | — | — | 44,656 | |||||||||||||||||||||
Equity issuance costs | — | (1,462 | ) | — | — | — | — | (1,462 | ) | |||||||||||||||||||
Issuance of 23,803,312 shares of common stock upon acquisition, net of issuance fees | 238 | 600,166 | — | — | — | — | 600,404 | |||||||||||||||||||||
Stock-based compensation | — | 8,778 | — | — | — | — | 8,778 | |||||||||||||||||||||
Employee stock purchases | — | 1,002 | — | — | — | — | 1,002 | |||||||||||||||||||||
December 31, 2008 | 774 | 842,323 | 109,365 | (112,281 | ) | — | — | 840,181 | ||||||||||||||||||||
Net income | — | — | 127,243 | — | — | — | 127,243 | |||||||||||||||||||||
Postretirement plans and workers’ compensation obligations (net of taxes of $0): | ||||||||||||||||||||||||||||
Changes in accumulated actuarial loss | — | — | — | (147,074 | ) | — | — | (147,074 | ) | |||||||||||||||||||
Changes in prior service cost | — | — | — | (551 | ) | — | — | (551 | ) | |||||||||||||||||||
Changes in diesel fuel hedge | — | — | — | 10,730 | — | — | 10,730 | |||||||||||||||||||||
Total comprehensive loss | (9,652 | ) | ||||||||||||||||||||||||||
Issuance of 12,000,000 shares of common stock from equity | ||||||||||||||||||||||||||||
offering | 120 | 88,957 | — | — | — | — | 89,077 | |||||||||||||||||||||
Stock-based compensation | — | 13,852 | — | — | — | — | 13,852 | |||||||||||||||||||||
Employee stock purchases | 3 | 2,033 | — | — | — | — | 2,036 | |||||||||||||||||||||
Stock grants to employees | 6 | (6 | ) | — | — | — | — | — | ||||||||||||||||||||
December 31, 2009 | $ | 903 | $ | 947,159 | $ | 236,608 | $ | (249,176 | ) | $ | — | $ | — | $ | 935,494 | |||||||||||||
F-29
Table of Contents
(1) | Basis of Presentation |
(2) | Summary of Significant Accounting Policies |
F-30
Table of Contents
F-31
Table of Contents
Years | ||
Buildings and improvements | 10 to 20 | |
Machinery and equipment | 3 to 30 | |
Leasehold improvements | Shorter of life of asset, mine or lease |
F-32
Table of Contents
F-33
Table of Contents
F-34
Table of Contents
F-35
Table of Contents
(3) | New Accounting Pronouncements |
F-36
Table of Contents
F-37
Table of Contents
(4) | Common Stock Offering |
(5) | Restructuring and Impairment Charge |
F-38
Table of Contents
(6) | Business Combinations |
Cash | $ | 21,015 | ||
Accounts receivable, net | 88,471 | |||
Inventories | 49,294 | |||
Other current assets | 39,073 | |||
Property, plant, equipment and mine development, net | 2,360,072 | |||
Other noncurrent assets | 5,193 | |||
Total assets acquired | 2,563,118 | |||
Trade accounts payable and accrued expenses | 235,505 | |||
Below market sales contracts acquired, current | 497,882 | |||
Long-term debt | 144,606 | |||
Below market sales contracts acquired, noncurrent | 447,804 | |||
Accrued postretirement benefit costs | 430,837 | |||
Other noncurrent liabilities | 195,051 | |||
Total liabilities assumed | 1,951,685 | |||
Total purchase price | $ | 611,433 | ||
F-39
Table of Contents
F-40
Table of Contents
Year Ended December 31, | ||||||||
2008 | 2007 | |||||||
Revenues: | ||||||||
As reported | $ | 1,654,622 | $ | 1,073,362 | ||||
Pro forma | 2,207,353 | 2,194,432 | ||||||
Net income: | ||||||||
As reported | $ | 142,728 | $ | (102,147 | ) | |||
Pro forma | 253,626 | 299,725 | ||||||
Basic earnings per share: | ||||||||
As reported | $ | 2.23 | $ | (2.00 | ) | |||
Pro forma | $ | 3.96 | $ | 5.60 | ||||
Diluted earnings per share: | ||||||||
As reported | $ | 2.21 | $ | (2.00 | ) | |||
Pro forma | $ | 3.92 | $ | 5.60 |
(7) | Risk Management and Financial Instruments |
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December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Assets: | ||||||||
Fuel contracts, cash flow hedges | $ | 2,021 | $ | — | ||||
Liabilities: | ||||||||
Fuel contracts, cash flow hedges | 986 | 9,695 | ||||||
$200 million of 3.25% Convertible Senior Notes due 2013 | 163,617 | 99,863 |
(8) | Net Gain on Disposal or Exchange of Assets and Other Commercial Transactions |
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(9) | Earnings per Share |
(10) | Inventories |
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Materials and supplies | $ | 39,285 | $ | 52,023 | ||||
Saleable coal | 28,255 | 15,107 | ||||||
Raw coal | 13,648 | 13,823 | ||||||
Total | $ | 81,188 | $ | 80,953 | ||||
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(11) | Accumulated Other Comprehensive Loss |
Net | ||||||||||||||||
Actuarial Loss | ||||||||||||||||
Associated with | ||||||||||||||||
Postretirement | Prior Service | Total | ||||||||||||||
Plans and | Cost Associated | Accumulated | ||||||||||||||
Workers’ | with | Diesel | Other | |||||||||||||
Compensation | Postretirement | Fuel | Comprehensive | |||||||||||||
Obligations | Plans | Hedge | Loss | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
December 31, 2006 | $ | (318,614 | ) | $ | (3,507 | ) | $ | — | $ | (322,121 | ) | |||||
Unrealized gains (losses) | 56,624 | (7,656 | ) | — | 48,968 | |||||||||||
Reclassification from other comprehensive income to earnings | 35,085 | (1,306 | ) | — | 33,779 | |||||||||||
Retention by Peabody of certain liabilities at spin-off | 165,334 | — | — | 165,334 | ||||||||||||
December 31, 2007 | (61,571 | ) | (12,469 | ) | — | (74,040 | ) | |||||||||
Unrealized losses | (39,263 | ) | — | (9,695 | ) | (48,958 | ) | |||||||||
Reclassification from other comprehensive income to earnings | 11,397 | (680 | ) | — | 10,717 | |||||||||||
December 31, 2008 | (89,437 | ) | (13,149 | ) | (9,695 | ) | (112,281 | ) | ||||||||
Unrealized gains (losses) | (163,339 | ) | — | 5,450 | (157,889 | ) | ||||||||||
Reclassification from other comprehensive income to earnings | 16,265 | (551 | ) | 5,280 | 20,994 | |||||||||||
December 31, 2009 | $ | (236,511 | ) | $ | (13,700 | ) | $ | 1,035 | $ | (249,176 | ) | |||||
(12) | Leases |
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Capital | Operating | Coal | ||||||||||
Leases | Leases | Reserves | ||||||||||
(Dollars in thousands) | ||||||||||||
2010 | $ | 9,268 | $ | 40,443 | $ | 28,191 | ||||||
2011 | 4,159 | 33,411 | 22,616 | |||||||||
2012 | 3,600 | 25,807 | 20,996 | |||||||||
2013 | 3,600 | 14,825 | 19,519 | |||||||||
2014 | 3,600 | 3,805 | 17,465 | |||||||||
2015 and thereafter | 15,600 | 419 | 145,283 | |||||||||
Total minimum lease and royalty payments | $ | 39,827 | $ | 118,710 | $ | 254,070 | ||||||
Less interest | (11,788 | ) | ||||||||||
Present value of minimum capital lease payments | $ | 28,039 | ||||||||||
(13) | Trade Accounts Payable and Accrued Expenses |
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Trade accounts payable | $ | 147,254 | $ | 201,046 | ||||
Accrued healthcare, including postretirement | 70,993 | 66,509 | ||||||
Accrued taxes other than income | 47,540 | 27,646 | ||||||
Accrued payroll and related benefits | 35,923 | 40,719 | ||||||
Workers’ compensation obligations | 26,609 | 28,225 | ||||||
Environmental obligations | 13,730 | — | ||||||
Other accrued benefits | 10,901 | 11,029 | ||||||
Accrued royalties | 10,011 | 9,532 | ||||||
Accrued lease payments | 9,910 | 4,330 | ||||||
Diesel fuel hedge | 986 | 5,915 | ||||||
Other accrued expenses | 32,494 | 18,839 | ||||||
Total trade accounts payable and accrued expenses | $ | 406,351 | $ | 413,790 | ||||
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(14) | Income Taxes |
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Federal statutory rate | $ | 44,535 | $ | 49,955 | $ | (35,751 | ) | |||||
Depletion | (22,588 | ) | (16,597 | ) | (11,281 | ) | ||||||
State income taxes, net of U.S. federal tax benefit | 3,520 | 5,692 | (6,911 | ) | ||||||||
Noncontrolling interest | — | — | (1,652 | ) | ||||||||
Changes in valuation allowance | (27,225 | ) | (42,871 | ) | 55,183 | |||||||
Changes in tax reserves | 1,307 | 960 | 107 | |||||||||
Other, net | 451 | 2,861 | 305 | |||||||||
Total | $ | — | $ | — | $ | — | ||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Deferred tax assets: | ||||||||
Postretirement benefit obligations | $ | 372,335 | $ | 425,087 | ||||
Tax credits and loss carryforwards | 240,471 | 133,860 | ||||||
Accrued workers’ compensation liabilities | 98,051 | 92,199 | ||||||
Accrued reclamation and mine closing liabilities | 89,406 | 98,084 | ||||||
Obligation to industry fund | 16,357 | 12,672 | ||||||
Sales contract liabilities | 124,157 | 274,704 | ||||||
Other | 81,556 | 43,986 | ||||||
Total gross deferred tax assets | 1,022,333 | 1,080,592 | ||||||
Deferred tax liabilities: | ||||||||
Property, plant, equipment and mine development, leased coal interests and advance royalties, principally due to differences in depreciation, depletion and asset writedowns | 878,874 | 878,144 | ||||||
Long-term debt | 12,758 | 15,824 | ||||||
Total gross deferred tax liabilities | 891,632 | 893,968 | ||||||
Valuation allowance | (130,701 | ) | (186,624 | ) | ||||
Net deferred tax liability | $ | — | $ | — | ||||
Deferred taxes consisted of the following: | ||||||||
Current deferred income taxes | $ | — | $ | — | ||||
Noncurrent deferred income taxes | — | — | ||||||
Net deferred tax liability | $ | — | $ | — | ||||
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(15) | Long-Term Debt |
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
3.25% Convertible Senior Notes due 2013 | $ | 167,501 | $ | 159,637 | ||||
Capital leases | 28,039 | 10,218 | ||||||
Promissory notes | 10,453 | 11,438 | ||||||
Short-term borrowings | — | 23,000 | ||||||
Total | $ | 205,993 | $ | 204,293 | ||||
Less current portion of debt | (8,042 | ) | (28,170 | ) | ||||
Long-term debt, less current maturities | $ | 197,951 | $ | 176,123 | ||||
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(Dollars in | ||||
Year of Maturity | thousands) | |||
2010 | $ | 8,042 | ||
2011 | 3,329 | |||
2012 | 3,033 | |||
2013 | 203,294 | |||
2014 | 3,581 | |||
2015 and thereafter | 17,213 | |||
Total cash payments on debt | 238,492 | |||
Debt discount on convertible notes | (32,499 | ) | ||
Total long-term debt | $ | 205,993 | ||
(16) | Derivatives |
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December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Fair value of current fuel contracts (Prepaid expenses and other current assets) | $ | 2,021 | $ | — | ||||
Fair value of current fuel contracts (Trade accounts payable and accrued expenses) | 986 | 5,915 | ||||||
Fair value of noncurrent fuel contracts (Other noncurrent liabilities) | — | 3,780 | ||||||
Net unrealized gains (losses) from fuel hedges, net of tax (Accumulated other comprehensive loss) | 1,035 | (9,695 | ) |
(17) | Asset Retirement Obligations |
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Balance at beginning of year | $ | 224,180 | $ | 134,364 | ||||
Liabilities incurred | 4,113 | 203 | ||||||
Liabilities settled or disposed | (16,248 | ) | (6,540 | ) | ||||
Accretion expense | 25,395 | 19,116 | ||||||
Revisions to estimate | 1,780 | 1,057 | ||||||
Liabilities acquired through acquisition | 5,298 | 75,980 | ||||||
Balance at end of year | $ | 244,518 | $ | 224,180 | ||||
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(18) | Workers’ Compensation Obligations |
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Service cost | $ | 5,462 | $ | 3,382 | $ | 2,971 | ||||||
Interest cost | 9,042 | 9,876 | 9,124 | |||||||||
Net amortization of actuarial gains | (4,504 | ) | (4,009 | ) | (1,607 | ) | ||||||
Total occupational disease | 10,000 | 9,249 | 10,488 | |||||||||
Traumatic injury claims | 18,798 | 13,261 | 13,160 | |||||||||
State assessment taxes | 2,503 | 2,546 | 4,373 | |||||||||
Total provision | $ | 31,301 | $ | 25,056 | $ | 28,021 | ||||||
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Discount rate: | ||||||||||||
Occupational disease | 6.00 | % | 6.40 | % | 6.00 | % | ||||||
Traumatic injury | 6.06 | % | 5.80 | % | 6.00 | % | ||||||
Inflation rate | 3.50 | % | 3.50 | % | 3.50 | % |
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December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Occupational disease costs | $ | 152,079 | $ | 154,527 | ||||
Traumatic injury claims | 68,249 | 61,878 | ||||||
Total obligations | 220,328 | 216,405 | ||||||
Less current portion (included in Accrued expenses) | (26,609 | ) | (28,225 | ) | ||||
Noncurrent obligations (included in Workers’ compensation obligations) | $ | 193,719 | $ | 188,180 | ||||
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Change in benefit obligation: | ||||||||
Beginning of year obligation | $ | 154,527 | $ | 155,829 | ||||
Service cost | 5,462 | 3,382 | ||||||
Interest cost | 9,042 | 9,876 | ||||||
Acquisitions/divestitures | — | 3,176 | ||||||
Net change in actuarial gain | (6,508 | ) | (6,876 | ) | ||||
Benefit and administrative payments | (10,444 | ) | (10,860 | ) | ||||
Net obligation at end of year | 152,079 | 154,527 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of period | — | — | ||||||
Employer contributions | 10,444 | 10,860 | ||||||
Benefits paid | (10,444 | ) | (10,860 | ) | ||||
Fair value of plan assets at end of period | — | — | ||||||
Obligation at end of period | $ | 152,079 | $ | 154,527 | ||||
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(19) | Pension and Savings Plans |
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(20) | Postretirement Healthcare Benefits |
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Service cost for benefits earned | $ | 3,715 | $ | 1,731 | $ | 981 | ||||||
Interest cost on accumulated postretirement benefit obligation | 70,509 | 51,472 | 65,964 | |||||||||
Amortization of prior service cost | (551 | ) | (680 | ) | (1,306 | ) | ||||||
Amortization of actuarial losses | 18,813 | 13,516 | 34,260 | |||||||||
Net periodic postretirement benefit costs | $ | 92,486 | $ | 66,039 | $ | 99,899 | ||||||
December 31, | ||||||||
2009 | 2008 | |||||||
(Dollars in thousands) | ||||||||
Change in benefit obligation: | ||||||||
Accumulated postretirement benefit obligation at beginning of period | $ | 1,064,928 | $ | 554,748 | ||||
Service cost | 3,715 | 1,731 | ||||||
Interest cost | 70,509 | 51,472 | ||||||
Participant contributions | 969 | 412 | ||||||
Plan amendments | (19,391 | ) | — | |||||
Acquisitions/divestitures | — | 456,396 | ||||||
Benefits paid | (65,203 | ) | (42,491 | ) | ||||
Change in actuarial loss | 181,523 | 42,660 | ||||||
Accumulated postretirement benefit obligation at end of period | 1,237,050 | 1,064,928 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of period | — | — | ||||||
Employer contributions | 64,234 | 42,079 | ||||||
Participant contributions | 969 | 412 | ||||||
Benefits paid and administrative fees (net of Medicare Part D reimbursements) | (65,203 | ) | (42,491 | ) | ||||
Fair value of plan assets at end of period | — | — | ||||||
Accrued postretirement benefit obligation | 1,237,050 | 1,064,928 | ||||||
Less current portion (included in Accrued expenses) | (67,069 | ) | (61,674 | ) | ||||
Noncurrent obligation (included in Accrued postretirement benefit costs) | $ | 1,169,981 | $ | 1,003,254 | ||||
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Year Ended December 31, | ||||
2009 | 2008 | |||
Discount rate | 6.30% | 6.80% | ||
Rate of compensation increase | 3.50% | 3.50% | ||
Measurement date | December 31, 2009 | December 31, 2008 |
Year Ended December 31, | ||||||
2009 | 2008 | 2007 | ||||
Discount rate | 6.80% | 6.80% | 6.00% | |||
Rate of compensation increase | 3.50% | 3.50% | 3.50% | |||
Measurement date | December 31, 2008 | December 31, 2007 | December 31, 2006 |
Year Ended December 31, | ||||||||
2009 | 2008 | |||||||
Healthcare cost trend rate assumed for next year | 7.00 | % | 9.25 | % | ||||
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 5.00 | % | 4.75 | % | ||||
Year that the rate reaches that ultimate trend rate | 2016 | 2014 |
+1.0% | -1.0% | |||||||
(Dollars in thousands) | ||||||||
Effect on total service and interest cost components | $ | 9,306 | $ | (7,758 | ) | |||
Effect on year-end postretirement benefit obligation | 160,756 | (138,189 | ) |
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Postretirement | ||||
Benefits | ||||
2010 | $ | 67,069 | ||
2011 | 72,337 | |||
2012 | 76,848 | |||
2013 | 81,532 | |||
2014 | 85,119 | |||
Years2015-2018 | 457,581 |
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(21) | Related Party Transactions |
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(22) | Guarantees |
Workers’ | Retiree | |||||||||||||||||||||||
Reclamation | Lease | Compensation | Health | |||||||||||||||||||||
Obligations | Obligations | Obligations | Obligations | Other(1) | Total | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Surety bonds | $ | 135,986 | $ | — | $ | 44 | $ | — | $ | 16,786 | $ | 152,816 | ||||||||||||
Letters of credit | 85,184 | 10,287 | 201,034 | 50,487 | 5,142 | 352,134 | ||||||||||||||||||
Third-party guarantees | — | — | — | — | 1,819 | 1,819 | ||||||||||||||||||
$ | 221,170 | $ | 10,287 | $ | 201,078 | $ | 50,487 | $ | 23,747 | $ | 506,769 | |||||||||||||
(1) | Other includes letters of credit and surety bonds related to collateral for surety companies and bank guarantees, road maintenance and performance guarantees. |
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(23) | Commitments and Contingencies |
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(24) | Segment Information |
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Illinois | Corporate | |||||||||||||||
Appalachia | Basin | and Other(1) | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | $ | 1,776,204 | $ | 269,079 | $ | — | $ | 2,045,283 | ||||||||
Adjusted EBITDA | 294,373 | 8,550 | (192,178 | ) | 110,745 | |||||||||||
Additions to property, plant, equipment and mine development | 69,931 | 7,437 | 895 | 78,263 | ||||||||||||
Income from equity affiliates | 398 | — | — | 398 |
Illinois | Corporate | |||||||||||||||
Appalachia | Basin | and Other(1) | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | $ | 1,370,979 | $ | 283,643 | $ | — | $ | 1,654,622 | ||||||||
Adjusted EBITDA | 172,994 | 13,155 | (141,911 | ) | 44,238 | |||||||||||
Additions to property, plant, equipment and mine development | 109,428 | 8,823 | 3,137 | 121,388 | ||||||||||||
Loss from equity affiliates | (915 | ) | — | — | (915 | ) |
Illinois | Corporate | |||||||||||||||
Appalachia | Basin | and Other(1) | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | $ | 821,116 | $ | 252,246 | $ | — | $ | 1,073,362 | ||||||||
Adjusted EBITDA | 89,850 | 11,862 | (101,281 | ) | 431 | |||||||||||
Additions to property, plant, equipment and mine development | 48,955 | 6,639 | — | 55,594 | ||||||||||||
Income from equity affiliates | 63 | �� | — | — | 63 |
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
(Dollars in thousands) | ||||||||||||
Consolidated Adjusted EBITDA | $ | 110,745 | $ | 44,238 | $ | 431 | ||||||
Depreciation, depletion and amortization | (205,339 | ) | (125,356 | ) | (85,640 | ) | ||||||
Sales contract accretion, net | 298,572 | 249,522 | — | |||||||||
Reclamation and remediation obligation expense | (35,116 | ) | (19,260 | ) | (20,144 | ) | ||||||
Restructuring and impairment | (20,157 | ) | — | — | ||||||||
Interest expense | (38,108 | ) | (23,648 | ) | (8,337 | ) | ||||||
Interest income | 16,646 | 17,232 | 11,543 | |||||||||
Net income (loss) | $ | 127,243 | $ | 142,728 | $ | (102,147 | ) | |||||
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(25) | Stockholders’ Equity |
Shares | ||||
Outstanding | ||||
October 31, 2007 | 53,141,880 | |||
Stock grants to employees | 375,656 | |||
December 31, 2007 | 53,517,536 | |||
Stock grants to employees | 5,697 | |||
Employee stock purchases | 56,654 | |||
Shares issued to Magnum shareholders | 23,803,312 | |||
December 31, 2008 | 77,383,199 | |||
Stock grants to employees | 553,428 | |||
Employee stock purchases | 370,583 | |||
Shares issued in equity offering | 12,000,000 | |||
Stock options exercised | 12,729 | |||
December 31, 2009 | 90,319,939 | |||
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(26) | Stock-Based Compensation |
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Weighted | ||||||||
Year Ended | Average | |||||||
December 31, | Grant-Date | |||||||
2009 | Fair Value | |||||||
Nonvested at January 1, 2009 | 381,353 | $ | 23.73 | |||||
Granted | 663,740 | 5.14 | ||||||
Forfeited | (109,889 | ) | 12.13 | |||||
Vested | (1,092 | ) | 22.91 | |||||
Nonvested at December 31, 2009 | 934,112 | 11.88 | ||||||
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Weighted | ||||||||
Year Ended | Average | |||||||
December 31, | Grant-Date | |||||||
2009 | Fair Value | |||||||
Nonvested at January 1, 2009 | 506,375 | $ | 21.88 | |||||
Granted | 59,568 | 5.13 | ||||||
Forfeited | (50,756 | ) | 23.48 | |||||
Vested | (1,894 | ) | 56.77 | |||||
Nonvested at December 31, 2009 | 513,293 | 19.65 | ||||||
Weighted | ||||||||
Year Ended | Average | |||||||
December 31, | Grant-Date | |||||||
2009 | Fair Value | |||||||
Nonvested at January 1, 2009 | 679,352 | $ | 23.47 | |||||
Granted | 378,800 | 7.48 | ||||||
Forfeited | (111,477 | ) | 18.49 | |||||
Nonvested at December 31, 2009 | 946,675 | 18.01 | ||||||
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Weighted | ||||||||||||||||
Weighted | Aggregate | Average | ||||||||||||||
Year Ended | Average | Intrinsic | Remaining | |||||||||||||
December 31, | Grant-Date | Value | Contractual | |||||||||||||
2009 | Fair Value | (in millions) | Life | |||||||||||||
Nonvested at January 1, 2009 | 1,069,730 | $ | 23.66 | |||||||||||||
Granted | 757,600 | 5.13 | ||||||||||||||
Forfeited | (182,507 | ) | 17.24 | |||||||||||||
Exercised | (12,729 | ) | 5.13 | $ | 0.1 | |||||||||||
Nonvested at December 31, 2009 | 1,632,094 | 15.92 | $ | 6.9 | 7.8 | |||||||||||
Year Ended December 31, | ||||||
2009 | 2008 | 2007 | ||||
Weighted-average fair value | $2.49 | $30.10 | $7.67 | |||
Risk-free interest rate | 1.31% | 3.55% | 4.22% | |||
Expected option life | 2.87 years | 6.69 years | 6.69 years | |||
Expected volatility | 78.41% | 47.61% | 30.64% | |||
Dividend yield | 0% | 0% | 0% |
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(27) | Summary Quarterly Financial Information (Unaudited) |
Year Ended December 31, 2009 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(Dollars in thousands, except per share and stock price data) | ||||||||||||||||
Revenues | $ | 528,936 | $ | 506,996 | $ | 506,189 | $ | 503,162 | ||||||||
Operating profit | 37,249 | 34,691 | 59,775 | 16,990 | ||||||||||||
Net income | 32,143 | 31,390 | 52,842 | 10,868 | ||||||||||||
Basic earnings per share | $ | 0.41 | $ | 0.39 | $ | 0.59 | $ | 0.12 | ||||||||
Diluted earnings per share | $ | 0.41 | $ | 0.39 | $ | 0.58 | $ | 0.12 | ||||||||
Weighted average shares used in calculating basic earnings per share | 77,906,152 | 79,940,308 | 90,277,301 | 90,322,074 | ||||||||||||
Stock price — high and low prices | $ | 9.00-$2.76 | $ | 10.90-$3.51 | $ | 14.12-$4.97 | $ | 17.24-$10.21 |
Year Ended December 31, 2008 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Quarter | Quarter | Quarter | Quarter | |||||||||||||
(Dollars in thousands, except per share and stock price data) | ||||||||||||||||
Revenues | $ | 284,334 | $ | 339,680 | $ | 489,583 | $ | 541,025 | ||||||||
Operating profit (loss) | (4,905 | ) | 16,917 | 72,394 | 64,738 | |||||||||||
Net income (loss)(1) | (3,066 | ) | 11,236 | 71,199 | 63,359 | |||||||||||
Basic earnings per share(1) | $ | (0.06 | ) | $ | 0.21 | $ | 0.99 | $ | 0.82 | |||||||
Diluted earnings per share(1) | $ | (0.06 | ) | $ | 0.21 | $ | 0.99 | $ | 0.82 | |||||||
Weighted average shares used in calculating basic earnings per share(1) | 53,518,744 | 53,512,286 | 71,681,084 | 77,382,195 | ||||||||||||
Stock price — high and low prices | $ | 28.89-$16.14 | $ | 82.23-$23.13 | $ | 77.74-$24.09 | $ | 28.45-$5.24 |
(1) | Net income, basic earnings per share and diluted earnings per share were adjusted to reflect the retrospective application of authoritative guidance adopted January 1, 2009. Net income and earnings per share were adjusted to reflect additional interest expense above the stated coupon rate of 3.25% on our Convertible Senior Notes issued in May 2008 based on the requirement to bifurcate the conversion feature of the debt. Additionally, restricted stock shares were included in the calculation of basic earnings per share as unvested participating securities in all four quarters. |
(28) | Subsequent Events |
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(29) | Supplemental Guarantor/Non-Guarantor Financial Information |
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Year Ended December 31, 2009 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | ||||||||||||||||
Sales | $ | — | $ | 1,995,667 | $ | — | $ | 1,995,667 | ||||||||
Other revenues | — | 49,616 | — | 49,616 | ||||||||||||
Total revenues | — | 2,045,283 | — | 2,045,283 | ||||||||||||
Costs and expenses | ||||||||||||||||
Operating costs and expenses | 254 | 1,893,165 | — | 1,893,419 | ||||||||||||
Income from equity affiliates | (206,492 | ) | (398 | ) | 206,492 | (398 | ) | |||||||||
Depreciation, depletion and amortization | 2,316 | 203,023 | — | 205,339 | ||||||||||||
Reclamation and remediation obligation expense | — | 35,116 | — | 35,116 | ||||||||||||
Sales contract accretion | — | (298,572 | ) | — | (298,572 | ) | ||||||||||
Restructuring and impairment charge | — | 20,157 | — | 20,157 | ||||||||||||
Selling and administrative expenses | 47,334 | 1,398 | — | 48,732 | ||||||||||||
Net gain on disposal or exchange of assets | — | (7,215 | ) | — | (7,215 | ) | ||||||||||
Operating profit | 156,588 | 198,609 | (206,492 | ) | 148,705 | |||||||||||
Interest expense | 29,415 | 8,693 | — | 38,108 | ||||||||||||
Interest income | (70 | ) | (16,576 | ) | — | (16,646 | ) | |||||||||
Net income | $ | 127,243 | $ | 206,492 | $ | (206,492 | ) | $ | 127,243 | |||||||
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Year Ended December 31, 2008 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | ||||||||||||||||
Sales | $ | — | $ | 1,630,873 | $ | — | $ | 1,630,873 | ||||||||
Other revenues | — | 23,749 | — | 23,749 | ||||||||||||
Total revenues | — | 1,654,622 | — | 1,654,622 | ||||||||||||
Costs and expenses | ||||||||||||||||
Operating costs and expenses | 310 | 1,607,436 | — | 1,607,746 | ||||||||||||
(Income) loss from equity affiliates | (202,668 | ) | 915 | 202,668 | 915 | |||||||||||
Depreciation, depletion and amortization | 3,267 | 122,089 | — | 125,356 | ||||||||||||
Reclamation and remediation obligation expense | — | 19,260 | — | 19,260 | ||||||||||||
Sales contract accretion | — | (279,402 | ) | — | (279,402 | ) | ||||||||||
Selling and administrative expenses | 35,585 | 3,022 | — | 38,607 | ||||||||||||
Net gain on disposal or exchange of assets | — | (7,004 | ) | — | (7,004 | ) | ||||||||||
Operating profit | 163,506 | 188,306 | (202,668 | ) | 149,144 | |||||||||||
Interest expense | 21,349 | 2,299 | — | 23,648 | ||||||||||||
Interest income | (571 | ) | (16,661 | ) | — | (17,232 | ) | |||||||||
Net income | $ | 142,728 | $ | 202,668 | $ | (202,668 | ) | $ | 142,728 | |||||||
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Year Ended December 31, 2007 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Revenues | ||||||||||||||||
Sales | $ | — | $ | 1,069,316 | $ | — | $ | 1,069,316 | ||||||||
Other revenues | — | 4,046 | — | 4,046 | ||||||||||||
Total revenues | — | 1,073,362 | — | 1,073,362 | ||||||||||||
Costs and expenses | ||||||||||||||||
Operating costs and expenses | — | 1,109,315 | — | 1,109,315 | ||||||||||||
(Income) loss from equity affiliates | 24,209 | (63 | ) | (24,209 | ) | (63 | ) | |||||||||
Depreciation, depletion and amortization | 415 | 85,225 | — | 85,640 | ||||||||||||
Reclamation and remediation obligation expense | — | 20,144 | — | 20,144 | ||||||||||||
Selling and administrative expenses | 7,820 | 37,317 | — | 45,137 | ||||||||||||
Net gain on disposal or exchange of assets | — | (81,458 | ) | — | (81,458 | ) | ||||||||||
Operating loss | (32,444 | ) | (97,118 | ) | 24,209 | (105,353 | ) | |||||||||
Interest expense | 1,166 | 7,302 | (131 | ) | 8,337 | |||||||||||
Interest income | (247 | ) | (11,427 | ) | 131 | (11,543 | ) | |||||||||
Net loss | (33,363 | ) | (92,993 | ) | 24,209 | (102,147 | ) | |||||||||
Net income attributable to noncontrolling interest | — | 4,721 | — | 4,721 | ||||||||||||
Net loss attributable to Patriot | (33,363 | ) | (97,714 | ) | 24,209 | (106,868 | ) | |||||||||
Effect of noncontrolling interest purchase arrangement | — | (15,667 | ) | — | (15,667 | ) | ||||||||||
Net loss attributable to common stockholders | $ | (33,363 | ) | $ | (113,381 | ) | $ | 24,209 | $ | (122,535 | ) | |||||
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December 31, 2009 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 26,574 | $ | 524 | $ | — | $ | 27,098 | ||||||||
Accounts receivable and other, net | — | 188,897 | — | 188,897 | ||||||||||||
Inventories | — | 81,188 | — | 81,188 | ||||||||||||
Prepaid expenses and other current assets | 2,696 | 11,670 | — | 14,366 | ||||||||||||
Total current assets | 29,270 | 282,279 | — | 311,549 | ||||||||||||
Property, plant, equipment and mine development Land and coal interests | — | 2,864,225 | — | 2,864,225 | ||||||||||||
Buildings and improvements | 1,737 | 394,712 | — | 396,449 | ||||||||||||
Machinery and equipment | 16,314 | 615,301 | — | 631,615 | ||||||||||||
Less accumulated depreciation, depletion and amortization | (12,045 | ) | (718,990 | ) | — | (731,035 | ) | |||||||||
Property, plant, equipment and mine development, net | 6,006 | 3,155,248 | — | 3,161,254 | ||||||||||||
Notes receivable | — | 109,137 | — | 109,137 | ||||||||||||
Investments, intercompany and other assets | 1,340,392 | (160,764 | ) | (1,143,405 | ) | 36,223 | ||||||||||
Total assets | $ | 1,375,668 | $ | 3,385,900 | $ | (1,143,405 | ) | $ | 3,618,163 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current portion of debt | $ | — | $ | 8,042 | $ | — | $ | 8,042 | ||||||||
Trade accounts payable and accrued expenses | 20,083 | 386,268 | — | 406,351 | ||||||||||||
Below market sales contracts acquired | — | 150,441 | — | 150,441 | ||||||||||||
Total current liabilities | 20,083 | 544,751 | — | 564,834 | ||||||||||||
Long-term debt, less current maturities | 167,501 | 30,450 | — | 197,951 | ||||||||||||
Asset retirement obligations | — | 244,518 | — | 244,518 | ||||||||||||
Workers’ compensation obligations | — | 193,719 | — | 193,719 | ||||||||||||
Accrued postretirement benefit costs | 564 | 1,169,417 | — | 1,169,981 | ||||||||||||
Obligation to industry fund | — | 42,197 | — | 42,197 | ||||||||||||
Below market sales contracts acquired, noncurrent | — | 156,120 | — | 156,120 | ||||||||||||
Other noncurrent liabilities | 1,536 | 111,813 | — | 113,349 | ||||||||||||
Total liabilities | 189,684 | 2,492,985 | — | 2,682,669 | ||||||||||||
Stockholders’ equity | 1,185,984 | 892,915 | (1,143,405 | ) | 935,494 | |||||||||||
Total liabilities and stockholders’ equity | $ | 1,375,668 | $ | 3,385,900 | $ | (1,143,405 | ) | $ | 3,618,163 | |||||||
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December 31, 2008 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 1,957 | $ | 915 | $ | — | $ | 2,872 | ||||||||
Accounts receivable and other, net | 728 | 162,828 | — | 163,556 | ||||||||||||
Inventories | — | 80,953 | — | 80,953 | ||||||||||||
Prepaid expenses and other current assets | 865 | 20,207 | — | 21,072 | ||||||||||||
Total current assets | 3,550 | 264,903 | — | 268,453 | ||||||||||||
Property, plant, equipment and mine development Land and coal interests | — | 2,652,224 | — | 2,652,224 | ||||||||||||
Buildings and improvements | 1,737 | 388,382 | — | 390,119 | ||||||||||||
Machinery and equipment | 15,418 | 643,281 | — | 658,699 | ||||||||||||
Less accumulated depreciation, depletion and amortization | (9,729 | ) | (530,637 | ) | — | (540,366 | ) | |||||||||
Property, plant, equipment and mine development, net | 7,426 | 3,153,250 | — | 3,160,676 | ||||||||||||
Notes receivable | — | 131,066 | — | 131,066 | ||||||||||||
Investments, intercompany and other assets | 1,139,382 | (140,345 | ) | (936,912 | ) | 62,125 | ||||||||||
Total assets | $ | 1,150,358 | $ | 3,408,874 | $ | (936,912 | ) | $ | 3,622,320 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities | ||||||||||||||||
Current portion of debt | $ | 23,000 | $ | 5,170 | $ | — | $ | 28,170 | ||||||||
Trade accounts payable and accrued expenses | 19,429 | 394,361 | — | 413,790 | ||||||||||||
Below market sales contracts acquired | — | 324,407 | — | 324,407 | ||||||||||||
Total current liabilities | 42,429 | 723,938 | — | 766,367 | ||||||||||||
Long-term debt, less current maturities | 159,637 | 16,486 | — | 176,123 | ||||||||||||
Asset retirement obligations | — | 224,180 | — | 224,180 | ||||||||||||
Workers’ compensation obligations | — | 188,180 | — | 188,180 | ||||||||||||
Accrued postretirement benefit costs | 74 | 1,003,180 | — | 1,003,254 | ||||||||||||
Obligation to industry fund | — | 42,571 | — | 42,571 | ||||||||||||
Below market sales contracts acquired, noncurrent | — | 316,707 | — | 316,707 | ||||||||||||
Other noncurrent liabilities | 5,236 | 59,521 | — | 64,757 | ||||||||||||
Total liabilities | 207,376 | 2,574,763 | — | 2,782,139 | ||||||||||||
Stockholders’ equity | 942,982 | 834,111 | (936,912 | ) | 840,181 | |||||||||||
Total liabilities and stockholders’ equity | $ | 1,150,358 | $ | 3,408,874 | $ | (936,912 | ) | $ | 3,622,320 | |||||||
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Year Ended December 31, 2009 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | (45,370 | ) | $ | 84,981 | $ | — | $ | 39,611 | |||||||
Cash Flows From Investing Activities | ||||||||||||||||
Additions to property, plant, equipment and mine development | (896 | ) | (77,367 | ) | — | (78,263 | ) | |||||||||
Additions to advance mining royalties | — | (16,997 | ) | — | (16,997 | ) | ||||||||||
Proceeds from disposal or exchange of assets | — | 5,513 | — | 5,513 | ||||||||||||
Proceeds from notes receivable | — | 11,000 | — | 11,000 | ||||||||||||
Other | — | 1,154 | — | 1,154 | ||||||||||||
Net cash used in investing activities | (896 | ) | (76,697 | ) | — | (77,593 | ) | |||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Proceeds from equity offering, net of costs | 89,077 | — | — | 89,077 | ||||||||||||
Long-term debt payments | — | (5,905 | ) | — | (5,905 | ) | ||||||||||
Proceeds from employee stock purchases | 2,036 | — | — | 2,036 | ||||||||||||
Short-term debt payments | (23,000 | ) | — | — | (23,000 | ) | ||||||||||
Intercompany transactions | 2,770 | (2,770 | ) | — | — | |||||||||||
Net cash provided by (used in) financing activities | 70,883 | (8,675 | ) | — | 62,208 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 24,617 | (391 | ) | — | 24,226 | |||||||||||
Cash and cash equivalents at beginning of period | 1,957 | 915 | — | 2,872 | ||||||||||||
Cash and cash equivalents at end of period | $ | 26,574 | $ | 524 | $ | — | $ | 27,098 | ||||||||
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Year Ended December 31, 2008 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | (37,126 | ) | $ | 100,552 | $ | — | $ | 63,426 | |||||||
Cash Flows From Investing Activities | ||||||||||||||||
Additions to property, plant, equipment and mine development | (3,137 | ) | (118,251 | ) | — | (121,388 | ) | |||||||||
Additions to advance mining royalties | — | (11,981 | ) | — | (11,981 | ) | ||||||||||
Investment in joint ventures | — | (16,365 | ) | — | (16,365 | ) | ||||||||||
Cash acquired in business combination | — | 21,015 | — | 21,015 | ||||||||||||
Acquisitions | — | (9,566 | ) | — | (9,566 | ) | ||||||||||
Proceeds from disposal or exchange of assets | — | 2,077 | — | 2,077 | ||||||||||||
Other | — | (2,457 | ) | — | (2,457 | ) | ||||||||||
Net cash used in investing activities | (3,137 | ) | (135,528 | ) | — | (138,665 | ) | |||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Long-term debt payments | — | (2,684 | ) | — | (2,684 | ) | ||||||||||
Convertible notes proceeds | 200,000 | — | — | 200,000 | ||||||||||||
Termination of Magnum debt facility | — | (136,816 | ) | — | (136,816 | ) | ||||||||||
Deferred financing costs | (10,906 | ) | — | — | (10,906 | ) | ||||||||||
Common stock issuance fees | (1,468 | ) | — | — | (1,468 | ) | ||||||||||
Proceeds from employee stock purchases | 1,002 | — | — | 1,002 | ||||||||||||
Short-term debt borrowings | 23,000 | — | — | 23,000 | ||||||||||||
Intercompany transactions | (174,902 | ) | 174,902 | — | — | |||||||||||
Net cash provided by financing activities | 36,726 | 35,402 | — | 72,128 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | (3,537 | ) | 426 | — | (3,111 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 5,494 | 489 | — | 5,983 | ||||||||||||
Cash and cash equivalents at end of period | $ | 1,957 | $ | 915 | $ | — | $ | 2,872 | ||||||||
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Year Ended December 31, 2007 | ||||||||||||||||
Parent | Guarantor | |||||||||||||||
Company | Subsidiaries | Eliminations | Consolidated | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Cash Flows From Operating Activities | ||||||||||||||||
Net cash provided by (used in) operating activities | $ | 1,362 | $ | (81,061 | ) | $ | — | $ | (79,699 | ) | ||||||
Cash Flows From Investing Activities | ||||||||||||||||
Additions to property, plant, equipment and mine development | (5,021 | ) | (50,573 | ) | — | (55,594 | ) | |||||||||
Additions to advance mining royalties | — | (3,964 | ) | — | (3,964 | ) | ||||||||||
Acquisitions | — | (47,733 | ) | — | (47,733 | ) | ||||||||||
Proceeds from disposal or exchange of assets | — | 29,426 | — | 29,426 | ||||||||||||
Net change in receivables from former affiliates | — | 132,586 | — | 132,586 | ||||||||||||
Net cash provided by (used in) investing activities | (5,021 | ) | 59,742 | — | 54,721 | |||||||||||
Cash Flows From Financing Activities | ||||||||||||||||
Long-term debt payments | — | (8,358 | ) | — | (8,358 | ) | ||||||||||
Contribution from former parent | 30,000 | 13,647 | — | 43,647 | ||||||||||||
Deferred financing costs | (4,726 | ) | — | — | (4,726 | ) | ||||||||||
Intercompany transactions | (16,121 | ) | 16,121 | — | — | |||||||||||
Net cash provided by financing activities | 9,153 | 21,410 | — | 30,563 | ||||||||||||
Net increase in cash and cash equivalents | 5,494 | 91 | — | 5,585 | ||||||||||||
Cash and cash equivalents at beginning of period | — | 398 | — | 398 | ||||||||||||
Cash and cash equivalents at end of period | $ | 5,494 | $ | 489 | $ | — | $ | 5,983 | ||||||||
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• | common stock; | |
• | preferred stock; | |
• | debt securities; | |
• | warrants; | |
• | purchase contracts; and | |
• | units. |
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Affinity Mining Company | Kanawha River Ventures II, LLC | |
Apogee Coal Company, LLC | Kanawha River Ventures III, LLC | |
Appalachia Mine Services, LLC | KE Ventures, LLC | |
Beaver Dam Coal Company, LLC | Little Creek LLC | |
Big Eagle Rail, LLC | Logan Fork Coal Company | |
Big Eagle LLC | Magnum Coal Company LLC | |
Black Stallion Coal Company, LLC | Magnum Coal Sales LLC | |
Black Walnut Coal Company | Martinka Coal Company, LLC | |
Bluegrass Mine Services, LLC | Midland Trail Energy LLC | |
Brook Trout Coal, LLC | Midwest Coal Resources II, LLC | |
Catenary Coal Company, LLC | Mountain View Coal Company, LLC | |
Central States Coal Reserves of Kentucky, LLC | New Trout Coal Holdings II, LLC | |
Charles Coal Company, LLC | North Page Coal Corp. | |
Cleaton Coal Company | Ohio County Coal Company, LLC | |
Coal Clean LLC | Panther LLC | |
Coal Properties, LLC | Patriot Coal Company, L.P. | |
Coal Reserve Holding Limited Liability Company No. 2 | Patriot Coal Sales LLC | |
Colony Bay Coal Company | Patriot Leasing Company LLC | |
Cook Mountain Coal Company, LLC | Patriot Midwest Holdings, LLC | |
Coyote Coal Company LLC | Patriot Trading LLC | |
Dakota LLC | Patriot Ventures LLC | |
Day LLC | Pine Ridge Coal Company, LLC | |
Dixon Mining Company, LLC | Pond Creek Land Resources, LLC | |
Dodge Hill Holding JV, LLC | Pond Fork Processing LLC | |
Dodge Hill Mining Company, LLC | Remington Holdings LLC | |
Dodge Hill of Kentucky, LLC | Remington II LLC | |
Eastern Associated Coal, LLC | Remington LLC | |
Eastern Coal Company, LLC | Rivers Edge Mining, Inc. | |
Eastern Royalty, LLC | Robin Land Company, LLC | |
Grand Eagle Mining, Inc. | Sentry Mining, LLC | |
HCR Holdings, LLC | Snowberry Land Company | |
Heritage Coal Company LLC | Speed Mining LLC | |
Highland Mining Company, LLC | Sterling Smokeless Coal Company, LLC | |
Highwall Mining LLC | TC Sales Company, LLC | |
Hillside Mining Company | The Presidents Energy Company LLC | |
Hobet Mining, LLC | Thunderhill Coal LLC | |
Indian Hill Company | Trout Coal Holdings, LLC | |
Infinity Coal Sales, LLC | Union County Coal Co., LLC | |
Interior Holdings, LLC | Viper LLC | |
IO Coal LLC | Weatherby Processing LLC | |
Jarrell’s Branch Coal Company | Wildcat, LLC | |
Jupiter Holdings LLC | Winchester LLC | |
Kanawha Eagle Coal, LLC | Winifrede Dock Limited Liability Company | |
Kanawha River Ventures I, LLC | Yankeetown Dock, LLC |
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(a) | Current Reports onForm 8-K filed on January 5, 2010, January 6, 2010, January 7, 2010, February 23, 2010 (two8-Ks), March 3, 2010, March 4, 2010 (with respect to Item 1.01 only), March 8, 2010 (two8-Ks), March 9, 2010, March 16, 2010 and April 26, 2010 (two8-Ks); |
• | price volatility and demand, particularly in higher margin products; | |
• | geologic, equipment and operational risks associated with mining; | |
• | changes in general economic conditions, including coal, power and steel market conditions; | |
• | availability and costs of competing energy resources; | |
• | regulatory and court decisions including, but not limited to, those impacting permits issued pursuant to the Clean Water Act; | |
• | environmental laws and regulations and changes in the interpretation or enforcement thereof, including those affecting our operations and those affecting our customers’ coal usage; | |
• | developments in greenhouse gas emission regulation and treatment, including any development of commercially successful carbon capture and storage techniques or market-based mechanisms, such as acap-and-trade system, for regulating greenhouse gas emissions; | |
• | coal mining laws and regulations; | |
• | labor availability and relations; | |
• | the outcome of pending or future litigation; | |
• | changes in the costs to provide healthcare to eligible active employees and certain retirees under postretirement benefit obligations; |
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• | changes to contribution requirements to multi-employer retiree healthcare and pension plans; | |
• | reductions of purchases or deferral of shipments by major customers; | |
• | availability and costs of credit, surety bonds and letters of credit; | |
• | customer performance and credit risks; | |
• | inflationary trends, including those impacting materials used in our business; | |
• | worldwide economic and political conditions; | |
• | downturns in consumer and company spending; | |
• | supplier and contract miner performance, and the availability and cost of key equipment and commodities; | |
• | availability and costs of transportation; | |
• | difficulty in implementing our business strategy; | |
• | our ability to replace proven and probable coal reserves; | |
• | the outcome of commercial negotiations involving sales contracts or other transactions; | |
• | our ability to respond to changing customer preferences; | |
• | our dependence on Peabody Energy for a significant portion of our revenues; | |
• | failure to comply with debt covenants; | |
• | the effects of mergers, acquisitions and divestitures, including our ability to successfully integrate mergers and acquisitions; | |
• | weather patterns affecting energy demand; | |
• | competition in our industry; | |
• | interest rate fluctuation; | |
• | wars and acts of terrorism or sabotage; | |
• | impact of pandemic illness; and | |
• | other factors, including those discussed in Legal Proceedings, set forth in Part I, Item 3 of our Annual Report onForm 10-K for the year ended December 31, 2009 and in Part II, Item 1 of our Quarterly Report onForm 10-Q for the three months ended March 31, 2010. |
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Three Months | Three Months | |||||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||
Ratio of earnings to fixed charges | 1.4 | x | 3.8 | x | 3.5 | x | 5.4 | x(1) | N/A | (2) | 1.9 | x | 2.7 | x |
(1) | The ratio of earnings to fixed charges for the year ended December 31, 2008 has been adjusted to reflect the retrospective application of authoritative guidance. | |
(2) | Earnings were insufficient to cover fixed charges by $102.5 million for the year ended December 31, 2007. |
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• | the Board of Directors approved the business combination before the stockholder became an interested stockholder, or the Board approved the transaction that resulted in the stockholder becoming an interested stockholder; | |
• | upon completion of the transaction which resulted in the stockholder becoming an interested stockholder, such stockholder owned at least 85% of the voting stock outstanding when the transaction began |
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other than shares held by directors who are also officers and other than shares held by certain employee stock plans; |
• | or the Board approved the business combination after the stockholder became an interested stockholder and the business combination was approved at a meeting by at least two-thirds of the outstanding voting stock not owned by such stockholder. |
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• | debt or equity securities issued by us (but not securities of third parties) or any combination thereof; | |
• | currencies; or | |
• | commodities. |
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• | the designation, aggregate principal amount and authorized denominations; | |
• | the maturity date; | |
• | the interest rate, if any, and the method for calculating the interest rate; | |
• | the interest payment dates and the record dates for the interest payments; | |
• | any mandatory or optional redemption terms or prepayment, conversion, sinking fund or exchangeability or convertability provisions; | |
• | the place where we will pay principal and interest; | |
• | if other than denominations of $1,000 or multiples of $1,000, the denominations the debt securities will be issued in; | |
• | additional provisions, if any, relating to the defeasance of the debt securities; | |
• | the currency or currencies, if other than the currency of the United States, in which principal and interest will be paid; | |
• | any United States federal income tax consequences; | |
• | the dates on which premium, if any, will be paid; | |
• | our right, if any, to defer payment interest and the maximum length of this deferral period; | |
• | whether and the extent that the debt securities shall be guaranteed by the guarantors and the form of any such guarantee; | |
• | any listing on a securities exchange; | |
• | the initial public offering price; and | |
• | other specific terms, including any additional events of default or covenants. |
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• | cure ambiguities, defects or inconsistencies; | |
• | provide for the assumption of our obligations in the case of a merger or consolidation; | |
• | make any change that would provide any additional rights or benefits to the holders of the debt securities of a series; | |
• | add guarantors with respect to the debt securities of any series; | |
• | secure the debt securities of a series; | |
• | establish the form or forms of debt securities of any series; | |
• | maintain the qualification of the indenture under the Trust Indenture Act; or | |
• | make any change that does not adversely affect the rights of any holder. |
• | reduce the principal amount, or extend the fixed maturity, of the debt securities, or alter or waive the redemption provisions of the debt securities; | |
• | change the currency in which principal, any premium or interest is paid; |
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• | reduce the percentage in principal amount outstanding of debt securities of any series which must consent to an amendment, supplement or waiver or consent to take any action; | |
• | impair the right to institute suit for the enforcement of any payment on the debt securities; | |
• | waive a payment default with respect to the debt securities or any guarantee; | |
• | reduce the interest rate or extend the time for payment of interest on the debt securities; | |
• | adversely affect the ranking of the debt securities of any series; | |
• | release any guarantor from any of its obligations under its guarantee or the indenture, except in compliance with the terms of the indenture. |
• | Patriot shall be the continuing person or, if Patriot is not the continuing person, the resulting, surviving or transferee person (the “surviving entity”) is a company organized and existing under the laws of the United States or any State or territory; | |
• | the surviving entity will expressly assume all of our obligations under the debt securities and the indenture, and will, if required by law to effectuate the assumption, execute a supplemental indenture which will be delivered to the trustee and will be in form and substance reasonably satisfactory to the trustee; | |
• | immediately after giving effect to such transaction or series of transactions on a pro forma basis, no default has occurred and is continuing; and | |
• | Patriot or the surviving entity will have delivered to the trustee an officers’ certificate and opinion of counsel stating that the transaction or series of transactions and a supplemental indenture, if any, complies with this covenant and that all conditions precedent in the indenture relating to the transaction or series of transactions have been satisfied. |
• | either: |
• | all debt securities of any series issued that have been authenticated and delivered have been delivered to the trustee for cancellation; or | |
• | all the debt securities of any series issued that have not been delivered to the trustee for cancellation will become due and payable within one year (a “Discharge”) and we have made irrevocable arrangements satisfactory to the trustee for the giving of notice of redemption by such trustee in our |
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name, and at our expense and we have irrevocably deposited or caused to be deposited with the trustee sufficient funds to pay and discharge the entire indebtedness on the series of debt securities to pay principal, interest and any premium; |
• | we have paid or caused to be paid all other sums then due and payable under the indenture; and | |
• | we have delivered to the trustee an officers’ certificate and an opinion of counsel, each stating that all conditions precedent under the indenture relating to the satisfaction and discharge of the indenture have been complied with. |
• | the rights of holders of the debt securities to receive principal, interest and any premium when due; | |
• | our obligations with respect to the debt securities concerning issuing temporary debt securities, registration of transfer of debt securities, mutilated, destroyed, lost or stolen debt securities and the maintenance of an office or agency for payment for security payments held in trust; | |
• | the rights, powers, trusts, duties and immunities of the trustee; and | |
• | the defeasance provisions of the indenture. |
• | we must irrevocably have deposited or caused to be deposited with the trustee as trust funds for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefits of the holders of the debt securities of a series: |
• | money in an amount; | |
• | United States Government Obligations; or | |
• | a combination of money and United States Government Obligations, |
• | in the case of legal defeasance, we have delivered to the trustee an opinion of counsel stating that, under then applicable federal income tax law, the holders of the debt securities of that series will not recognize gain or loss for federal income tax purposes as a result of the deposit, defeasance and discharge to be effected and will be subject to the same federal income tax as would be the case if the deposit, defeasance and discharge did not occur; | |
• | in the case of covenant defeasance, we have delivered to the trustee an opinion of counsel to the effect that the holders of the debt securities of that series will not recognize gain or loss for United States federal income tax purposes as a result of the deposit and covenant defeasance to be effected and will be subject to the same federal income tax as would be the case if the deposit and covenant defeasance did not occur; |
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• | no default with respect to the outstanding debt securities of that series has occurred and is continuing at the time of such deposit after giving effect to the deposit or, in the case of legal defeasance, no default relating to bankruptcy or insolvency has occurred and is continuing at any time on or before the 91st day after the date of such deposit, it being understood that this condition is not deemed satisfied until after the 91st day; | |
• | the legal defeasance or covenant defeasance will not cause the trustee to have a conflicting interest within the meaning of the Trust Indenture Act, assuming all debt securities of a series were in default within the meaning of such Act; | |
• | the legal defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which we are a party; | |
• | the legal defeasance or covenant defeasance will not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended, unless the trust is registered under such Act or exempt from registration; and | |
• | we have delivered to the trustee an officers’ certificate and an opinion of counsel stating that all conditions precedent with respect to the defeasance or covenant defeasance have been complied with. |
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• | directly to purchasers; | |
• | through agents; | |
• | through underwriters; and | |
• | through dealers. |
• | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchases; | |
• | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; | |
• | purchases by a broker-dealer as principal and resales by the broker-dealer for its own account; | |
• | an exchange distribution in accordance with the rules of the applicable exchange; | |
• | privately negotiated transactions; | |
• | directly through one or more purchasers; | |
• | in market transactions, including, without limitation, over the counter transactions; | |
• | derivative transactions or transactions involving other similar instruments; | |
• | a combination of any of these methods of sale; or | |
• | any other method permitted by applicable law. |
• | the market price prevailing at the time of sale; | |
• | a price related to the prevailing market price; | |
• | at negotiated prices; or | |
• | a price the selling security holder determines from time to time. |
• | the name or names of any underwriters, dealers or agents; | |
• | the purchase price of the securities and the proceeds to us from the sale; | |
• | any underwriting discounts and commissions or agency fees and other items constituting underwriters’ or agents’ compensation; and | |
• | any delayed delivery arrangements. |
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