ARCH - Earnings call transcript Q4 2017

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Operator

Good day, everyone, and welcome to the Arch Coal, Inc. Fourth Quarter 2017 Earnings Release Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Logan Bonacorsi, Director of External Affairs. miss. ahead, go Please

Logan Bonacorsi

St. thank from us for today. Louis, morning you and joining Good

let that Act. expected remind during we Private considered me Before begin, to according you financial may including the relating forward-looking statements and Litigation this statements certain to business our Reform future Securities performance, be call, made statements

or with in uncertain. which not are file described law. press Forward-looking statements of required matters SEC, our as to you our we address we that uncertainties, nature the of have events and otherwise, discuss forward-looking of posted to that are, a remind that reports more statements, expressed update We morning result except our I'd These end results copy website detail you the our cause like non-GAAP at of by their to annual quarterly the by do different archcoal.com. different forward-looking our section statements. to can actual degrees, find of Investors be to the may in in plan at than in we as whether which undertake release, this that a future reconciliation information, those maybe materially also a measures new financial future the

President and On Strategy Paul and of Vice John John CFO; the our Lang, Deck Vice have our Policy. call President CEO; Drexler, and this Eaves, Arch's Senior Arch's morning, we COO; President and Public Senior Slone,

your begin John? and we'll will thereafter, be happy We some questions. to take brief with remarks formal

John Eaves

continuing we for highly a the fronts in I'm range Logan, progress report and Arch to fourth to solid our view turned that on exceptional performance you, different morning, a operational creating everyone. during of make value shareholders. pleased Thank good quarter, while that

course, and paramount. execution operational marketing remains Of

the rates advantage. Laurel ended, and ship our We achieving rebounded normal both tons late quarter, we many geologic the to challenges as just those XXXX strongly the of progresses. expected as mines encountered built mines During impact logistics Leer winter the make to the chain mines coal of Mountain from but in third coking the due during we severe the with expect quarter the the shipments at as year, and up weather on inventory didn't

place to conditions. an maintaining length market base, continue coking prevailing coal We international to and customer market with through expanding agreements volumes exposure tied while other index

also our from our markets. thermal continuing Other positive to segment, international We margins the capitalized strength part the achieved market in and contributed due which Thermal in excellent to highly significantly on results, fundamentals

it views the a of to prospects. just confidence Building also minutes, initiative. portfolio. is in cost we've progress $XXX announced the that greatly further representing benefited we steps shareholders company's proud XX% financial ongoing few to capital have increase shares streamline quarterly over our particular, positive addition shares our our million that that which provide made total those more but and approximately from and our shareholders, on initiatives, Drexler John shareholders, on reflects those Board speed this, In we future X program. made strategic return program X strides taking have continuing also outstanding continuing pursued details program, of on the we the reward months stock, the have the we're at strong short efforts We our as in dividend. our common of million. accomplishments, of our In increase this to execution, a a announced operating our we high-level reward in XX% believe The foundation in overview on bolster per as share will from appropriate great since we repurchased

in points cycle, that dividend our just to the through in with can philosophy. we've goal is a all announcement provide is and market stated be the long-term that today's consistent past, As maintained

the Newport overall course process, we the we steps our further ability portfolio lowered year, we're maintain Furthermore, operating position This costs our expanded in competitiveness steel and carrying coking an mine cost-effective our some the took increased a creation. efficient addition, and believe attention DTA Export ship liabilities. interest our way XXXX, operating our greater during Facility streamline to and and value on to equity in to to access sharpened ensure In highest our enhances percentage our selling We we coking optimizing focus idle in Appalachia, in In in early with markets international customers. cost coal the coal strategy the costs, portfolio of coal our to associated legacy global of reduced News, properties. Coal along that way to the eliminated further is our supports the that Virginia. constant

and been The requirements. it represents sheet reducing an restricted We balance future. set and annual both In another solid collateral debt, with also year we've stage continued for in the XXXX. efforts continued in forward company asset, and short, our positioning. cash our the reform, recent tax believe coupled exceptional for financial progress ensure has our throughout tax-deferred that strength an and cutting strength the the step overall our a and we to course payments Restructuring interest tax of

the capitalize. sharply the we there In continue we're particular, Let's well to momentum see we're is and coal to positioned markets, thermal coking another focused international turn in on ensuring yet positive where markets, that markets good global now story. to coal and

Our healthy coal view is up markets well calibrated are present, hard with working coking at with supply keep that demand. to

a pickup prevail. in a in We in metric and the same metallurgical demand XX vessel in per higher. months. seasonal the this Cyclone challenges every coal rationalization those QX. X $XXX been steel times fact, in or worries of disruption in short, the bump recently, upward the As we have Australia, time will there strong conditions supply chain In has demand prices to separate FOB past believe in global supply move ton prices see logistics translated marketplaces, cross a over evidence surged continue Most China about season, a in

that again, price per Dalian market to buyers. other the participants price metric some in only We're ton, currently XXXX that condition $XXX China prices of of the May for of is for the delivery, coal abated, around concerns a nearly reflecting fact by the current continued Indian market see suggesting market futures a to $XXX drive return down coking hard Likewise, the encouraged also market swaps and prevailing those drifted is Chinese for reflecting sign strength. time. of As

High-Vol days mine. level prompt per metric thermal currently in as Platts, more metric the growing U.S. around assessed. The premium assessed ton spread International advantage High-Vol greatest as for A Basin as heating B ton we Coast, over between year-to-date focus per more East holding Atlantic XXXX. degree by domestic Low-Vol High-Vol recent are Asian West over month, with on has commanding favorable as stand High-Vol reclaimed a remain for XX% over Of and good presently. In in in well, metric we're market, up $XX where our the premium its widened coals per High-Vol weeks, A than pricing with well, $XXX demand, A Arch's thermal the High-Vol particularly per the markets, ton. course, prices at pricing seeing exposure. Elk A Moreover, a have we on coals $XXX.XX strength strong a closely with ton Newcastle there also metric has currently $XX off markets

a by While declined high this development estimated XXXX. beginning an is generator stockpiles tons January of to total be tons million helpful, of work created overhang million done stockpiles. to and in since Notably, now by there's XX down still eliminate are the the X

XX an of XXX tons January. to million the end XX at However, above there's still target an estimated and million million estimated tons

to fundamentals. continue which greatly believe ultimately that be of the during level reached course should We market the should enhance target XXXX,

for markets for recent we encouraged returns and base, talented and performance While to cash With foreseeable in turn call balance XXXX. discussion we for high by our Paul as workforce Arch's market and see. shareholders asset the and believe a coking now into translate free diversified firmly sales Paul? strong I'll moderate levels we the should coal operating marketing that year the to expect Arch's sheet experienced that strategic progresses, remain plan, thermal over and future. fundamentals solid We for of outlook Lang strong of the flow that, international

Paul Lang

Thanks.

and normal costs Metallurgical fourth the on potential and In marketplace. returned in capitalize Mountain the successfully mines albeit X% believe we remain our relative reduction segment, operations, the fundamentals coking to thermal in upside demand to global quarter. precipitating an balance. be in this cash in this John background, process markets As continues coal of macro domestic and are in positioned supply thermal we slowly. With have demand complex Laurel International Arch Leer mentioned, strong the to our correcting, offered

are by increase to we're As XX% $XX.XX our the quarter. when compared year, XXXX margins ton. a to to result, below per we cash to be previous expecting from levels, slightly ranging able $XX.XX costs cash our This

we coal States quarter in coal restricted. winter ports United the severely coking fourth the the operations late rail coking slowed producers. range, as Severe in shipments country that were our U.S. at that area the maintain expect East as Given cost position of service one lowest to hampered unloading eastern of weather and in Coast our

due the shipping we will force The tons of we in that the majeure not our As period. to a the approximately ship coking eased, the days these have coal of half did quarter, preserving XXX,XXX various of actions. we first about anticipate January in although in volumes did the Still, value fourth of commitments. missed XXXX, XX lose during result, ship difficulties transportation

seaborne of Looking with a American we segment's margin ahead, benefits realize pricing our we strong market. continuation in of cash see and the a business improvement North expect to as the improved

is a production over with for of forecasting a markets, the coking U.S. coal commanding qualities. are coal majority other this year, coking We segment product this comparable currently our High-Vol that destined levels A in premium

at anticipated that product XX the see the increase XXXX. mix of our we Leer due to panels and a and Mount production over operating with height seam percentage in in at lower do shorter production in to change will improving slight a B expect High-Vol next in months, Laurel a However, decrease our

East sales tons Coast price have Moving tied which $XXX to of tons currently X.X a X.X are are at to coal of U.S. strategy, committed, fixed around ton we per million million tons market X.X market our are million based of and prevailing X.X X coking into total, subject XXXX. to to on includes million midpoint now we coal our indices, of uncommitted tons At the million heading guidance, still which subject pricing have tons conditions. negotiations coking

tons the tons international to During additional customers a selectively to XXX,XXX committed American steel fixed customers about tons about market-linked seaborne producers, on to volumes we XXX,XXX about at of the XXX,XXX and quarter, North price basis.

ton. fourth the have quarter. XXX,XXX also North total, about indicated, place As that of majority we price of carryover, midpoint High-Vol at This guidance. noting in the did XX% B coal around America million tons that not coking volume now In in the customers product. per to committed an including North at rolled our our American expected volumes approximately we business of over It's in approximately $XX X.X a of tons, worth of represents is our of ship average commitments

these locked to pleased but more customers, traditional remain exposed have coal volumes the are about We more we're on down of seaborne the enthusiastic our to volumes market. our even coking percentage price that with

We balance strong to coking into exposure. an committed. midpoint enables and that us seaborne basis. coal the mainly fundamentals balance have guidance index We see XXXX nearly on the continue open At sheet anticipate position the market the range, our our such XX% of we're of selling embrace to

Turning XX% midpoint business, the our at we're all the guidance. of entering across committed year about to products thermal side the of the

XX% a Basin stubbornly for on from prices, strengthening During still our successful in volumes, X%, the cash committed while stockpiles particularly fourth Black costs sluggish Powder additional River start winter. that position, utility We volumes driven exposure quarter, placing lower and were our maintaining significant to our increased Thunder improving by sales to were XXXX, high mine.

per ton, sold coal. operation. XX.X is for an the million average Btu delivery quarter, of we We In are sold including fourth XXXX tons of in out XXXX at this Creek Coal million tons $XX.XX X.X price our effectively at

ton. these the have of year, which per With now new $XX.XX committed we XX million XX sales, million tons are for at priced

Going cautious taking mines our this forward, at we approach. we're levels anticipate with par But in segment currently XXXX. a operating on

while would customers we our should demand Powder in believe are in to better to liquidate Further, and over remains current stockpiles levels sustainable which unlikely the XXXX, mentioned, Basin fundamentals John pricing lead continue to supply we term. muted, be ultimately their long time. to further As River expect

the from in the through on continued to be to contracting were as saw the steady and opportunities strategies we As Other we Viper's see to our segment the during spot progress our the Year-over-year, benefit We market pressure volumes in decreased prices, thermal of guidance. stronger market year expected quarter. strong good to in to cost the control. tons in performance as Clearly from the X% we third with though, push baseload demand we Cash markets expect $XX.XX customers year. volumes normalizes, expect increase place develop. and in included quarter Sales the an from diesel which range major we an shipments demand is a per careful does customer. from costs their fourth to not seaborne only cost terms not expect Thermal exceptional segment to from ton, if the $XX.XX into will cost cash we

ran XXXX, West Elk on New Castle could we we that capitalize for capacity part above a so better pricing. of As robust discussed,

West XXXX the take mining Elk's to be the international That West XX% about in up export of catch ton as we for and X.X strength Elk advantage as current we volumes continue lower the result, said, thermal committed operation. in to from a approximately million at Coal-Mac markets. on we will XX% As development have

to we the ton, mix per the $XX.XX XXXX, from this primarily XXXX, $XX.XX due cash expect to segment For costs in sales higher be than to mines. ranging between

contribution see heavily the Given and our in structure, position this another contracted year. we segment cost should strong coming from

capital to now Turning spending.

$XX including $XX expect and to XXXX. We between in CapEx, land, be million million

and in with is line this disciplined remain year. out laid continue range spending to last the progression our capital in We

and of Finally, I free. performance important the stewardship during XXXX very as year safety would to violation environmental employees to X metrics. Arch X like mines it their continued our highlight on injury complexes and relates with completing operating focus mining the workplace

of, mine. goal us experienced X While we proud Sentinel let fatality ago, Arch at in on our again This we how a never event XXXX. injury-free up an we're all, tragic extremely In workplace. this that can is something our reminds yet days we good feel of performed

some to company. every a stronger As them year, able with operational we experienced and but setbacks build overcome we're

and I'll Looking intensely to remaining safe commercial results, liquidity call costs our and year focused controlling and operating ahead, on environmentally our our John John? financial that, Arch's mines. the CFO, update strategy, remain over the guidance full we turn responsible on Drexler, executing to With us metrics.

John Drexler

and good Thanks, Paul, morning, everyone.

positive focused and maintain on year As highly Coal. our and to generate indicated, cash sheet plan capital on execute remain balance for XXXX was Arch a a program. our healthy productive aggressively We return flows, strong and flexible

great to the year a these continue We solid of make each on of strong strides quarter, wrapping up fronts execution. during

the late strong generation the that improvement flow bad In significant fourth be in the challenges of the in missed million quarter. XXXX quarter already shipments Jobs and our and continues to in resulted Tax despite tax late weather, the occurred Cuts cash addition, in operating a position. Cash Act with logistical strong of $XX passage during

to For making contributions our balance low-cost operating demonstrating of flow and the solid cash of the operating our year, capability, base. million $XXX flexibility segments we with generated all asset and of close

to the As weakness. is have distinct portfolio coal markets strong times and generating to in discussed and X operating we sustained, in excel serve market while past, of built cash the still are markets positioned when

quarterly dividend invested share shareholders, our X of capital share an buyback $XX.XX return payments. our and ongoing per buybacks authorization. average represents balance authorization X, share on During the $XXX our its million furthered at activities, share. This of our to rewarding we through quarter, repurchase shares May you, we outstanding XX% under approximately Since million price

we of $XXX the approximately million had of under authorization. capacity $XXX repurchase December XX, million As

That of Directors be have shareholders capital common increase the business. on dividends repurchases, quarterly paid ability we confidence commitment long-term XX% common a increase an increase to as to share plan our an per $X.XX with program, cash at the dividend. since cash or our share. initiation per on to highlights dividend, to in our the million next $XX X. quarterly of of March Further in addition execute continue our stockholders of approved the allocation the demonstrating will quarterly In for ongoing share to close has payment the in paid dividend than in our the as of the business XX record well This That has increase Board is dividend. outlook of $X.XX the more our March an on to Board

balance during on and the continue course of an between maintaining short-term of We strong focused ended industry We to recognize expect we to throughout a investments, remain protection of We $XXX of best liquidity. bottom $XXX maintain as healthy we cash quarterly sheet cycles, will cash a is cycles. increased balance in and million and learned, a intensely the expectation the We that position at experience ample sheet million. that level have well operate XXXX. million our within $XXX those year to the with the and pay

also of million debt, net Tax major passage leaving during and the Jobs us the One $XX the We was of development cash year position million. a Cuts quarter in Act. with ended $XXX other of the

many aware, also minimum to As tax you the of requirement. the passage act from corporate already XX% the and are rate alternative XX% reduced eliminated the of

credits by XXXX. the In refundable under fact, AMT act are

$XX carryback XXXX refund $XX the was were claims in able million in received of and be XXXX. valuation benefit a quarter remaining quarter of January. net will allowance with in primarily the associated million credits is between the The of AMT the and Our credits the credits. fourth a those $XX result refunded to AMT million associated release tax with of file We

AMT tax rate base at the for of under and rate, performance. keep scenarios our corporate for future X requirement combination deferred Going decade forward, next effectively should most elimination large tax the the asset of reduced the cash tax the our

guidance is and Our be cost $XX press has in equity to reflected between thoughts million we items our on expenses expect SG&A provided our XXXX. expense. This million. includes for compensation operating XXXX non-cash million An to release of Paul $XX $XX performance the note, and

a compensation. non-cash be our expecting spending of reducing we cash expense as During across for of cost midpoint $X summary, of it to million been we $XX powerful SG&A the non-cash In compensation, equity Net decrease SG&A $X of a equity guidance, continue year million company. on million are XXXX XXXX, the platform. focused the has of included from our of

portfolio We refinance and the healthy expense cash debt, complexes interest our to reprice of reducing million. year. were generated $XX low-cost flows able by Our throughout high-quality, ultimately annual

With the and flows, million benefit and healthy to capacity by of able increased return we reduce enhance by in our resulted with of third $XXX lower of The cash an and inventory-only collateral a strong borrowing balance collateral the implementation of sheet facility. combination parties parties. the third ABL of capacity collateral were held held

to capital Finally, and both were return we of repurchases. healthy to shareholders via our able dividends amounts share

we I'll back We what are over the to future, to to call turn specifically, XXXX take ready about offer. and questions. our excited you. has are Operator, With that,

Operator

we'll FBR. Riley Pipes Lucas Instructions] from with [Operator B. you. Thank take question our first And

Lucas Pipes

Good everybody. morning, Hey.

John Eaves

morning, Good Lucas.

Lucas Pipes

carryover I guidance, I fit would I there wanted to in follow when into the late you - range here all where as does the of But up And a in little guidance, XXXX, bad tons? the sales Or coal And side. think is weather about bit look include wide. those fairly your met the the they that appreciate picture? XXXX. on

Paul Lang

to bit in at tons the guidance. couple in our little And is way weeks. is Yes. the look - frankly, it a of the think of of I XXX,XXX are last Lucas, experience out included carryover range the our the

more XXX,XXX things the seaborne more see swing that these volumes or gotten year-end into we particularly at we've tons. XXX,XXX the As and market, can

the the kind for basis that's of range. So

John Drexler

every kind if this got have we portfolio exposed how to to of at John. Lucas, straddling as going look to we've Paul the international, boats and repositioned Certainly, we're so quarter. the our domestic market, is that you it are from met said, XX% international quarter

as bit at thought where move we have wide narrow to suspect forward. that going right range that we are, you're I million million. was we'll The a So movements X.X range we and given little But some now X.X that there. appropriate. is

Lucas Pipes

lower is How makes it. bit. older? a the appreciate event from That panels, you like obviously, think think to Leer is that persist? that then, this I Got will portion have that? a that or And little that. this I more mix prepared shorter Paul, you of condition is that long the remarks change maybe bit a sense. color? will A appreciate in little I XXXX contribution of going something the mentioned year here, getting would do High-Vol about the Is the your and How

Paul Lang

And Yes. want into. This Lucas, I area in context. to a that guess, headed was - it I this known was keep we're

XX% we're about months. High-Vol about as at look localized you was If at What XXXX, High-Vol leaves B. should That we product is and XX of XX% Leer into did XX% pretty heading last and A. our Low-Vol about

will most our it'll produce High-Vol as to will XXXX, So span we'll in XX%. of about still XXXX. to Low-Vol product With B our XX% our up and of drop High-Vol XX% go that, A

Lucas Pipes

That's very contracted maybe And that you thus the High-Vol the little terms of a far, have that more towards spectrum? B tilted is tons in helpful.

Paul Lang

the was and just High-Vol XX% the B. XXX,XXX So North about market into American X.X of QX, you look if round million that tons kind of tons were we at committed, numbers,

about North market This seaborne in XXX,XXX A If of we and High-Vol was this XX%. XX% John $XXX. and XX% you we that year bag were about year think a The about XX% market about last the were be it, mentioned, Low-Vol, into at as B. mixed XX% we'll the American about sold High-Vol

Lucas Pipes

and It's very Thank good this color appreciate helpful. luck. you. I really

Paul Lang

Lucas. you, Thank

Operator

MKM we'll take our question Daniel And Scott from now next with Partners.

Daniel Scot

everyone. Good Hey. morning,

John Eaves

Dan. Morning,

Daniel Scot

when you're you guidance maybe at the kind we think Leer the Is thousand looking holding couple about includes Or XXXX? ton achieve might X.X what is a about way the is new over, guys? carried run hundred from tons coal, As on that of to back rate. impacts out, of that - panels capacity about nameplate shorter in you back kind million a Lucas' the for think follow to questions on coking about this that

Paul Lang

think back I to more in Luke the XXXX. expect it's to - Leer a - Dan. get rate run latter, It's we normal

Daniel Scott

Okay.

would it that the million up And maybe so towards ton push X rate?

Paul Lang

I it's like headed about last year, X - million X.X mean, million. out Yes. to about we where

Daniel Scott

have that bringing you - follow-up And of year has would in be say what about do there. Great. do points I you - obviously dividend have Okay. flow last with. cash a start need free to M&A a lots it with number to special My control, cash things then year. pretty the and it think, on do capital share that's, coking that price to thinking you deck coal all you ongoing. repurchases it's conservative in think point Or cycle, increased, my dividends? more problem a good to about start under Pre-funding going or debt at cash you this similar or And markets? about model At hand what firm on point do are Leer? been At

John Drexler

have this Dan, at we we're John. Valley. excited Tygart Certainly, is potential the about projects

additional do said, anything. we producing are XXX hurry any that’s low-cost X got like we're said, we've As can I High-Vol to that out that in mean, fee owned not in We we A. our pretty With employ there position. million and longwalls tons

tough at think. plan I We're comparison. pretty bar pretty now, we have - look we when we're frankly, external with tough We and we've look our M&A. at right what continue a opportunities high a to compare pretty that to business at pleased got Tygart Valley. external It's Quite

got dividend, share the on mentioned, repurchase the about think left as that. $XXX we million about As we program, John

comfortable we're our right now. think I executing plan

of about decision, business months by et conditions, cetera. of think and market the call we driven Valley be Obviously, getting Tygart XX it with business the I Board currently. where decide our pushing terms make the in permit environment, it'll about, when in got the We've that to another we and to that forward. talk comfortable but plan we'll continue really keep Paul is place something it's to

Daniel Scott

the I And look appreciate just schedule quickly, versus then high a you agree, tell longwall move should to at the it I this externally And for could pretty option. us bar be year? Leer that.

Paul Lang

Yes.

they late late into one got QX into fourth have QX be late late 'XX. Laurel have roll do, another this 'XX. Elk, If QX year. move Then happen of fail, we another may Mountain should another we one West could in in mid and and in move go As the QX we together. we the not we in year, quarter. we QX, Never could that one in Leer, have it'll

Daniel Scott

very right. Thanks All much, guys.

Operator

we'll take now from And question with Vertical a Dudas Michael Research.

Michael Dudas

gentlemen. morning, Good

John Eaves

Good morning, Michael.

Michael Dudas

over certain you their And a to look may business replenishing changing out pretty accelerate in the are months? I think, given pricing their having certainly and the mix shareholders of the - - that's your year are that markets rewarded your guys of and think, their obviously, - got well? in international exposure your seeing 'XX. the met bit side, or patience in decent the marketplace. of the to Do the on you've some pointed the John, you're a relative for of were ago, getting changing Compared several what that customers and like some thinking tightness here I next you sense there's you [indiscernible] pretty locking views to market serve inventories future

Paul Lang

that, and I'll I'll Michael, the finish shot first let take John up. at

be us about little think basis. to nervous And a I - time. I was price think I tons yet you some customers about on to did see coal pricing. the it's equal not, that that's a it at Whether And or it think the marks trend was future seen. commit represents XXX,XXX seaborne fixed

John Eaves

balance business, look now. in and think something relative demand right about I we this I supply I are think mean interesting at guess, - Michael, as we it today,

lot this of North hadn't you or a really years, last go If been business, back America employed in globally. whether couple it of it's in capital

we tons, you're low we production can price more to And range. that because million we create probably think the a the bit to down to dips, when out. down that come with higher Arch's I million X up structure. said, we've that real that extreme can So it willing X that's on buyers we on are and actually some if volume works struggle you're those prices in short going We said our really $XXX these $XXX price understand of cost value advantage cost of certainly stabilize think to little around those cycles, lock of And But dip. that that some see that going really to movements. think is hit but recently to think

But positioned. index-linked lock our some to we're like want pricing we we're If in with comfortable tying pricing. the we're pretty way pricing, So comfortable the customers volume that. to with also with

Deck Slone

it's just - Michael, Deck. Michael, its

to With little is bit. in system recognize is and certainly feel in system XX year, production operational terms down last Australia market jump tons that. looking Obviously, to metallurgical see million like fragile there. beginning a the out is does - pretty of logistical XX challenges. to continuing It million, Just the looking exports

with John while a demand As take of get to to said, to of been there's underinvestment. back It's kind up the sort to keep going - we're robust seeing. that

expectation. is tenor feel the And it so like there a different does in

at XXXX market at still $XXX. swaps even, up you're If for the you look

the there's think then to see keep blips "hey, of we'll upon I for while. that link [ph] And stressed So that, a struggling in bit was to things time, system the prices. some through I there a these we're we're fact supply run looking at these some a now for likely the will better and a real appreciation expectation normalize." think pace and once

Michael Dudas

will contracting question million coal interesting now follow-up of that U.S. differently expectations to forward? - XXX achieve look to is, a now, will maybe bit turning more million, to start and about year if market think their seem a excellent your to going Deck, those points. levels relative inventory thermal, are to from My utilities pricing XXX

Paul Lang

I coming. U.S. the - in that's little bit there natural be this year. We're is typically, our differential too think supply. you where is may market know, of we the a Michael, that just and price as great But

tons. we'll can't dynamic have push some all to year all customers I operators the We deliveries back that to of close about going - getting smaller a it's concerns coal But come of heard product. the down value domestically, at And overseas. some to could end, change bit. from from into If particularly the of we little the parity get the the heading next think

Michael Dudas

Paul. it. Thanks, Appreciate

Operator

question take Global. now from Seaport We'll Mark with Levin from next our

Mark Levin

very Thanks Hey. much.

way at Low-Vol it, be First left what's or B? is look is I unpriced you versus much XXXX, be mix the versus in High-Vol to A of is the of better of met priced question, coal the guess, that that needs remaining How that to sold when putting - that?

Paul Lang

All unpriced, uncommitted and me, is XX% is X% excuse A - right, committed unpriced, B. is and High-Vol Low-Vol Mark, Low-Vol, the for High-Vol is for X% the XX% and

Low-Vol, XX% is XX% High-Vol uncommitted and the A High-Vol unpriced, is is For and B. XX%

Mark Levin

PRB. PRB Got I that think the in When color. it. know versus you 'XX the guidance guys for you Appreciate about don't that specific gave 'XX -

on interpreted 'XX in expectation is or think I right? flattish call the 'XX that versus the for that not be I is to volume

Paul Lang

That is correct.

Mark Levin

Okay. I just wanted that. sure to I make understood

came in a back or half The that? it considerably. met or turn balance is terrific a obviously point Third cost of excellent more question, buying any the or big a sheet discussion a is of a the generating guess structure at company As Would I in turn this the Board been stock were, more a you about cash, leverage putting more putting prices point? a question. and picture shape. is to, you a free Has a consider down of turn if there dividend? alluded you're just as on leverage Johns, shape either Would of half guys paying even consider of lot in turn the or - a or

John Drexler

items Mark, is There's John thoughtful there. always all Drexler. those of for this consideration

I the we've cash plan we've it's clear course that the been excess and targeting executed the executed includes share a the program and capital program. aggressively over the that repurchase of quarterly out plan think year, on a dividend that towards and flows we've given return laid that the both

We're our cost very with balance are sheet very is the of comfortable position comfortable the the that with We operations. in. structure

continue we additional right flows. going, to as see - see moment this need we're in to put so And not to we very I think And that look now, market's the as course expect we But healthy that, the from something considered today, very to similar to in be that's that be Not balance where of I so leverage I ongoing on forward, future. sit think, sheet. our that think the what could we we've here looking far where will ahead, generate a on And cash XXXX. at forward, we just to say we done through time, continue I as execute don't plan. move

Mark Levin

- go ahead. I'm Yes sorry, Great.

John Eaves

ahead. go No, Okay.

Mark Levin

was No. just M&A. just I final around was question my -

one very, about production the your if you you happen? But looking for question, good returns I at picture on you a alluded in that is or you when what's you kind the met big coal which in to or a that As versus of picture Leer, domestic would needs think can view look would the very to of you market do guys - that's be big Dan's get think in think you Appalachia, going And you project. to market M&A be consolidate? is think, obviously response to obviously guys U.S. the willing that met role ultimately, play market to,

John Eaves

don't the our certainly, to that role I know do Well, consolidating. it's

fragmented met I earlier, U.S. think will said, our be comfortable Who probably But a how somewhere. externally. needs consolidate an guess. I is that said time. like and market evolves opportunity for I We our With anybody's as I yes, to probably we're still think somewhat there's We're I over lot. that always think pretty and opportunities position. that think looking the - organic with

Mark Levin

accomplish year. congratulations and it. thanks Great. - this Got on the all Well, great,

John Eaves

Mark. Thanks,

Paul Lang

Thank you, Mark.

Operator

our next question take Jeremy We'll Sussman from Clarkson. with

Jeremy Sussman

Yes, hi. my Thanks taking question. for

John Eaves

Jeremy. Morning,

Paul Lang

Morning, Jeremy.

Jeremy Sussman

Morning.

to of somewhere QX, a And correctly, I like, going more. about you port. gave High-Vol where Platts little my yet the about what XX% during - presumably in of bit your think mine. coal per in sounds exports, quarter short at think of export to if the index price 'XX $XXX the into FOB fixed let And met for metric percentages Based I the side just majority has so new High-Vol the ton at dig sort - on it think ton have was $XXX A us priced. guess when the you guess, be I is range some math, So I you signed per business $XXX I met I production left your me you A, heard

$XXX, if look is today, above which about So QX is A index the level. I the $XX High-Vol

if guess, of guess, $XXX ton speaking, index? of commitments I average be safe that's new saw of So is pricing much way, first to conversion, done short all, detail, imply north least can much too QX, than per are to kind be we kind And $XXX, at? same a at $XXX the it the second, $XXX on that guys you would in say today a higher are going which we of something either currently I fixed relatively should your at - that use substantially

Paul Lang

question. Platts tried Yes, we've I think price - indexes. to - We off off to price no East Coast everything

I think the what for the of those are people sets vessel the differently shipped looked index gets at and customers different before is confusing some by those that are price.

going so conversion selling interpret are to we average also and our pretty and Coast the in index trading a and is And after average, bath use short Some to average East about the customers of less prices, a XX to effectively, vessel we to days on there's range load, wide ton. - hit $XX but transportation before the price on transportation. the tons at prices, those the $XX maybe

Jeremy Sussman

Okay.

at isn't too levels. far them like my sounds it today's math So off

Paul Lang

That is correct.

Jeremy Sussman

on the initiatives easier in one. about? what in cost of the I met of of expectations coal talked XXXX, and simply versus guidance And your Mountain coal Okay. just that maybe of you've is other cost-cutting decline. met ton sort midpoint Lone - year-over-year Based of imply think the $X removal segment per much the How kind an for some

Paul Lang

of also royalties, remember even the are price you chunk go but our about at that contracts a Mountain, big our price of taxes fixed to removal $XX. Clearly, up going fixed Lone and is

taxes So up of and $X.XX going royalties that. are

is there problem. a So embedded high-class some cost is which increase,

Jeremy Sussman

Right.

Okay. luck. much Well, and you good very thank

Paul Lang

Thanks, Jeremy.

Operator

next our now Stifel. with We'll take Forward question Paul from

Paul Forward

Good Thanks. morning.

John Eaves

Paul. Morning,

Paul Forward

Elk. change Other On production and from West the be that lower XX% going given, it - is like big you've shifting over lower the XX%, to the guidance Thermal segment sounded think to to I anticipated

about may to anticipating The West ton. wanted the, little any Elk, XXXX gave of ask the $XX.XX high were like XXXX Just bit was X guidance were at not end cash cost that ton. you you costs longwall be per $XX.XX it moves think, year. And range per the a for I sounded of end there the at

range - up. in a what kind thinking of have wanted was that happen that 'XX? about step the What to big setting of did for number than you ask that to guidance ask your higher in to that's I cost 'XX? end to high what wanted reach Just much

Paul Lang

this Paul. Paul, Yes. is

run the short as I have. I mine just more harder, net think kind move at produce it the may longwall looking West We way it we you we tons was the of look we than was, would more Elk, bringing any coal can at ran not ratably. have And term, the but in forward.

that we got we've that that I there's we if where think think average able if do move Where are of forward top I'm at end longwall of is, well development an that just following upside to on guidance, work our rate. it. I through look assuming of move So and can we'll kind year pace we development we the that QX bring that, production impacting and ourselves do without in and guidance into the

Deck Slone

Paul, reiterate Deck. just - to it's

the on reiterate pushes cost fewer to The we'll of big up. this basis, Just more part a clearly obviously and is Coal-Mac tons tons that have a higher there. Elk percentage that tons fact that West mix and

issue. So is mix of just this some

effort strong advantage to caught ran And with we really Elk as indicated, of in West prices. we XXXX take development. we very a result, an new up As capital aggressively in

XXXX. be can't it'll - we be mix. run can't also level it'll in contribution, same small - big but will be the of Elk - So component a as we a West the at quite lower make

won't even the each result, a on as those necessarily mine, for costs just so - And higher, be will a though each see average It's mix you higher issue. costs. -

Paul Forward

might some - uncommitted on if cost? just a there can Deck, the mix to greater on effect of bring the up May following that And share significant that you like, be of give a be sense us could average some point. tons Coal-Mac up? offset that price in has guess XXXX, I

Paul Lang

Yes.

sales The with those We as there's mines mines XXX% and Deck the mix. the are in difference bit this is difficulty segment pop due in the in to cost. little a X expecting a about of have segment, realization said, X

the tweak between you volumes So numbers. mines those can the it at all, skew X

Paul Forward

Right.

in sounded that over the And fourth kind number so sub-$XX. down shifting Okay. And or product of per to it like it were the ton. being signings looks something mix like around new with to quarter $XX.XX PRB, do had

upper few up into in We just of PRB. pricing last pick a days the the the spot kind $XXs have over seen

you if ability for on capture $XX.XX-plus little can talk wondered balance going with of the the coal tons? of bit for about that? to XXXX year what's Just pricing a your for the type kind that And uncommitted of the

Paul Lang

I you bed would theme as about, in don't think this ourselves year, pretty our PRB. the the talk we say quality we hear good look as what in think head time is a quite to strengthen I tons we the should we the although into It's put clearly have we the open market, on the market a reflect I position common at They're not have sync. at lower the higher-quality And left physical. tons and indices usually

the get on look, - think the and I And are little gas, prices they and think if see I they a you I rising in could continue correct. way are we things PRB. think directional help

John Eaves

the But to Paul, as I Paul improve, said volume where the it. earlier we're don't mean, in market going want not script, it see does we his market into if force

up and different. back So we'll something do

John Drexler

kind [indiscernible] definitively finally I down the don't about I inflection we've that of a get Mike point the we We but happens is tons we've since in so it overhang, XXX earlier stockpile to what Paul, XXXX, might seen done that the thing really mean, of or be we fundamentals. beginning a positive. when be certainly, terms Dudas guess when market one in will positive know should induce overhang of that asked stockpiles. million what

still as feels down, in move as there's this movement. to do some it some But encouraging we As like well, PRB. of the upward it we see to is indicated work

right the the how see out. But we'll year there. we're moving So direction certainly, plays in

Paul Forward

Thanks Okay. lot. a

John Eaves

Paul. you, Thank

Operator

Cooperman with We'll Cobalt move Wayne now Capital. to

Wayne Cooperman

any To count, cash there your guys. beat but If December repurchase did for year-end to for a free flow first, 'XX? where And Hey, of rest share you XX? actually took based guidance may dead free stock? is on - you share we using on not our specific, out would just just the kind and horse, be then maybe estimates cash a flow anticipate being of to subtracted plan the the dividend, buy without back just there? Or end game

John Drexler

here. million couple We Yes. of we approximately A bought back X outstanding over of Wayne, Drexler John our XXXX, items. indicated shares. of the course

share million. Our XX at started count

the at physical XX So actual of the end shares year, the outstanding shares. were million

do As policy. we on move capital forward, expect healthy to execute flows. cash our to as free we've see continue return We we indicated,

I 'XX, not I communicated we've only plan well. that it but course of the over as we've executed think on think

cash Looking expect ongoing forward, healthy generation. we do

from over expect I we what to consideration of said, forward. into the with think to wavering 'XX to do course So take communication addition that in With flow we're very were cash favorable some we on the million did of other our moving you that do consider... don't healthy up liquidity events. We into cash able very to the able factored all of to $XXX that cash have with were operational we collateral and free flow, amount third-parties have

Wayne Cooperman

any shares, second... count? assuming you diluted number so is for a, right 'XX XX is, your And question million the My share don't buy

John Drexler

Yes. to If you - were

to XX additional you no our shares of were share QX million. assume the end common outstanding repurchases, If were at

look... you If

Wayne Cooperman

or is or diluted? diluted that That's basic -

John Drexler

basic. That's

our on face we here. about XXX,XXX see et affected have you of you the the and dilutive cetera, X.X income That's shares. I'm net by all share warrants million statement, it's the effect price, that rounding look the of effect of outstanding. If

immaterial. relatively is dilution the So

million repurchases. XX shares additional it's no So outstanding share assuming XXXX, for

Wayne Cooperman

And follow just the up to on last.

taxes interest liquidity told for whatever what is, and the if what all just told our realize EBITDA, you've you dividends us aside, and and we everything we I CapEx you told know us are X is estimate us So - events are.

you is as you And I repurchase? with end end share So net my into year year? the - expect position balance so, to to debt guess, the if the going that's do if simplest... the we same started go

John Drexler

- it's yes, I a Wayne, I think know question. great

So execute $XXX into policy our continue of between cash and we is plan, I'll we to different like the we of expect do consideration plays liquidity I position everyday and things, on And described. on return going think million keep we've $XXX you've our absent which way indicated how decisions lot the our that to kind would there. capital what a that of million. we're frame make - that to exactly to But up

Wayne Cooperman

little on the your question gotten bit. slamming aren't margins production very And brakes you worse. mean, What's get PRB. bit the a margin competitors harder just down you little from stopping last you back until I good on So pulled and always they've guys a have going know I and forward?

John Eaves

from operate not up, I back I at not lower Wayne, our a this dumping reconfigure and just at tons price mean, we need do I keep million in we'll we're doesn't kind volume mean, market. that the don't earlier, call it going additional is that sold I to just mind it XX.X mean, $XX.XX. we threshold. levels. to pain want coal we're today, to of think whatever market to mentioned I where John. to I That's mean, going any in if we it we see are call improvement put

Wayne Cooperman

Does that…¦

Paul Lang

Yes.

add is, patient. need think I I'll we to I think what that be just to

the term, think got advantage quality Over the on best and have longer out the there. ratio I we've we'll

little So do taking some to willing - longer and now, think the we're term. a pain it I look, going slow for

Operator

the time, or additional to turn we questions. this And back for conference remarks. all at have you closing time will I for that's Mr. Eaves, the

John Eaves

XXXX shareholder for We their the want of execute updating in commend Thank business performance for April. well exceptional value our on you the Arch. very Arch certainly We plan. think create you. you and your We on in to look the all much. to I employees interest sometime to positioned to XXXX. in appreciate Coal results company Thank continue first forward we've quarter

Operator

thank participation. all your you We does conference. that today's conclude for And

disconnect. now may You

Arch Resources (ARCH) 13 Feb 182017 Q4 Earnings call transcript