Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 10-Q

 

(Mark One)

 

x      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2014

 

o         Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from                 to                 .

 

Commission file number: 1-13105

 

 

Arch Coal, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

43-0921172

(State or other jurisdiction

 

(I.R.S. Employer

of incorporation or organization)

 

Identification Number)

 

One CityPlace Drive, Suite 300, St. Louis, Missouri

 

63141

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code: (314) 994-2700

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

At April 30, 2014 there were 212,279,999 shares of the registrant’s common stock outstanding.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

 

Page

Part I FINANCIAL INFORMATION

3

 

Item 1. Financial Statements

3

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

 

Item 4. Controls and Procedures

30

Part II OTHER INFORMATION

 

 

Item 1. Legal Proceedings

31

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

34

 

Item 4. Mine Safety Disclosures

34

 

Item 6. Exhibits

35

 

2



Table of Contents

 

Part I

FINANCIAL INFORMATION

Item 1.    Financial Statements.

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

(Unaudited)

 

Revenues

 

$

735,971

 

$

737,370

 

Costs, expenses and other operating

 

 

 

 

 

Cost of sales (exclusive of items shown separately below)

 

686,314

 

649,743

 

Depreciation, depletion and amortization

 

104,423

 

110,193

 

Amortization of acquired sales contracts, net

 

(3,696

)

(2,810

)

Change in fair value of coal derivatives and coal trading activities, net

 

914

 

1,308

 

Selling, general and administrative expenses

 

29,136

 

33,209

 

Other operating income, net

 

(7,998

)

(2,842

)

 

 

809,093

 

788,801

 

 

 

 

 

 

 

Loss from operations

 

(73,122

)

(51,431

)

Interest expense, net

 

 

 

 

 

Interest expense

 

(96,471

)

(95,074

)

Interest and investment income

 

1,843

 

2,836

 

 

 

(94,628

)

(92,238

)

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(167,750

)

(143,669

)

Benefit from income taxes

 

(43,611

)

(59,353

)

Loss from continuing operations

 

(124,139

)

(84,316

)

Income from discontinued operations, net of tax

 

 

14,267

 

Net loss

 

$

(124,139

)

$

(70,049

)

 

 

 

 

 

 

Loss from continuing operations

 

 

 

 

 

Basic and diluted loss per common share

 

$

(0.59

)

$

(0.40

)

 

 

 

 

 

 

Net loss

 

 

 

 

 

Basic and diluted loss per common share

 

$

(0.59

)

$

(0.33

)

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

212,171

 

212,062

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.01

 

$

0.03

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Net loss

 

$

(124,139

)

$

(70,049

)

 

 

 

 

 

 

Derivative instruments

 

 

 

 

 

Comprehensive loss before tax

 

(229

)

(1,179

)

Income tax benefit

 

82

 

425

 

 

 

(147

)

(754

)

Pension, postretirement and other post-employment benefits

 

 

 

 

 

Comprehensive income (loss) before tax

 

(1,847

)

1,954

 

Income tax benefit (provision)

 

665

 

(703

)

 

 

(1,182

)

1,251

 

 

 

 

 

 

 

Available-for-sale securities

 

 

 

 

 

Comprehensive income (loss) before tax

 

(2,033

)

1,553

 

Income tax benefit (provision)

 

732

 

(559

)

 

 

(1,301

)

994

 

Total other comprehensive income (loss)

 

(2,630

)

1,491

 

Total comprehensive loss

 

$

(126,769

)

$

(68,558

)

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

4



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

865,761

 

$

911,099

 

Short term investments

 

248,572

 

248,414

 

Trade accounts receivable

 

230,002

 

198,020

 

Other receivables

 

44,810

 

31,553

 

Inventories

 

224,806

 

264,161

 

Prepaid royalties

 

6,896

 

8,083

 

Deferred income taxes

 

48,869

 

49,144

 

Coal derivative assets

 

12,316

 

14,851

 

Other current assets

 

55,296

 

56,746

 

Total current assets

 

1,737,328

 

1,782,071

 

Property, plant and equipment, net

 

6,616,144

 

6,734,286

 

Other assets

 

 

 

 

 

Prepaid royalties

 

87,552

 

87,577

 

Equity investments

 

223,235

 

221,456

 

Other noncurrent assets

 

158,925

 

164,803

 

Total other assets

 

469,712

 

473,836

 

Total assets

 

$

8,823,184

 

$

8,990,193

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

160,361

 

$

176,142

 

Accrued expenses and other current liabilities

 

328,561

 

278,587

 

Current maturities of debt

 

29,950

 

33,493

 

Total current liabilities

 

518,872

 

488,222

 

Long-term debt

 

5,112,995

 

5,118,002

 

Asset retirement obligations

 

390,408

 

402,713

 

Accrued pension benefits

 

10,484

 

7,111

 

Accrued postretirement benefits other than pension

 

37,995

 

39,255

 

Accrued workers’ compensation

 

75,817

 

78,062

 

Deferred income taxes

 

368,057

 

413,546

 

Other noncurrent liabilities

 

181,866

 

190,033

 

Total liabilities

 

6,696,494

 

6,736,944

 

Stockholders’ equity

 

 

 

 

 

Common stock, $0.01 par value, authorized 260,000 shares, issued 213,792 shares at both March 31, 2014 and December 31, 2013.

 

2,141

 

2,141

 

Paid-in capital

 

3,040,946

 

3,038,613

 

Treasury stock, at cost

 

(53,848

)

(53,848

)

Accumulated deficit

 

(897,611

)

(771,349

)

Accumulated other comprehensive income

 

35,062

 

37,692

 

Total stockholders’ equity

 

2,126,690

 

2,253,249

 

Total liabilities and stockholders’ equity

 

$

8,823,184

 

$

8,990,193

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

5



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

Net loss

 

$

(124,139

)

$

(70,049

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation, depletion and amortization

 

104,423

 

118,868

 

Amortization of acquired sales contracts, net

 

(3,696

)

(2,810

)

Amortization relating to financing activities

 

3,236

 

6,167

 

Prepaid royalties expensed

 

1,803

 

3,537

 

Employee stock-based compensation expense

 

2,333

 

2,713

 

Gains on disposals and divestitures, net

 

(15,129

)

(595

)

Changes in:

 

 

 

 

 

Receivables

 

(27,245

)

(12,340

)

Inventories

 

7,441

 

(2,816

)

Accounts payable, accrued expenses and other current liabilities

 

43,989

 

38,249

 

Income taxes, net

 

(115

)

458

 

Deferred income taxes

 

(43,698

)

(54,993

)

Other

 

10,522

 

16,902

 

Cash provided by (used in) operating activities

 

(40,275

)

43,291

 

Investing activities

 

 

 

 

 

Capital expenditures

 

(14,454

)

(54,522

)

Additions to prepaid royalties

 

(591

)

(9,142

)

Proceeds from disposals and divestitures

 

28,195

 

714

 

Purchases of short term investments

 

(119,176

)

(26,787

)

Proceeds from sales of short term investments

 

117,681

 

11,534

 

Investments in and advances to affiliates

 

(3,242

)

(4,298

)

Change in restricted cash

 

 

1,163

 

Cash provided by (used in) investing activities

 

8,413

 

(81,338

)

Financing activities

 

 

 

 

 

Payments on term loan

 

(4,875

)

(4,125

)

Net payments on other debt

 

(4,521

)

(5,964

)

Debt financing costs

 

(1,957

)

 

Dividends paid

 

(2,123

)

(6,367

)

Cash used in financing activities

 

(13,476

)

(16,456

)

Decrease in cash and cash equivalents

 

(45,338

)

(54,503

)

Cash and cash equivalents, beginning of period

 

911,099

 

784,622

 

Cash and cash equivalents, end of period

 

$

865,761

 

$

730,119

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

6



Table of Contents

 

Arch Coal, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

1.  Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Arch Coal, Inc. and its subsidiaries and controlled entities (the “Company”). The Company’s primary business is the production of thermal and metallurgical coal from surface and underground mines located throughout the United States, for sale to utility, industrial and steel producers both in the United States and around the world. The Company currently operates mining complexes in West Virginia, Kentucky, Maryland, Virginia, Illinois, Wyoming and Colorado.  All subsidiaries are wholly-owned. Intercompany transactions and accounts have been eliminated in consolidation.

 

The Company completed the sale of Canyon Fuel Company, LLC (“Canyon Fuel”) on August 16, 2013.  The results of Canyon Fuel have been segregated from continuing operations and are reflected, net of tax, as discontinued operations in the condensed consolidated statements of operations for the three months ended March 31, 2013.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three months ended March 31, 2014 are not necessarily indicative of results to be expected for the year ending December 31, 2014. These financial statements should be read in conjunction with the audited financial statements and related notes as of and for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission.

 

2.  Accounting Policies

 

There is no new accounting guidance that is expected to have a significant impact on the Company’s financial statements.

 

3.  Accumulated Other Comprehensive Income

 

The following items are included in accumulated other comprehensive income:

 

 

 

 

 

Pension,

 

 

 

 

 

 

 

 

 

Postretirement

 

 

 

 

 

 

 

 

 

and Other

 

 

 

Accumulated

 

 

 

 

 

Post-

 

 

 

Other

 

 

 

Derivative

 

Employment

 

Available-for-

 

Comprehensive

 

 

 

Instruments

 

Benefits

 

Sale Securities

 

Loss

 

 

 

(In thousands)

 

Balance at December 31, 2013

 

$

565

 

$

31,112

 

$

6,015

 

$

37,692

 

Unrealized gains (losses)

 

47

 

 

(1,657

)

(1,610

)

Amounts reclassified from accumulated other comprehensive income

 

(194

)

(1,182

)

356

 

(1,020

)

Balance at March 31, 2014

 

$

418

 

$

29,930

 

$

4,714

 

$

35,062

 

 

The following amounts were reclassified out of accumulated other comprehensive income:

 

7



Table of Contents

 

 

 

Amount Reclassified from

 

 

 

 

 

Accumulated other comprehensive
income

 

Line Item in the

 

Details about accumulated other

 

Three months ended March 31,

 

Condensed Consolidated

 

comprehensive income components

 

2014

 

2013

 

Statement of Operations

 

 

 

(In thousands)

 

 

 

Derivative instruments

 

$

303

 

$

859

 

Revenues

 

 

 

(109

)

(309

)

Benefit from income taxes

 

 

 

$

194

 

$

550

 

Net of tax

 

 

 

 

 

 

 

 

 

Pension, postretirement and other post-employment benefits

 

 

 

 

 

 

 

Amortization of prior service credits

 

$

2,626

 

$

2,908

(1)

 

 

Amortization of actuarial gains (losses), net

 

(779

)

(4,862

)(1)

 

 

 

 

1,847

 

(1,954

)

Total before tax

 

 

 

(665

)

703

 

Benefit from income taxes

 

 

 

$

1,182

 

$

(1,251

)

Net of tax

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

$

(556

)

$

(59

)(2)

Interest and investment income

 

 

 

200

 

21

 

Benefit from income taxes

 

 

 

$

(356

)

$

(38

)

Net of tax

 

 


(1) Production-related benefits and workers’ compensation costs are included in inventoriable production costs.

(2) The gains and losses on sales of available-for-sale-securities are determined on a specific identification basis.

 

4.  Divestitures

 

During the first quarter of 2014, the Company entered into agreements to sell an operating thermal coal complex and an idled thermal coal mine in Kentucky and the Company’s ADDCAR subsidiary, which manufactures a patented highwall mining system.  The sales closed during the quarter for total consideration of $45.5 million.  The Company received $26.3 million in cash and the remaining $19.0 million is payable $8.0 million on June 30, 2014 and $11.0 million on December 31, 2014.  The Company recognized a net pre-tax gain of $13.8 million from these divestitures, reflected in “other operating income, net” in the condensed consolidated statement of operations.

 

The following table summarizes the assets and liabilities of the divested operations reflected in the December 31, 2013 consolidated balance sheet:

 

 

 

(In thousands)

 

Inventories

 

$

33,283

 

Other current assets

 

1,032

 

Net property, plant & equipment

 

104,587

 

Other noncurrent assets

 

139

 

Accounts payable and accrued expenses

 

13,005

 

Other noncurrent liabilities

 

24,276

 

 

The following table summarizes the results of Canyon Fuel, reflected as discontinued operations in the condensed consolidated statement of operations through the date of disposition:

 

8



Table of Contents

 

 

 

Three Months Ended
March 31, 2013

 

 

 

(In thousands)

 

Total revenues

 

$

88,132

 

Income from discontinued operations before income taxes

 

$

18,989

 

Less: income tax expense

 

4,722

 

Income from discontinued operations

 

$

14,267

 

Basic and diluted earnings per common share from discontinued operations

 

$

0.07

 

 

5.  Inventories

 

Inventories consist of the following:

 

 

 

March 31,

 

December 31

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Coal

 

$

98,125

 

$

117,531

 

Repair parts and supplies

 

126,681

 

137,497

 

Work-in-process

 

 

9,133

 

 

 

$

224,806

 

$

264,161

 

 

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $8.6 million at March 31, 2014 and $8.4 million at December 31, 2013.

 

6.   Investments in Available-for-Sale Securities

 

The Company has invested in marketable debt securities, primarily highly liquid AA - rated corporate bonds and U.S. government and government agency securities.  These investments are held in the custody of a major financial institution.  These securities, along with the Company’s investments in marketable equity securities, are classified as available-for-sale securities and, accordingly, the unrealized gains and losses are recorded through other comprehensive income.

 

The Company’s investments in available-for-sale marketable securities are as follows:

 

 

 

March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Gross

 

Gross

 

 

 

Classification

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

Short-Term

 

Other

 

 

 

Cost Basis

 

Gains

 

Losses

 

Value

 

Investments

 

Assets

 

 

 

(In thousands)

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate notes and bonds

 

$

250,723

 

$

4

 

$

(2,155

)

$

248,572

 

$

248,572

 

$

 

Equity securities

 

5,420

 

12,203

 

(2,698

)

14,925

 

 

14,925

 

Total Investments

 

$

256,143

 

$

12,207

 

$

(4,853

)

$

263,497

 

$

248,572

 

$

14,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Gross

 

Gross

 

 

 

Classification

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

Short-Term

 

Other

 

 

 

Cost Basis

 

Gains

 

Losses

 

Value

 

Investments

 

Assets

 

 

 

(In thousands)

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

65,002

 

$

11

 

$

(75

)

$

64,938

 

$

64,938

 

$

 

Corporate notes and bonds

 

184,773

 

7

 

(1,304

)

183,476

 

183,476

 

 

Equity securities

 

5,271

 

13,660

 

(2,902

)

16,029

 

 

16,029

 

Total Investments

 

$

255,046

 

$

13,678

 

$

(4,281

)

$

264,443

 

$

248,414

 

$

16,029

 

 

9



Table of Contents

 

The aggregate fair value of investments with unrealized losses that have been owned for less than a year was $200.4 million and $164.3 million at March 31, 2014 and December 31, 2013, respectively. The aggregate fair value of investments with unrealized losses that were owned for over a year, and were also in a continuous unrealized loss position during that time, was $34.7 million and $48.7 million at March 31, 2014 and December 31, 2013, respectively.

 

The debt securities outstanding at March 31, 2014 have maturity dates ranging from the second quarter of 2014 through the third quarter of 2015.  The Company classifies its investments as current based on the nature of the investments and their availability to provide cash for use in current operations.

 

7.   Derivatives

 

Diesel fuel price risk management

 

The Company is exposed to price risk with respect to diesel fuel purchased for use in its operations. The Company anticipates purchasing approximately 57 to 67 million gallons of diesel fuel for use in its operations during 2014. To protect the Company’s cash flows from increases in the price of diesel fuel for its operations, the Company uses forward physical diesel purchase contracts and purchased heating oil call options. At March 31, 2014, the Company had protected the price of approximately 87% of its expected purchases for the remainder of 2014 and 30% of its expected purchases during the first half of 2015. At March 31, 2014, the Company had purchased heating oil call options for approximately 61 million gallons for the purpose of managing the price risk associated with future diesel purchases.

 

The Company has also purchased heating oil call options to manage the price risk associated with fuel surcharges on its barge and rail shipments, which cover increases in diesel fuel prices for the respective carriers. At March 31, 2014, the Company held heating oil call options for 3.8 million gallons that will settle ratably in the remainder of 2014 for the purpose of managing the fluctuations in cash flows associated with fuel surcharges on future shipments.

 

These positions reduce the Company’s risk of cash flow fluctuations related to these surcharges but the positions are not accounted for as hedges.

 

Coal price risk management positions

 

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market in order to manage its exposure to coal prices. The Company has exposure to the risk of fluctuating coal prices related to forecasted sales or purchases of coal or to the risk of changes in the fair value of a fixed price physical sales contract. Certain derivative contracts may be designated as hedges of these risks.

 

At March 31, 2014, the Company held derivatives for risk management purposes that are expected to settle in the following years:

 

(Tons in thousands)

 

2014

 

2015

 

Total

 

Coal sales

 

3,991

 

1,380

 

5,371

 

Coal purchases

 

1,778

 

 

1,778

 

 

The Company has also entered into a nominal quantity of natural gas put options to protect the Company from decreases in natural gas prices, which could impact coal demand.  These options are not accounted for as hedges.

 

Coal trading positions

 

The Company may sell or purchase forward contracts, swaps and options in the over-the-counter coal market for trading purposes. The Company is exposed to the risk of changes in coal prices on the value of its coal trading portfolio. The estimated future realization of the value of the trading portfolio is $6.6 million of gains during the remainder of 2014 and $1.4 million of gains in 2015.

 

10



Table of Contents

 

Tabular derivatives disclosures

 

The Company has master netting agreements with all of its counterparties which allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. Such netting arrangements reduce the Company’s credit exposure related to these counterparties. For classification purposes, the Company records the net fair value of all the positions with a given counterparty as a net asset or liability in the condensed consolidated balance sheets. The amounts shown in the table below represent the fair value position of individual contracts, and not the net position presented in the accompanying condensed consolidated balance sheets. The fair value and location of derivatives reflected in the accompanying condensed consolidated balance sheets are as follows:

 

 

 

March 31, 2014

 

 

 

December 31, 2013

 

 

 

Fair Value of Derivatives

 

Asset

 

Liability

 

 

 

Asset

 

Liability

 

 

 

(In thousands)

 

Derivative

 

Derivative

 

 

 

Derivative

 

Derivative

 

 

 

Derivatives Designated as Hedging Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

$

1,101

 

$

(215

)

 

 

$

909

 

$

(26

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives Not Designated as Hedging Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Heating oil — diesel purchases

 

2,683

 

 

 

 

4,681

 

 

 

 

Heating oil — fuel surcharges

 

152

 

 

 

 

422

 

 

 

 

Coal — held for trading purposes

 

75,886

 

(67,944

)

 

 

55,327

 

(45,763

)

 

 

Coal — risk management

 

4,543

 

(1,453

)

 

 

6,342

 

(1,950

)

 

 

Natural gas

 

398

 

 

 

 

 

 

 

 

Total

 

83,662

 

(69,397

)

 

 

66,772

 

(47,713

)

 

 

Total derivatives

 

84,763

 

(69,612

)

 

 

67,681

 

(47,739

)

 

 

Effect of counterparty netting

 

(69,612

)

69,612

 

 

 

(47,727

)

47,727

 

 

 

Net derivatives as classified in the balance sheets

 

$

15,151

 

$

 

$

15,151

 

$

19,954

 

$

(12

)

$

19,942

 

 

 

 

 

 

March 31, 2014

 

December 31,
2013

 

Net derivatives as reflected on the balance sheets

 

 

 

 

 

 

 

Heating oil

 

Other current assets

 

$

2,835

 

$

5,103

 

Coal

 

Coal derivative assets

 

12,316

 

14,851

 

 

 

Accrued expenses and other current liabilities

 

 

(12

)

 

 

 

 

$

15,151

 

$

19,942

 

 

The Company had a current asset for the right to reclaim cash collateral of $6.5 million at March 31, 2014 and $2.2 million at December 31, 2013. These amounts are not included with the derivatives presented in the table above and are included in “other current assets” in the accompanying condensed consolidated balance sheets.

 

The effects of derivatives on measures of financial performance are as follows:

 

Derivatives used in Cash Flow Hedging Relationships (in thousands)

For the Three Months Ended March 31,

 

 

 

Gain (Loss) Recognized in Other
Comprehensive
Income(Effective Portion)

 

Gains (Losses) Reclassified from
Other Comprehensive
Income into Income
(Effective Portion)

 

 

 

2014

 

2013

 

2014

 

2013

 

Coal sales

(1)

$

(515

)

$

(176

)

$

706

 

$

1,221

 

Coal purchases

(2)

589

 

(182

)

(404

)

(362

)

Totals

 

$

74

 

$

(358

)

$

302

 

$

859

 

 

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No ineffectiveness or amounts excluded from effectiveness testing relating to the Company’s cash flow hedging relationships were recognized in the results of operations in the three month periods ended March 31, 2014 and 2013.

 

Derivatives Not Designated as Hedging Instruments (in thousands)

For the Three Months Ended March 31,

 

 

 

Gain (Loss) Recognized

 

 

 

2014

 

2013

 

Coal — unrealized

(3)

$

(1,302

)

$

1,470

 

Coal — realized

(4)

$

2,879

 

$

9,217

 

Natural gas  — unrealized

(3)

$

8

 

$

 

Heating oil — diesel purchases

(4)

$

(2,963

)

$

(4,261

)

Heating oil — fuel surcharges

(4)

$

(254

)

$

(565

)

 


Location in statement of operations:

(1) — Revenues

(2) — Cost of sales

(3) — Change in fair value of coal derivatives and coal trading activities, net

(4) — Other operating income, net

 

The Company recognized net unrealized and realized  gains of $0.4 million  during the three months ended March 31, 2014 and net unrealized and realized losses of $2.8 million during the three months ended March 31, 2013 related to its trading portfolio, which are included in the caption “Change in fair value of coal derivatives and coal trading activities, net” in the accompanying condensed consolidated statements of operations, and are not included in the previous tables reflecting the effects of derivatives on measures of financial performance.

 

Based on fair values at March 31, 2014, gains on derivative contracts designated as hedge instruments in cash flow hedges of approximately $0.9 million are expected to be reclassified from other comprehensive income into earnings during the next twelve months.

 

8.   Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Payroll and employee benefits

 

$

58,220

 

$

67,621

 

Taxes other than income taxes

 

112,406

 

114,664

 

Interest

 

79,731

 

18,528

 

Acquired sales contracts

 

14,439

 

14,373

 

Workers’ compensation

 

16,470

 

12,434

 

Asset retirement obligations

 

22,682

 

24,940

 

Other

 

24,613

 

26,027

 

 

 

$

328,561

 

$

278,587

 

 

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Table of Contents

 

9.  Debt and Financing Arrangements

 

 

 

March 31,

 

December 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Term loan due 2018 ($1.92 billion and $1.93 billion face value, respectively)

 

$

1,902,731

 

$

1,906,975

 

7.00% senior notes due 2019 at par

 

1,000,000

 

1,000,000

 

9.875% senior notes due 2019 ($375.0 million face value)

 

362,573

 

362,358

 

8.00% senior secured notes due 2019 at par

 

350,000

 

350,000

 

7.25% senior notes due 2020 at par

 

500,000

 

500,000

 

7.25% senior notes due 2021 at par

 

1,000,000

 

1,000,000

 

Other

 

27,641

 

32,162

 

 

 

5,142,945

 

5,151,495

 

Less current maturities of debt

 

29,950

 

33,493

 

Long-term debt

 

$

5,112,995

 

$

5,118,002

 

 

At March 31, 2014, the available borrowing capacity under the Company’s lines of credit was approximately $250.1 million.

 

10.    Income taxes

 

During the three months ended March 31, 2014, the Company determined it was more likely than not that a portion of the federal and state net operating losses it expects to generate in 2014 will not be realized through future taxable income, and the estimated annual effective rate includes a valuation allowance for that portion.   In applying the estimated annual effective rate to earnings for the three months ended March 31, 2014, the Company increased its valuation allowance by $21.6 million related to federal net operating losses and $2.2 million related to state net operating losses.

 

11.  Fair Value Measurements

 

The hierarchy of fair value measurements assigns a level to fair value measurements based on the inputs used in the respective valuation techniques. The levels of the hierarchy, as defined below, give the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

 

·    Level 1 is defined as observable inputs such as quoted prices in active markets for identical assets. Level 1 assets include available-for-sale equity securities, U.S. Treasury securities, and coal futures that are submitted for clearing on the New York Mercantile Exchange.

 

·    Level 2 is defined as observable inputs other than Level 1 prices. These include quoted prices for similar assets or liabilities in an active market, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company’s level 2 assets and liabilities include U.S. government agency securities and commodity contracts (coal and heating oil) with fair values derived from quoted prices in over-the-counter markets or from prices received from direct broker quotes.

 

·    Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. These include the Company’s commodity option contracts (coal, natural gas and heating oil) valued using modeling techniques, such as Black-Scholes, that require the use of inputs, particularly volatility, that are rarely observable. Changes in the unobservable inputs would not have a significant impact on the reported Level 3 fair values at March 31, 2014.

 

The table below sets forth, by level, the Company’s financial assets and liabilities that are recorded at fair value in the accompanying condensed consolidated balance sheet:

 

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Table of Contents

 

 

 

March 31, 2014

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Investments in marketable securities

 

$

263,497

 

$

14,925

 

$

248,572

 

$

 

Derivatives

 

15,151

 

10,956

 

218

 

3,977

 

Total assets

 

$

278,648

 

$

25,881

 

$

248,790

 

$

3,977

 

 

The Company’s contracts with its counterparties allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default or termination. For classification purposes, the Company records the net fair value of all the positions with these counterparties as a net asset or liability. Each level in the table above displays the underlying contracts according to their classification in the accompanying condensed consolidated balance sheet, based on this counterparty netting.

 

The following table summarizes the change in the fair values of financial instruments categorized as level 3.

 

 

 

Three Months Ended
March 31, 2014

 

 

 

(In thousands)

 

Balance, beginning of period

 

$

4,946

 

Realized and unrealized losses recognized in earnings, net

 

(2,925

)

Purchases

 

1,956

 

Ending balance

 

$

3,977

 

 

Net unrealized losses of $2.6 million were recognized during the three months ended March 31, 2014 related to level 3 financial instruments held on March 31, 2014.

 

Fair Value of Long-Term Debt

 

At March 31, 2014 and December 31, 2013, the fair value of the Company’s debt, including amounts classified as current, was $4.5 billion and $4.6 billion, respectively. Fair values are based upon observed prices in an active market, when available, or from valuation models using market information, which fall into Level 2 in the fair value hierarchy.

 

12.   Loss Per Common Share

 

The effect of options, restricted stock and restricted stock units equaling 6.9 million and 8.6 million shares of common stock were excluded from the calculation of diluted weighted average shares outstanding for the three month periods ended March 31, 2014 and 2013, respectively, because the exercise price or grant price of the securities exceeded the average market price of the Company’s common stock for these periods. The weighted average share impacts of options, restricted stock and restricted stock units that were excluded from the calculation of weighted average shares due to the Company’s incurring a net loss for the three months ended March 31, 2014 and 2013 were not significant.

 

13.  Employee Benefit Plans

 

The following table details the components of pension benefit costs (credits):

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Service cost

 

$

5,924

 

$

7,700

 

Interest cost

 

4,364

 

3,926

 

Expected return on plan assets

 

(5,978

)

(5,806

)

Amortization of prior service costs (credits)

 

(54

)

(158

)

Amortization of other actuarial losses

 

948

 

4,551

 

Net benefit cost

 

$

5,204

 

$

10,213

 

 

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Table of Contents

 

The following table details the components of other postretirement benefit costs (credits):

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Service cost

 

$

444

 

$

556

 

Interest cost

 

464

 

431

 

Amortization of prior service credits

 

(2,501

)

(2,750

)

Amortization of other actuarial losses (gains)

 

(170

)

77

 

Net benefit credit

 

$

(1,763

)

$

(1,686

)

 

14.   Commitments and Contingencies

 

The Company accrues for cost related to contingencies when a loss is probable and the amount is reasonably determinable. Disclosure of contingencies is included in the financial statements when it is at least reasonably possible that a material loss or an additional material loss in excess of amounts already accrued may be incurred.

 

Allegheny Energy Supply (“Allegheny”), the sole customer of coal produced at the Company’s subsidiary Wolf Run Mining Company’s (“Wolf Run”) Sycamore No. 2 mine, filed a lawsuit against Wolf Run, Hunter Ridge Holdings, Inc. (“Hunter Ridge”), and ICG in state court in Allegheny County, Pennsylvania on December 28, 2006, and amended its complaint on April 23, 2007. Allegheny claimed that Wolf Run breached a coal supply contract when it declared force majeure under the contract upon idling the Sycamore No. 2 mine in the third quarter of 2006, and that Wolf Run continued to breach the contract by failing to ship in volumes referenced in the contract.  The Sycamore No. 2 mine was idled after encountering adverse geologic conditions and abandoned gas wells that were previously unidentified and unmapped.

 

After extensive searching for gas wells and rehabilitation of the mine, it was re-opened in 2007, but with notice to Allegheny that it would necessarily operate at reduced volumes in order to safely and effectively avoid the many gas wells within the reserve.  The amended complaint also alleged that the production stoppages constitute a breach of the guarantee agreement by Hunter Ridge and breach of certain representations made upon entering into the contract in early 2005.  Allegheny voluntarily dropped the breach of representation claims later.  Allegheny claimed that it would incur costs in excess of $100 million to purchase replacement coal over the life of the contract.  ICG, Wolf Run and Hunter Ridge answered the amended complaint on August 13, 2007, disputing all of the remaining claims.

 

On November 3, 2008, ICG, Wolf Run and Hunter Ridge filed an amended answer and counterclaim against the plaintiffs seeking to void the coal supply agreement due to, among other things, fraudulent inducement and conspiracy.  On September 23, 2009, Allegheny filed a second amended complaint alleging several alternative theories of liability in its effort to extend contractual liability to ICG, which was not a party to the original contract and did not exist at the time Wolf Run and Allegheny entered into the contract.  No new substantive claims were asserted.  ICG answered the second amended complaint on October 13, 2009, denying all of the new claims.  The Company’s counterclaim was dismissed on motion for summary judgment entered on May 11, 2010.  Allegheny’s claims against ICG were also dismissed by summary judgment, but the claims against Wolf Run and Hunter Ridge were not.  The court conducted a non-jury trial of this matter beginning on January 10, 2011 and concluding on February 1, 2011.

 

At the trial, Allegheny presented its evidence for breach of contract and claimed that it is entitled to past and future damages in the aggregate of between $228 million and $377 million.  Wolf Run and Hunter Ridge presented their defense of the claims, including evidence with respect to the existence of force majeure conditions and excuse under the contract and applicable law.  Wolf Run and Hunter Ridge presented evidence that Allegheny’s damages calculations were significantly inflated because it did not seek to determine damages as of the time of the breach and in some instances artificially assumed future nondelivery or did not take into account the apparent requirement to supply coal in the future.  On May 2, 2011, the trial court entered a Memorandum and Verdict determining that Wolf Run had breached the coal supply contract and that the performance shortfall was not excused by force majeure.  The trial court awarded total damages and interest in the amount of $104.1 million, which consisted of $13.8 million for past damages, and $90.3 million for future damages.  ICG and Allegheny filed post-verdict motions in the trial court and on August 23, 2011, the court denied the parties’ motions.  The court entered a final judgment on August 25, 2011, in the amount of $104.1 million, which included pre-judgment interest.

 

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Table of Contents

 

The parties appealed the lower court’s decision to the Superior Court of Pennsylvania.  On August 13, 2012, the Superior Court of Pennsylvania affirmed the award of past damages, but ruled that the lower court should have calculated future damages as of the date of breach, and remanded the matter back to the lower court with instructions to recalculate that portion of the award. On November 19, 2012, Allegheny filed a Petition for Allowance of Appeal with the Supreme Court of Pennsylvania and Wolf Run and Hunter Ridge filed an Answer.  On July 2, 2013, the Supreme Court of Pennsylvania denied the Petition of Allowance.  As this action finalized the past damage award, Wolf Run paid $15.6 million for the past damage amount, including interest, to Allegheny in July 2013.  The future damage award is now back before the lower court, and a new trial has been scheduled to start May 13, 2014.

 

In addition, the Company is a party to numerous claims and lawsuits with respect to various matters. As of March 31, 2014 and December 31, 2013, the Company had accrued $23.1 million and $30.4 million, respectively, for all legal matters, including $10.1 million and $11.7 million, respectively, classified as current.  The ultimate resolution of any such legal matter could result in outcomes which may be materially different from amounts the Company has accrued for such matters.

 

15.  Segment Information

 

The Company’s reportable business segments are based on the major coal producing basins in which the Company operates  and may include a number of mine complexes. The Company manages its coal sales by coal basin, not by individual mining complex. Geology, coal transportation routes to customers, regulatory environments and coal quality or type are characteristic to a basin, and, accordingly, market and contract pricing have developed by coal basin. Mining operations are evaluated based on their per-ton operating costs (defined as including all mining costs but excluding pass-through transportation expenses), as well as on other non-financial measures, such as safety and environmental performance. The Company’s reportable segments are the Powder River Basin (PRB) segment, with operations in Wyoming; and the Appalachia (APP) segment, with operations in West Virginia, Kentucky, Maryland and Virginia.  The “Other” category combines other operating segments and includes the Company’s coal mining operations in Colorado and Illinois and its ADDCAR subsidiary, which the Company sold in the first quarter of 2014.

 

Operating segment results for the three months ended March 31, 2014 and 2013 are presented below. Results for the reportable segments include all direct costs of mining, including all depreciation, depletion and amortization related to the mining operations, even if the assets are not recorded at the operating segment level.  These reportable segments results do not reflect the mine closure or impairment costs, since those are not reflected in the operating income reviewed by management.  Corporate, Other and Eliminations includes these charges, as well as the change in fair value of coal derivatives and coal trading activities, net; corporate overhead; land management; other support functions; and the elimination of intercompany transactions.   The operating segment results reflect only those from continuing operations, and exclude the results of Canyon Fuel, since they are classified as discontinued operations in the condensed consolidated statements of operations.

 

The asset amounts below represent an allocation of assets consistent with the basis used for the Company’s incentive compensation plans. The amounts in Corporate, Other and Eliminations represent primarily corporate assets (cash, receivables, investments, plant, property and equipment) as well as unassigned coal reserves, above-market acquired sales contracts and other unassigned assets.

 

16



Table of Contents

 

 

 

PRB

 

APP

 

Other
Operating
Segments

 

Corporate,
Other and
Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Three Months Ended March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

358,607

 

$

279,137

 

$

98,227

 

$

 

$

735,971

 

Income (loss) from operations

 

(4,898

)

(25,728

)

1,635

 

(44,131

)

(73,122

)

Depreciation, depletion and amortization

 

39,245

 

54,988

 

9,519

 

671

 

104,423

 

Amortization of acquired sales contracts, net

 

(789

)

(2,974

)

67

 

 

(3,696

)

Capital expenditures

 

2,094

 

8,156

 

1,801

 

2,403

 

14,454

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

361,946

 

$

282,618

 

$

92,806

 

$

 

$

737,370

 

Income (loss) from operations

 

15,516

 

(27,116

)

7,384

 

(47,215

)

(51,431

)

Depreciation, depletion and amortization

 

42,227

 

55,331

 

11,304

 

1,331

 

110,193

 

Amortization of acquired sales contracts, net

 

(1,199

)

(2,472

)

861

 

 

(2,810

)

Capital expenditures

 

2,157

 

49,297

 

763

 

2,305

 

54,522

 

 

A reconciliation of segment income (loss) from operations to consolidated loss before income taxes follows:

 

 

 

Three Months Ended March 31,

 

 

 

2014

 

2013

 

 

 

(In thousands)

 

Loss from operations

 

$

(73,122

)

$

(51,431

)

Interest expense

 

(96,471

)

(95,074

)

Interest and investment income

 

1,843

 

2,836

 

Loss from continuing operations before income taxes

 

$

(167,750

)

$

(143,669

)

 

16. Supplemental Consolidating Financial Information

 

Pursuant to the indentures governing Arch Coal, Inc.’s senior notes, certain wholly-owned subsidiaries of the Company have fully and unconditionally guaranteed the senior notes on a joint and several basis. The following tables present condensed consolidating financial information for (i) the Company, (ii) the issuer of the senior notes, (iii) the guarantors under the senior notes, and (iv) the entities which are not guarantors under the senior notes (Arch Receivable Company, LLC and the Company’s subsidiaries outside the United States):

 

17



Table of Contents

 

Condensed Consolidating Statements of Operations

Three Months Ended March 31, 2014

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Revenues

 

$

 

$

735,971

 

$

 

$

 

$

735,971

 

Costs, expenses and other

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of items shown separately below)

 

3,389

 

683,775

 

 

(850

)

686,314

 

Depreciation, depletion and amortization

 

1,472

 

102,942

 

9

 

 

104,423

 

Amortization of acquired sales contracts, net

 

 

(3,696

)

 

 

(3,696

)

Change in fair value of coal derivatives and coal trading activities, net

 

 

914

 

 

 

914

 

Selling, general and administrative expenses

 

19,944

 

7,865

 

1,803

 

(476

)

29,136

 

Other operating income, net

 

1,593

 

(9,480

)

(1,437

)

1,326

 

(7,998

)

 

 

26,398

 

782,320

 

375

 

 

809,093

 

Loss from investment in subsidiaries

 

(35,347

)

 

 

35,347

 

 

Loss from operations

 

(61,745

)

(46,349

)

(375

)

35,347

 

(73,122

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(113,655

)

(6,324

)

(1,050

)

24,558

 

(96,471

)

Interest and investment income

 

7,601

 

17,651

 

1,149

 

(24,558

)

1,843

 

 

 

(106,054

)

11,327

 

99

 

 

(94,628

)

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

(167,799

)

(35,022

)

(276

)

35,347

 

(167,750

)

Provision for (benefit from) income taxes

 

(43,660

)

 

49

 

 

(43,611

)

Net loss

 

$

(124,139

)

$

(35,022

)

$

(325

)

$

35,347

 

$

(124,139

)

Total comprehensive loss

 

$

(126,769

)

$

(36,428

)

$

(325

)

$

36,753

 

$

(126,769

)

 

18



Table of Contents

 

Condensed Consolidating Statements of Operations

Three Months Ended March 31, 2013

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Revenues

 

$

 

$

737,370

 

$

 

$

 

$

737,370

 

Costs, expenses and other

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of items shown separately below)

 

2,883

 

646,860

 

 

 

649,743

 

Depreciation, depletion and amortization

 

1,406

 

108,778

 

9

 

 

110,193

 

Amortization of acquired sales contracts, net

 

 

(2,810

)

 

 

(2,810

)

Change in fair value of coal derivatives and coal trading activities, net

 

 

1,308

 

 

 

1,308

 

Selling, general and administrative expenses

 

21,698

 

10,035

 

1,476

 

 

33,209

 

Other operating income, net

 

(5,907

)

4,077

 

(1,012

)

 

(2,842

)

 

 

20,080

 

768,248

 

473

 

 

788,801

 

Income from investment in subsidiaries

 

(2,871

)

 

 

2,871

 

 

Income (loss) from operations

 

(22,951

)

(30,878

)

(473

)

2,871

 

(51,431

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(110,827

)

(6,442

)

(1,041

)

23,236

 

(95,074

)

Interest and investment income

 

9,098

 

15,443

 

1,531

 

(23,236

)

2,836

 

 

 

(101,729

)

9,001

 

490

 

 

(92,238

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(124,680

)

(21,877

)

17

 

2,871

 

(143,669

)

Benefit from income taxes

 

(59,353

)

 

 

 

(59,353

)

Income (loss) from continuing operations

 

(65,327

)

(21,877

)

17

 

2,871

 

(84,316

)

Income from discontinued operations, net of tax

 

(4,722

)

18,989

 

 

 

14,267

 

Net income (loss)

 

$

(70,049

)

$

(2,888

)

$

17

 

$

2,871

 

$

(70,049

)

Total comprehensive income (loss)

 

$

(68,558

)

$

(3,324

)

$

17

 

$

3,307

 

$

(68,558

)

 

19



Table of Contents

 

Condensed Consolidating Balance Sheets

March 31, 2014

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

753,902

 

$

100,353

 

$

11,506

 

$

 

$

865,761

 

Short term investments

 

248,572

 

 

 

 

248,572

 

Receivables

 

33,115

 

16,594

 

229,737

 

(4,634

)

274,812

 

Inventories

 

 

224,806

 

 

 

224,806

 

Other

 

80,500

 

42,347

 

530

 

 

123,377

 

Total current assets

 

1,116,089

 

384,100

 

241,773

 

(4,634

)

1,737,328

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

23,765

 

6,592,317

 

28

 

34

 

6,616,144

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

7,724,424

 

 

 

(7,724,424

)

 

Intercompany receivables

 

 

2,079,874

 

 

(2,079,874

)

 

Note receivable from Arch Western

 

675,000

 

 

 

(675,000

)

 

Other

 

157,663

 

311,976

 

73

 

 

469,712

 

Total other assets

 

8,557,087

 

2,391,850

 

73

 

(10,479,298

)

469,712

 

Total assets

 

$

9,696,941

 

$

9,368,267

 

$

241,874

 

$

(10,483,898

)

$

8,823,184

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

18,326

 

$

141,921

 

$

114

 

$

 

$

160,361

 

Accrued expenses and other current liabilities

 

105,706

 

226,757

 

732

 

(4,634

)

328,561

 

Current maturities of debt

 

25,481

 

4,469

 

 

 

29,950

 

Total current liabilities

 

149,513

 

373,147

 

846

 

(4,634

)

518,872

 

Long-term debt

 

5,095,777

 

17,218

 

 

 

5,112,995

 

Intercompany payables

 

1,865,706

 

 

214,168

 

(2,079,874

)

 

Note payable to Arch Coal

 

 

675,000

 

 

(675,000

)

 

Asset retirement obligations

 

1,018

 

389,390

 

 

 

390,408

 

Accrued pension benefits

 

2,873

 

7,611

 

 

 

10,484

 

Accrued postretirement benefits other than pension

 

4,213

 

33,782

 

 

 

37,995

 

Accrued workers’ compensation

 

27,606

 

48,211

 

 

 

75,817

 

Deferred income taxes

 

368,057

 

 

 

 

368,057

 

Other noncurrent liabilities

 

55,522

 

126,039

 

305

 

 

181,866

 

Total liabilities

 

7,570,285

 

1,670,398

 

215,319

 

(2,759,508

)

6,696,494

 

Stockholders’ equity

 

2,126,656

 

7,697,869

 

26,555

 

(7,724,390

)

2,126,690

 

Total liabilities and stockholders’ equity

 

$

9,696,941

 

$

9,368,267

 

$

241,874

 

$

(10,483,898

)

$

8,823,184

 

 

20



Table of Contents

 

Condensed Consolidating Balance Sheets

December 31, 2013

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

799,333

 

$

100,418

 

$

11,348

 

$

 

$

911,099

 

Short term investments

 

248,414

 

 

 

 

248,414

 

Receivables

 

14,177

 

23,018

 

197,015

 

(4,637

)

229,573

 

Inventories

 

 

264,161

 

 

 

264,161

 

Other

 

84,401

 

43,617

 

806

 

 

128,824

 

Total current assets

 

1,146,325

 

431,214

 

209,169

 

(4,637

)

1,782,071

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

24,851

 

6,709,398

 

37

 

 

6,734,286

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

7,741,589

 

 

 

(7,741,589

)

 

Intercompany receivables

 

 

 

1,953,719

 

(181,095

)

(1,772,624

)

 

Note receivable from Arch Western

 

675,000