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, 2015

 

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 20, 2015 there were 212,662,307 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

30

Item 4. Controls and Procedures

31

Part II OTHER INFORMATION

31

Item 1. Legal Proceedings

31

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

35

Item 4. Mine Safety Disclosures

35

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,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

Revenues

 

$

677,005

 

$

735,971

 

Costs, expenses and other operating

 

 

 

 

 

Cost of sales (exclusive of items shown separately below)

 

562,322

 

686,314

 

Depreciation, depletion and amortization

 

104,874

 

104,423

 

Amortization of acquired sales contracts, net

 

(3,390

)

(3,696

)

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

 

1,220

 

914

 

Selling, general and administrative expenses

 

22,605

 

29,136

 

Other operating (income) expense, net

 

9,086

 

(7,998

)

 

 

696,717

 

809,093

 

 

 

 

 

 

 

Loss from operations

 

(19,712

)

(73,122

)

Interest expense, net

 

 

 

 

 

Interest expense

 

(99,252

)

(96,471

)

Interest and investment income

 

2,373

 

1,843

 

 

 

(96,879

)

(94,628

)

 

 

 

 

 

 

Loss before income taxes

 

(116,591

)

(167,750

)

Benefit from income taxes

 

(3,396

)

(43,611

)

Net loss

 

$

(113,195

)

$

(124,139

)

 

 

 

 

 

 

Losses per common share

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted LPS - Net loss

 

$

(0.53

)

$

(0.59

)

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

212,660

 

212,171

 

 

 

 

 

 

 

Dividends declared per common share

 

$

 

$

0.01

 

 

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,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

Net loss

 

$

(113,195

)

$

(124,139

)

 

 

 

 

 

 

Derivative instruments

 

 

 

 

 

Comprehensive income (loss) before tax

 

5,045

 

(229

)

Income tax benefit (provision)

 

(1,817

)

82

 

 

 

3,228

 

(147

)

Pension, postretirement and other post-employment benefits

 

 

 

 

 

Comprehensive income (loss) before tax

 

294

 

(1,847

)

Income tax benefit (provision)

 

(105

)

665

 

 

 

189

 

(1,182

)

Available-for-sale securities

 

 

 

 

 

Comprehensive income (loss) before tax

 

291

 

(2,033

)

Income tax benefit (provision)

 

(104

)

732

 

 

 

187

 

(1,301

)

 

 

 

 

 

 

Total other comprehensive income (loss)

 

3,604

 

(2,630

)

Total comprehensive loss

 

$

(109,591

)

$

(126,769

)

 

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,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

689,972

 

$

734,231

 

Short term investments

 

249,518

 

248,954

 

Trade accounts receivable

 

198,314

 

211,506

 

Other receivables

 

15,435

 

20,511

 

Inventories

 

240,113

 

190,253

 

Prepaid royalties

 

12,841

 

11,118

 

Deferred income taxes

 

50,414

 

52,728

 

Coal derivative assets

 

14,777

 

13,257

 

Other current assets

 

59,605

 

60,193

 

Total current assets

 

1,530,989

 

1,542,751

 

Property, plant and equipment, net

 

6,371,335

 

6,453,458

 

Other assets

 

 

 

 

 

Prepaid royalties

 

63,622

 

66,806

 

Equity investments

 

225,030

 

235,842

 

Other noncurrent assets

 

123,964

 

130,866

 

Total other assets

 

412,616

 

433,514

 

Total assets

 

$

8,314,940

 

$

8,429,723

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

167,480

 

$

180,113

 

Accrued expenses and other current liabilities

 

321,503

 

302,396

 

Current maturities of debt

 

34,368

 

36,885

 

Total current liabilities

 

523,351

 

519,394

 

Long-term debt

 

5,117,982

 

5,123,485

 

Asset retirement obligations

 

404,844

 

398,896

 

Accrued pension benefits

 

14,436

 

16,260

 

Accrued postretirement benefits other than pension

 

34,453

 

32,668

 

Accrued workers’ compensation

 

98,683

 

94,291

 

Deferred income taxes

 

419,064

 

422,809

 

Other noncurrent liabilities

 

141,804

 

153,766

 

Total liabilities

 

6,754,617

 

6,761,569

 

Stockholders’ equity

 

 

 

 

 

Common stock, $0.01 par value, authorized 260,000 shares, issued 214,179 shares and 213,791 shares at March 31, 2015 and December 31, 2014, respectively

 

2,145

 

2,141

 

Paid-in capital

 

3,050,216

 

3,048,460

 

Treasury stock, at cost, 1,517 shares at March 31, 2015 and December 31, 2014

 

(53,863

)

(53,863

)

Accumulated deficit

 

(1,445,020

)

(1,331,825

)

Accumulated other comprehensive income

 

6,845

 

3,241

 

Total stockholders’ equity

 

1,560,323

 

1,668,154

 

Total liabilities and stockholders’ equity

 

$

8,314,940

 

$

8,429,723

 

 

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,

 

 

 

2015

 

2014

 

 

 

(Unaudited)

 

Operating activities

 

 

 

 

 

Net loss

 

$

(113,195

)

$

(124,139

)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

Depreciation, depletion and amortization

 

104,874

 

104,423

 

Amortization of acquired sales contracts, net

 

(3,390

)

(3,696

)

Amortization relating to financing activities

 

6,219

 

3,236

 

Prepaid royalties expensed

 

1,674

 

1,803

 

Employee stock-based compensation expense

 

1,760

 

2,333

 

Gains on disposals and divestitures, net

 

(46

)

(15,129

)

Deferred income taxes

 

(3,433

)

(43,698

)

Changes in:

 

 

 

 

 

Receivables

 

18,252

 

(27,245

)

Inventories

 

(49,860

)

7,441

 

Accounts payable, accrued expenses and other current liabilities

 

7,186

 

43,989

 

Income taxes, net

 

40

 

(115

)

Other

 

25,646

 

10,522

 

Cash used in operating activities

 

(4,273

)

(40,275

)

Investing activities

 

 

 

 

 

Capital expenditures

 

(22,880

)

(14,454

)

Additions to prepaid royalties

 

(213

)

(591

)

Proceeds from disposals and divestitures

 

46

 

28,195

 

Purchases of marketable securities

 

(101,793

)

(119,176

)

Proceeds from sale or maturity of marketable securities and other investments

 

99,914

 

117,681

 

Investments in and advances to affiliates

 

(1,843

)

(3,242

)

Cash provided by (used in) investing activities

 

(26,769

)

8,413

 

Financing activities

 

 

 

 

 

Payments on term loan

 

(4,875

)

(4,875

)

Net payments on other debt

 

(4,810

)

(4,521

)

Dividends paid

 

 

(2,123

)

Debt financing costs

 

 

(1,957

)

Withdrawals (deposits) of restricted cash

 

(3,532

)

 

Cash used in financing activities

 

(13,217

)

(13,476

)

Increase (decrease) in cash and cash equivalents

 

(44,259

)

(45,338

)

Cash and cash equivalents, beginning of period

 

734,231

 

911,099

 

Cash and cash equivalents, end of period

 

$

689,972

 

$

865,761

 

 

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 (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, Maryland, Virginia, Illinois, Wyoming and Colorado.  All subsidiaries are wholly-owned. Intercompany transactions and accounts have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and U.S. Securities and Exchange Commission regulations. In the opinion of management, all adjustments, consisting of normal, recurring accruals considered necessary for a fair presentation, have been included. Results of operations for the three months ended March 31, 2015 are not necessarily indicative of results to be expected for the year ending December 31, 2015. 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, 2014 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 (“AOCI”):

 

 

 

 

 

Pension,

 

 

 

 

 

 

 

 

 

Postretirement

 

 

 

 

 

 

 

 

 

and Other

 

 

 

Accumulated

 

 

 

 

 

Post-

 

 

 

Other

 

 

 

Derivative

 

Employment

 

Available-for-

 

Comprehensive

 

 

 

Instruments

 

Benefits

 

Sale Securities

 

Income

 

 

 

(In thousands)

 

Balance at December 31, 2014

 

$

2,550

 

$

2,860

 

$

(2,169

)

$

3,241

 

Unrealized gains (losses)

 

3,535

 

 

(1,603

)

1,932

 

Amounts reclassified from AOCI

 

(307

)

189

 

1,790

 

1,672

 

Balance at March 31, 2015

 

$

5,778

 

$

3,049

 

$

(1,982

)

$

6,845

 

 

The following amounts were reclassified out of AOCI:

 

7



Table of Contents

 

 

 

Amounts Reclassified

from AOCI

 

 

 

 

 

Three Months Ended
March 31,

 

Line Item in the
Condensed Consolidated

 

Details About AOCI Components

 

2015

 

2014

 

Statement of Operations

 

 

 

(In thousands)

 

 

 

Derivative instruments

 

$

481

 

$

303

 

Revenues

 

 

 

(174

)

(109

)

Benefit from income taxes

 

 

 

$

307

 

$

194

 

Net of tax

 

 

 

 

 

 

 

 

 

Pension, postretirement and other post-employment benefits

 

 

 

 

 

 

 

Amortization of prior service credits (1)

 

$

2,084

 

$

2,626

 

 

 

Amortization of actuarial gains (losses), net (1)

 

(2,378

)

(779

)

 

 

 

 

(294

)

1,847

 

 

 

 

 

105

 

(665

)

Benefit from income taxes

 

 

 

$

(189

)

$

1,182

 

Net of tax

 

 

 

 

 

 

 

 

 

Available-for-sale securities

 

$

(2,797

)

$

(556

)

Interest and investment income

 

 

 

1,007

 

200

 

Benefit from income taxes

 

 

 

$

(1,790

)

$

(356

)

Net of tax

 

 


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

 

8



Table of Contents

 

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 in the first quarter of 2014 for total consideration of $45.3 million.  The Company received $26.3 million in cash in the first quarter of 2014, and the remainder was paid in the second and fourth quarters of 2014.  The Company recognized a net pre-tax gain of $13.8 million from these divestitures, reflected in “other operating (income) expense, net” in the condensed consolidated statement of operations.

 

5.  Inventories

 

Inventories consist of the following:

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

(In thousands)

 

Coal

 

$

117,180

 

$

71,901

 

Repair parts and supplies

 

122,933

 

118,352

 

 

 

$

240,113

 

$

190,253

 

 

The repair parts and supplies are stated net of an allowance for slow-moving and obsolete inventories of $6.8 million at March 31, 2015 and $6.6 million at December 31, 2014.

 

6.   Investments in Available-for-Sale Securities

 

The Company has invested in marketable debt securities, primarily highly liquid investment grade corporate bonds.  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, 2015

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

Accumulated

 

 

 

Classification

 

 

 

 

 

Gross Unrealized

 

Fair

 

Short-Term

 

Other

 

 

 

Cost Basis

 

Gains

 

Losses

 

Value

 

Investments

 

Assets

 

 

 

(In thousands)

 

Available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate notes and bonds

 

$

252,673

 

$

2

 

$

(3,157

)

$

249,518

 

$

249,518

 

$

 

Equity securities

 

3,910

 

2,875

 

(2,830

)

3,955

 

 

3,955

 

Total Investments

 

$

256,583

 

$

2,877

 

$

(5,987

)

$

253,473

 

$

249,518

 

$

3,955

 

 

9



Table of Contents

 

 

 

December 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

 

$

253,590

 

$

 

$

(4,636

)

$

248,954

 

$

248,954

 

$

 

Equity securities

 

3,910

 

4,125

 

(2,890

)

5,145

 

 

5,145

 

Total Investments

 

$

257,500

 

$

4,125

 

$

(7,526

)

$

254,099

 

$

248,954

 

$

5,145

 

 

The aggregate fair value of investments with unrealized losses that were owned for less than a year was $177.3 million and $163.0 million at March 31, 2015 and December 31, 2014, 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 $64.4 million and $86.1 million at March 31, 2015 and December 31, 2014, respectively. The unrealized losses in our portfolio are the result of normal market fluctuations. We do not currently intend to sell these investments before recovery of their amortized cost base.

 

The debt securities outstanding at March 31, 2015 have maturity dates ranging from the second quarter of 2015 through the third quarter of 2016.  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 2015.  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, 2015, the Company had protected the price of approximately 86% of its expected purchases for the remainder of the year with out-of-the-money call options with an average strike price of $3.13 per gallon.  Due to the drop in heating oil pricing, the Company has layered in 19.5 million gallons of at-the-money call options for the second half of 2015 representing 60% of expected purchases at an average strike price of $1.92 per gallon.  Additionally, the Company has protected approximately 37%  of our expected 2016 purchases with out-of-the-money call options.  At March 31, 2015, the Company had purchased heating oil call options for approximately 66 million gallons for the purpose of managing the price risk associated with future diesel purchases.  These 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, 2015, the Company held derivatives for risk management purposes that are expected to settle in the following years:

 

(Tons in thousands)

 

2015

 

2016

 

Total

 

Coal sales

 

3,595

 

280

 

3,875

 

Coal purchases

 

1,672

 

60

 

1,732

 

 

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Table of Contents

 

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 $0.3 million of losses during the remainder of 2015 and $1.4 million of gains in 2016.

 

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, 2015

 

 

 

December 31, 2014

 

 

 

Fair Value of Derivatives

 

Asset

 

Liability

 

 

 

Asset

 

Liability

 

 

 

(In thousands)

 

Derivative

 

Derivative

 

 

 

Derivative

 

Derivative

 

 

 

Derivatives Designated as Hedging Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Coal

 

$

6,896

 

$

(107

)

 

 

$

6,535

 

$

(2,492

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives Not Designated as Hedging Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Heating oil — diesel purchases

 

4,079

 

 

 

 

300

 

 

 

 

Coal — held for trading purposes

 

126,397

 

(125,204

)

 

 

96,898

 

(93,272

)

 

 

Coal — risk management

 

16,484

 

(11,094

)

 

 

8,510

 

(3,688

)

 

 

Natural gas

 

1,148

 

(753

)

 

 

 

 

 

 

Total

 

148,108

 

(137,051

)

 

 

105,708

 

(96,960

)

 

 

Total derivatives

 

155,004

 

(137,158

)

 

 

112,243

 

(99,452

)

 

 

Effect of counterparty netting

 

(136,148

)

136,148

 

 

 

(98,686

)

98,686

 

 

 

Net derivatives as classified in the balance sheets

 

$

18,856

 

$

(1,010

)

$

17,846

 

$

13,557

 

$

(766

)

$

12,791

 

 

 

 

 

 

March 31, 2015

 

December 31, 2014

 

Net derivatives as reflected on the balance sheets (in thousands)

 

 

 

 

 

 

 

Heating oil

 

Other current assets

 

$

4,079

 

$

300

 

Coal

 

Coal derivative assets

 

14,777

 

13,257

 

 

 

Accrued expenses and other current liabilities

 

(1,010

)

(766

)

 

 

 

 

$

17,846

 

$

12,791

 

 

The Company had a current liability for the obligation to post cash collateral of $0.7 million and $2.4 million at March 31, 2015 and December 31, 2014, respectively. These amounts are not included with the derivatives presented in the table above and are included in “accrued expenses and other current liabilities”, in the accompanying condensed consolidated balance sheets.

 

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Table of Contents

 

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

 

Derivatives used in Cash Flow Hedging Relationships (in thousands)

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)

 

 

 

2015

 

2014

 

2015

 

2014

 

Coal sales

(1)

$

10,265

 

$

(515

)

$

882

 

$

706

 

Coal purchases

(2)

(4,738

)

589

 

(401

)

(404

)

Totals

 

$

5,527

 

$

74

 

$

481

 

$

302

 

 

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, 2015 and 2014.

 

Derivatives Not Designated as Hedging Instruments (in thousands)

Three Months Ended March 31,

 

 

 

Gain (Loss) Recognized

 

 

 

2015

 

2014

 

Coal — unrealized

(3)

$

(411

)

$

(1,302

)

Coal — realized

(4)

$

1,091

 

$

2,879

 

Natural gas — unrealized

(3)

$

159

 

$

8

 

Heating oil — diesel purchases

(4)

$

(2,365

)

$

(2,963

)

Heating oil — fuel surcharges

(4)

$

 

$

(254

)

 


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

 

Based on fair values at March 31, 2015, gains on derivative contracts designated as hedge instruments in cash flow hedges of approximately $6.3 million are expected to be reclassified from other comprehensive income into earnings during the next twelve months.

 

Related to its trading portfolio, the Company recognized net unrealized and realized losses of $1.0 million and $0.4 million of net unrealized and realized gains during the three months ended March 31, 2015 and 2014, respectively.  Gains and losses from trading activities 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.

 

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8.  Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

(In thousands)

 

Payroll and employee benefits

 

$

49,039

 

$

73,362

 

Taxes other than income taxes

 

111,362

 

114,598

 

Interest

 

77,375

 

30,384

 

Acquired sales contracts

 

11,635

 

12,453

 

Workers’ compensation

 

15,586

 

16,714

 

Asset retirement obligations

 

19,215

 

19,222

 

Other

 

37,291

 

35,663

 

 

 

$

321,503

 

$

302,396

 

 

9.  Debt and Financing Arrangements

 

 

 

March 31,

 

December 31,

 

 

 

2015

 

2014

 

 

 

(In thousands)

 

Term loan due 2018 ($1.9 billion face value)

 

$

1,886,971

 

$

1,890,846

 

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)

 

363,997

 

363,493

 

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

 

51,382

 

56,031

 

 

 

5,152,350

 

5,160,370

 

Less current maturities of debt

 

34,368

 

36,885

 

Long-term debt

 

$

5,117,982

 

$

5,123,485

 

 

Financial covenant requirements may restrict the amount of unused capacity available to the Company for borrowings and letters of credit under credit facilities.  The credit facility amendment on December 17, 2013 amended financial maintenance covenants to include only a minimum liquidity test until June, 2015, at which time a maximum secured leverage ratio test takes effect.

 

At March 31, 2015, the available borrowing capacity under the Company’s lines of credit was approximately $179.4 million.

 

10.  Income taxes

 

During the first quarter of 2015, the Company determined it was more likely than not that the federal and state net operating losses it expects to generate in 2015 will not be realized based on projections of future taxable income.  Accordingly, the estimated annual effective rate for the year ended December 31, 2015 includes a valuation allowance.  In applying the estimated annual effective rate to earnings for the three months ended March 31, 2015, the Company increased its valuation allowance by $45.3 million for the federal net operating losses and $2.6 million for the state net operating losses.

 

During the first quarter of 2014, the Company increased its valuation allowance for the portion of the federal and state net operating losses it expected to generate in 2014.  The Company increased its valuation allowance by $21.6 million for the federal net operating losses and $2.2 million for the state net operating losses.

 

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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, 2015.

 

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:

 

 

 

March 31, 2015

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

 

(In thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

Investments in marketable securities

 

$

253,473

 

$

3,955

 

$

249,518

 

$

 

Derivatives

 

18,856

 

7,130

 

2,456

 

9,270

 

Total assets

 

$

272,329

 

$

11,085

 

$

251,974

 

$

9,270

 

Liabilities:

 

 

 

 

 

 

 

 

 

Derivatives

 

$

1,010

 

$

 

$

1,010

 

$

 

 

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, 2015

 

 

 

(In thousands)

 

Balance, beginning of period

 

$

3,040

 

Realized and unrealized losses recognized in earnings, net

 

(1,347

)

Realized and unrealized gains recognized in other comprehensive income, net

 

1,450

 

Purchases

 

7,783

 

Issuances

 

(1,656

)

Ending balance

 

$

9,270

 

 

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Table of Contents

 

Net unrealized gains of $0.1 million were recognized during the three months ended March 31, 2015 related to level 3 financial instruments held on March 31, 2015.

 

Fair Value of Long-Term Debt

 

At March 31, 2015 and December 31, 2014, the fair value of the Company’s debt, including amounts classified as current, was $2.4 billion and $2.7 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 8.3 million shares and 6.9 million shares of common stock were excluded from the calculation of diluted weighted average shares outstanding for the three months ended March 31, 2015 and March 31, 2014, 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, 2015 and March 31, 2014 were 2.5 million and 0.8 million, respectively.

 

13.  Employee Benefit Plans

 

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

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

 

 

(In thousands)

 

Service cost

 

$

4

 

$

5,924

 

Interest cost

 

3,570

 

4,364

 

Expected return on plan assets

 

(5,764

)

(5,978

)

Amortization of prior service costs (credits)

 

 

(54

)

Amortization of other actuarial losses

 

2,058

 

948

 

Net benefit cost

 

$

(132

)

$

5,204

 

 

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

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

 

 

(In thousands)

 

Service cost

 

$

233

 

$

444

 

Interest cost

 

335

 

464

 

Amortization of prior service credits

 

(2,084

)

(2,501

)

Amortization of other actuarial losses (gains)

 

(456

)

(170

)

Net benefit credit

 

$

(1,972

)

$

(1,763

)

 

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Table of Contents

 

14.  Commitments and Contingencies

 

The Company accrues for costs 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.

 

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.  Testimony on the future damage award in the lower court concluded on May 19, 2014, and post-trial briefs and responses were submitted on August 8, 2014.  The court held a hearing on this matter

 

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Table of Contents

 

on November 5, 2014 and on February 16, 2015 awarded Allegheny $7.5 million plus interest for the future damages.  On April 6, 2015, the parties entered into a settlement agreement pursuant to which Wolf Run agreed to pay $15 million and both parties agreed to release and discharge the other party from any further contractual liability.  As a result, the Company accrued an additional $2.8 million for the three months ended March 31, 2015 to bring the total amount accrued up to the settlement amount.  The expense associated with the accrual is reflected in the line item “Cost of sales”. In April, the Company idled the Sycamore No. 2 mine, the impact of which will be recorded in the second quarter.

 

In addition, the Company is a party to numerous other claims and lawsuits with respect to various matters. As of March 31, 2015 and December 31, 2014, the Company had accrued $17.3 million and $22.3 million, respectively, for all legal matters, including $17.3 million and $10.1 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 adjusted EBITDA, 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 primarily in West Virginia.  The “Other” category combines other operating segments and includes the Company’s coal mining operations in Colorado and Illinois.

 

Operating segment results for the three months ended March 31, 2015 and 2014 are presented below. The Company uses Adjusted EBITDA to assess the operating segments’ performance and to allocate resources.  The Company’s management believes that Adjusted EBITDA presents a useful measure of our ability to service existing debt and incur additional debt based on ongoing operations.  Corporate, Other and Eliminations includes the change in fair value of coal derivatives and coal trading activities, net; corporate overhead; land management; other support functions; and the elimination of intercompany trans-actions.

 

 

 

PRB

 

APP

 

Other
Operating
Segments

 

Corporate,
Other and
Eliminations

 

Consolidated

 

 

 

(in thousands)

 

Three Months Ended March 31, 2015

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

391,206

 

$

223,439

 

$

62,360

 

$

 

$

677,005

 

Adjusted EBITDA

 

72,062

 

39,807

 

1,691

 

(31,788

)

81,772

 

Depreciation, depletion and amortization

 

44,361

 

48,727

 

10,055

 

1,731

 

104,874

 

Amortization of acquired sales contracts, net

 

(1,285

)

(2,105

)

 

 

(3,390

)

Capital expenditures

 

16,969

 

3,385

 

2,642

 

(116

)

22,880

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

358,607

 

$

279,137

 

$

98,227

 

$

 

$

735,971

 

Adjusted EBITDA

 

29,819

 

28,427

 

4,132

 

(34,773

)

27,605

 

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

 

 

A reconciliation of adjusted EBITDA to consolidated loss before income taxes follows:

 

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Table of Contents

 

 

 

Three Months Ended March 31,

 

 

 

2015

 

2014

 

 

 

(In thousands)

 

Adjusted EBITDA

 

$

81,772

 

$

27,605

 

Depreciation, depletion and amortization

 

(104,874

)

(104,423

)

Amortization of acquired sales contracts, net

 

3,390

 

3,696

 

Interest expense, net

 

(96,879

)

(94,628

)

Loss before income taxes

 

$

(116,591

)

$

(167,750

)

 

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):

 

Condensed Consolidating Statements of Operations

Three Months Ended March 31, 2015

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Revenues

 

$

 

$

677,005

 

$

 

$

 

$

677,005

 

Costs, expenses and other

 

 

 

 

 

 

 

 

 

 

 

Cost of sales (exclusive of items shown separately below)

 

7,470

 

555,686

 

 

(834

)

562,322

 

Depreciation, depletion and amortization

 

1,060

 

103,812

 

2

 

 

104,874

 

Amortization of acquired sales contracts, net

 

 

(3,390

)

 

 

(3,390

)

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

 

 

1,220

 

 

 

1,220

 

Asset impairment and mine closure costs

 

 

 

 

 

 

Selling, general and administrative expenses

 

15,439

 

6,243

 

1,448

 

(525

)

22,605

 

Other operating (income) expense, net

 

3,700

 

5,278

 

(1,251

)

1,359

 

9,086

 

 

 

27,669

 

668,849

 

199

 

 

696,717

 

Income from investment in subsidiaries

 

21,050

 

 

 

(21,050

)

 

Income (Loss) from operations

 

(6,619

)

8,156

 

(199

)

(21,050

)

(19,712

)

Interest expense, net

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(118,056

)

(6,763

)

(1,275

)

26,842

 

(99,252

)

Interest and investment income

 

8,072

 

19,774

 

1,369

 

(26,842

)

2,373

 

 

 

(109,984

)

13,011

 

94

 

 

(96,879

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations before income taxes

 

(116,603

)

21,167

 

(105

)

(21,050

)

(116,591

)

Provision for (benefit from) income taxes

 

(3,408

)

 

12

 

 

(3,396

)

Net income (loss)

 

$

(113,195

)

$

21,167

 

$

(117

)

$

(21,050

)

$

(113,195

)

Total comprehensive income (loss)

 

$

(109,591

)

$

24,407

 

$

(117

)

$

(24,290

)

$

(109,591

)

 

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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

 

Asset impairment and mine closure costs

 

 

 

 

 

 

Selling, general and administrative expenses

 

19,944

 

7,865

 

1,803

 

(476

)

29,136

 

Other operating (income) expense, 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

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (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

)

 

19



Table of Contents

 

Condensed Consolidating Balance Sheets

March 31, 2015

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

577,832

 

$

100,430

 

$

11,710

 

$

 

$

689,972

 

Short term investments

 

249,518

 

 

 

 

249,518

 

Receivables

 

10,184

 

10,894

 

197,321

 

(4,650

)

213,749

 

Inventories

 

 

240,113

 

 

 

240,113

 

Other

 

82,714

 

44,828

 

10,095

 

 

137,637

 

Total current assets

 

920,248

 

396,265

 

219,126

 

(4,650

)

1,530,989

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

9,860

 

6,361,096

 

 

379

 

6,371,335

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

7,487,172

 

 

 

(7,487,172

)

 

Intercompany receivables

 

 

2,139,722

 

 

(2,139,722

)

 

Note receivable from Arch Western

 

675,000

 

 

 

(675,000

)

 

Other

 

125,994

 

285,227

 

1,395

 

 

412,616

 

Total other assets

 

8,288,166

 

2,424,949

 

1,395

 

(10,301,894

)

412,616

 

Total assets

 

$

9,218,274

 

$

9,182,310

 

$

220,521

 

$

(10,306,165

)

$

8,314,940

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

12,377

 

$

155,080

 

$

23

 

$

 

$

167,480

 

Accrued expenses and other current liabilities

 

117,096

 

208,275

 

782

 

(4,650

)

321,503

 

Current maturities of debt

 

24,645

 

9,723

 

 

 

34,368

 

Total current liabilities

 

154,118

 

373,078

 

805

 

(4,650

)

523,351

 

Long-term debt

 

5,081,468

 

36,514

 

 

 

5,117,982

 

Intercompany payables

 

1,946,138

 

 

193,584

 

(2,139,722

)

 

Note payable to Arch Coal

 

 

675,000

 

 

(675,000

)

 

Asset retirement obligations

 

1,000

 

403,844

 

 

 

404,844

 

Accrued pension benefits

 

5,323

 

9,113

 

 

 

14,436

 

Accrued postretirement benefits other than pension

 

4,643

 

29,810

 

 

 

34,453

 

Accrued workers’ compensation

 

10,046

 

88,637

 

 

 

98,683

 

Deferred income taxes

 

419,064

 

 

 

 

419,064

 

Other noncurrent liabilities

 

36,530

 

105,069

 

205

 

 

141,804

 

Total liabilities

 

7,658,330

 

1,721,065

 

194,594

 

(2,819,372

)

6,754,617

 

Stockholders’ equity

 

1,559,944

 

7,461,245

 

25,927

 

(7,486,793

)

1,560,323

 

Total liabilities and stockholders’ equity

 

$

9,218,274

 

$

9,182,310

 

$

220,521

 

$

(10,306,165

)

$

8,314,940

 

 

20



Table of Contents

 

Condensed Consolidating Balance Sheets

December 31, 2014

 

 

 

Parent/Issuer

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

 

 

 

(In thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

572,185

 

$

150,358

 

$

11,688

 

$

 

$

734,231

 

Short term investments

 

248,954

 

 

 

 

248,954

 

Receivables

 

9,656

 

15,933

 

211,043

 

(4,615

)

232,017

 

Inventories

 

 

190,253

 

 

 

190,253

 

Other

 

89,211

 

41,455

 

6,630

 

 

137,296

 

Total current assets

 

920,006

 

397,999

 

229,361

 

(4,615

)

1,542,751

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

10,470

 

6,442,623

 

2

 

363

 

6,453,458

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in subsidiaries

 

7,464,221

 

 

 

(7,464,221

)

 

Intercompany receivables

 

 

2,021,110

 

 

(2,021,110

)

 

Note receivable from Arch Western

 

675,000

 

 

 

(675,000

)

 

Other

 

131,884

 

300,058

 

1,572

 

 

433,514

 

Total other assets

 

8,271,105

 

2,321,168

 

1,572

 

(10,160,331

)

433,514

 

Total assets

 

$

9,201,581

 

$

9,161,790

 

$

230,935

 

$

(10,164,583

)

$

8,429,723

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

23,394

 

$

156,664

 

$

55

 

$

 

$

180,113

 

Accrued expenses and other current liabilities

 

85,899

 

220,017

 

1,095

 

(4,615

)

302,396

 

Current maturities of debt

 

27,625

 

9,260

 

 

 

36,885

 

Total current liabilities

 

136,918

 

385,941

 

1,150

 

(4,615

)