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Arch Coal, Inc. Reports Third Quarter 2009 Results.

Article Excerpt
Arch Coal delivers a solid operating performance in weak market cycle

ST. LOUIS, Oct. 30 /PRNewswire-FirstCall/ --

Earnings Highlights ------------------- In $ millions, except per Quarter Ended Nine Months Ended share data 9/30/09 9/30/08 9/30/09 9/30/08 ------------------------ ------- ------- ------- ------- Revenues $615.0 $769.5 $1,850.6 $2,253.9 Income from Operations 48.3 87.9 94.2 373.9 Net Income(1) 25.2 97.8 40.6 292.0 Fully Diluted EPS 0.16 0.68 0.28 2.02 ----------------- ---- ---- ---- ---- Adjusted EBITDA(2) $120.6 $159.9 $314.4 $590.3 (1)/- Net income attributable to ACI. (2)/- Adjusted EBITDA is defined and reconciled under "Reconciliation of Non-GAAP Measures" in this release.

Arch Coal, Inc. today reported net income of $25.2 million, or $0.16 per fully diluted share, in the third quarter of 2009 compared with net income of $97.8 million, or $0.68 per fully diluted share, in the third quarter of 2008. The company also recorded adjusted earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") of $120.6 million in the third quarter of 2009, representing a decline versus the prior-year quarter when stronger coal market conditions prevailed.

"Arch's third quarter financial results reflect an improved performance over the second quarter," said Steven F. Leer, Arch's chairman and chief executive officer. "We achieved margin expansion in each operating segment, driven by increased metallurgical coal demand in Central Appalachia and continued successful cost control across all regions. Our trading and brokerage operations also added incremental earnings in the quarter just ended."

For the first nine months of 2009, Arch earned net income of $40.6 million and adjusted EBITDA of $314.4 million. Net income and earnings per share figures included $7.2 million of expenses pertaining to the acquisition of Jacobs Ranch. By comparison, Arch earned net income of $292.0 million and adjusted EBITDA of $590.3 million in the prior-year period when coal market conditions were stronger.

Strategic Acquisition

As previously announced, Arch completed the acquisition of Rio Tinto's Jacobs Ranch mine on Oct. 1, 2009, for a purchase price of approximately $764 million, which includes an estimate for working capital adjustments. The company estimates synergies from the transaction of between $45 million and $55 million annually, beginning in 2010. Roughly one half of the synergies represent operational cost savings, while the remaining savings relate to administrative cost reductions as well as enhanced coal-blending optimization opportunities.

"The acquisition of Jacobs Ranch will further expand our size, scale and strategic position in the Powder River Basin ("PRB"), the nation's largest, fastest-growing and most cost competitive coal supply region," said Leer. "The integration of Jacobs Ranch into Black Thunder also creates what we believe to be the largest single coal-mining complex in the world, and further strengthens Arch's standing as a preferred, low-cost energy supplier to our nation's electric power generators."

"The integration process has been smooth and swift to date, and we remain on target for complete integration during the fourth quarter," said Leer. "This acquisition will allow us to reduce the expanded operation's average cost structure, improve coal quality optimization, boost our operational flexibility and increase output as market conditions warrant."

"Looking ahead, this acquisition supplements our existing low-cost assets and reserves in the PRB and further positions the company to capitalize on improving coal market fundamentals as 2010 progresses," continued Leer.

During the fourth quarter of 2009, Arch expects to record roughly $8 million in one-time acquisition-related expenses related to severance costs, advisory and legal fees as well as other costs from the integration of the operations.

Financial Developments

During the third quarter of 2009, Arch issued new debt and equity, with net proceeds from those transactions totaling nearly $900 million. Additionally, the company successfully amended and extended its $800 million revolving credit facility, increasing the capacity to $860 million through June 2011 and extending more than 95 percent of the original capacity through March 2013.

Arch ended the third quarter of...

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