Delivers record net income for a third
straight quarter
Achieves record coking coal realizations and
gross coking coal margins
Announces a quarterly dividend of $118.7 million, or $6.00 per share
ST.
LOUIS, July 28, 2022 /PRNewswire/ -- Arch
Resources, Inc. (NYSE: ARCH) today reported net income of
$407.6 million, or $19.30 per diluted share, in the second quarter
of 2022, compared with net income of $27.9
million, or $1.66 per diluted
share, in the prior-year period. Arch had adjusted earnings
before interest, taxes, depreciation, depletion, amortization,
accretion on asset retirement obligations (ARO), and non-operating
expenses ("adjusted EBITDA") [1] of $460.0
million in the second quarter of 2022, which included a
$1.9 million non-cash mark-to-market
loss associated with its coal-hedging activities. This
compares to $66.5 million of adjusted
EBITDA in the second quarter of 2021, which included an
$8.8 million non-cash mark-to-market
loss associated with its coal-hedging activities. Revenues
totaled $1,133.4 million for the
three months ended June 30, 2022,
versus $450.4 million in the
prior-year quarter.
In the second quarter of 2022, Arch made significant progress on
numerous strategic priorities and objectives:
- Delivered record net income for the third straight quarter
- Achieved record coking coal realizations and gross coking coal
margins
- Reduced total indebtedness by $135.8
million, or 42.1 percent, resulting in a net positive cash
position of $94.9 million
- Reached the targeted funding level of $130.0 million – inclusive of a July payment of
$30 million – for its recently
established thermal mine reclamation fund
- Deployed $280.7 million for
dividends and convertible securities settlements under its recently
relaunched capital return program, and
- Declared a third quarter cash dividend of $118.7 million, or $6.00 per share, even with a $137.8 million build in the company's receivables
balance associated with a substantial increase in high-priced
seaborne shipments in the quarter's second half
"During the second quarter, the Arch team delivered another
strong financial performance – with record net income, record
coking coal realizations and record coking coal margins – despite
continuing rail service challenges and isolated geologic issues in
our core metallurgical segment," said Paul
A. Lang, Arch's CEO and president. "In addition, Arch
deployed a total of $280.7 million
under its recently relaunched capital return program; further
fortified the balance sheet via the repayment of $135.8 million of indebtedness; and contributed
$90 million to the thermal mine
reclamation fund – inclusive of a July payment – that increased
total funding to $130.0 million, or
100 percent of the target level. In short, we are delivering
on our clear, consistent and actionable plan for value creation by
continuing to strengthen our financial position and reward our
stockholders."
"Based on the continuing strength in Arch's operating
performance and in keeping with the company's recently adopted
capital return formula, the board has declared a total quarterly
dividend of $118.7 million, or
$6.00 per share, which is equivalent
to 50 percent of Arch's second quarter discretionary cash flow,"
Lang added. "We view this substantial dividend, in
conjunction with the $8.11 per share
dividend paid in the second quarter, as a clear indication of the
board's ongoing confidence in the company's future outlook, and as
compelling evidence of Arch's significant and expanding
cash-generating capabilities."
Capital Allocation Model
In February 2022, Arch announced a new capital allocation
model that includes the return to stockholders of 50 percent of the
prior quarter's discretionary cash flow – defined as cash flow from
operating activities minus capital expenditures and contributions
to the thermal mine reclamation fund – via a variable quarterly
cash dividend in conjunction with a fixed quarterly cash
dividend. The company plans to retain the remaining
discretionary cash flow from the prior quarter for use in share
buybacks, the repurchase of potentially dilutive securities,
special dividends, and/or capital preservation.
Arch generated $268.2 million in
cash flow from operating activities in the second quarter, despite
a $137.8 million build in the
company's receivables balance associated with a substantial
increase in high-priced seaborne shipments in the quarter's second
half. The second quarter dividend payment
of $6.00 per share – which includes a fixed component
of $0.25 per share and a variable component
of $5.75 per share – is payable on September 15,
2022 to stockholders of record on August 31,
2022.
While the board is still evaluating the optimal use of the
discretionary cash flow remaining after the announced cash dividend
payment, it views share buybacks as an effective means of returning
capital to stockholders and views Arch stock as an attractive
investment option.
The Arch board recently increased the
company's authorization under its share repurchase program to
$500.0 million.
Financial and Liquidity Update
Arch ended the second quarter with cash and cash
equivalents of $281.9 million and total liquidity
of $349.7 million. As indicated, Arch repaid $135.8
million of its outstanding indebtedness during the second
quarter, reducing its total debt outstanding to just $187.0
million and resulting in a net positive cash position of
$94.9 million at quarter-end.
"We are pleased to deliver on our commitment to returning our
discretionary cash flow to stockholders, even as we take steps to
further fortify our balance sheet, fully fund our thermal mine
reclamation fund, and simplify our capital structure via the
settlement of a significant percentage of our convertible notes,"
said Matthew C. Giljum, Arch's chief financial officer.
"Through these carefully structured efforts, we believe we are
driving significant value for our stockholders while at the same
time reducing the overall risk profile of the company and ensuring
we have the financial flexibility to manage through future market
downturns."
Since the beginning of 2022, Arch has deployed approximately
$403.2 million under its capital
return program (inclusive of the just-announced third quarter
dividend); reduced its total debt by an aggregate of $417.5 million, or approximately 70%; and used a
total of $110.0 million to complete
the cash pre-funding of its thermal mine reclamation fund.
Operational Update
"The Arch team generated strong margins in both our core
metallurgical and legacy thermal segments during the second quarter
despite ongoing rail service disruptions, mounting inflationary
pressures, and isolated geologic issues in our coking coal
portfolio," said John T. Drexler,
Arch's chief operating officer. "Even with localized,
tougher-than-expected cutting conditions in the second panel at
Leer South, the metallurgical segment continued to build coking
coal inventories during the quarter. With 1.1 million tons of
high-value coking coal in our mine and port stockpiles at
quarter-end and the expectation of much-improved geologic
conditions at Leer South beginning in late August, we fully expect
to capitalize on still-strong market conditions as rail service
recovers."
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Metallurgical
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2Q22
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1Q22
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2Q21
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Tons sold (in
millions)
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2.1
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1.5
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2.0
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Coking
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2.1
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1.5
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1.8
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Thermal
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0.1
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0.1
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0.2
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Coal sales per ton
sold
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$286.40
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$255.52
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$89.71
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Coking
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$294.28
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$269.54
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$96.03
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Thermal
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$16.16
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$28.10
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$23.43
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Cash cost per ton
sold
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$98.95
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$88.04
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$59.37
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Cash margin per
ton
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$187.45
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$167.48
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$30.34
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Coal sales per ton
sold and cash cost per ton sold are defined and reconciled under
"Reconciliation of non-GAAP measures."
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Mining complexes
included in this segment are Leer, Leer South, Beckley and Mountain
Laurel.
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Despite higher-than-anticipated unit costs related to localized
geologic issues, higher sales-sensitive costs associated with a
higher average selling price, and inflationary pressures on
materials and supplies, the metallurgical segment generated record
margins during the second quarter. Arch expects coking coal
shipments to increase modestly in the third quarter when compared
to second quarter levels, reflecting gradually improving but still
hampered rail and logistical service levels, but has adjusted down
full-year volume guidance to reflect ongoing challenges.
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Thermal
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2Q22
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1Q22
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2Q21
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Tons sold (in
millions)
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17.8
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18.2
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15.2
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Coal sales per ton
sold
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$19.62
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$18.85
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$13.50
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Cash cost per ton
sold
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$14.48
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$13.43
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$10.88
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Cash margin per
ton
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$5.14
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$5.42
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$2.62
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Coal sales per ton
sold and cash cost per ton sold are defined and reconciled under
"Reconciliation of non-GAAP measures."
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Mining complexes
included in this segment are Black Thunder, Coal Creek and West
Elk.
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Despite a sequential stepdown in shipments during the second
quarter, which is typically the weakest shipping period of the year
in the Powder River Basin, as well as modest margin erosion, Arch's
legacy thermal segment again generated robust amounts of cash.
Strategic Plan for Legacy Thermal Assets
During the second quarter, Arch continued to deliver on its dual
objectives of driving forward with an accelerated reclamation plan
at its legacy thermal operations, while simultaneously harvesting
cash from these assets. During the quarter, the legacy
thermal segment delivered $93.3
million in segment-level adjusted EBITDA while expending
just $4.6 million in capital.
Over the past 23 quarters, Arch's thermal operations have
contributed just under $1.1 billion
in segment-level adjusted EBITDA, while expending just $118.6 million in capital.
Since the beginning of 2021, Arch has reduced the asset
retirement obligation at its Powder River Basin operations by more
than 20 percent to $151.2 million at
June 30, 2022. As
previously discussed, Arch has also created a thermal mine
reclamation fund that it is using to pre-fund and defease the
long-term mine closure and reclamation obligations of its Powder
River Basin operations. Inclusive of a $60 million contribution to this fund in the
second quarter and an incremental $30
million contribution earlier this month, the company has now
reached its targeted funding level of $130
million, matching the asset retirement obligation at the
Black Thunder mine. Arch expects future contributions to this
fund to total $3 million to
$5 million per quarter – consistent
with projected future accretion related to its asset retirement
obligation at Black Thunder – potentially offset by creditable
reclamation work completed during any given period.
"Since establishing our thermal mine reclamation fund in the
fourth quarter of 2021, we have moved quickly to build the fund's
balance to the targeted level of $130
million," Giljum said. "In doing so, we have set the
stage for strong, continued cash generation from these assets even
as we move forward with winding them down over an extended
timeframe in a careful and responsible manner."
Market Update
While global metallurgical coal markets have softened
considerably in recent weeks, coking coal prices remain at
exceptionally strong levels in historic terms. Arch's primary
product, High-Vol A coking coal, is currently being assessed at
$249 per metric ton on the U.S. East
Coast. The principal driver behind the recent erosion in
coking coal market dynamics, Arch believes, is slowing economic
growth across most of the world, which is having the predictable
knock-on effect on global steel markets. For the first six
months of 2022, global hot metal production is down approximately
5.5 percent.
However, Arch sees other market dynamics that are acting to
support global coking coal markets at present. The first of
these is still-weak coking coal production and shipping levels
globally. Coking coal exports out of Australia – traditionally the source of more
than 50 percent of seaborne coking coal supply – continue to
undershoot already weak 2021 levels, with export volumes down
approximately 5 million tons, or roughly 7 percent,
year-to-date. Additionally, the war in Ukraine threatens to trim Russian coking coal
export levels, particularly once the EU's ban on Russian coal
imports take effect in a few weeks' time. Elsewhere, U.S. and
Canadian export levels are up only modestly year-to-date, despite
exceptionally strong pricing levels through the year's first
half.
Another potential support mechanism for the global coking coal
market is a still strong international thermal market. The
price for thermal coal in Australia is currently around $415 per metric ton, and the thermal price in
northern Europe stands at
approximately $390 per metric
ton. As a result of that nearly unprecedented negative spread
between metallurgical and thermal prices, Arch recently sold a
vessel of its High-Vol B coking coal to a European thermal customer
for delivery in the fourth quarter, at a price significantly above
the U.S. East Coast metallurgical marks, and is actively exploring
other such opportunities.
In addition, Arch continues to capitalize on exceptionally
strong international thermal market conditions directly through the
export of thermal volumes from its West Elk and – to a lesser
extent – Black Thunder mines. While rail service remains a
significant barrier to moving additional volumes to energy-short
international customers, Arch still anticipates shipping an
incremental 600,000 tons of West Elk coal and nearly 500,000 tons
of Black Thunder coal into international markets in the second half
of 2022, at exceptional price levels.
Looking Ahead
"With our greatly upgraded coking coal portfolio, Arch is
exceptionally well-positioned to capitalize on still-constructive
coking coal market dynamics, both in the near and longer term,
while continuing to harvest robust amounts of cash from our
increasingly de-risked legacy thermal segment," said Lang.
"Even with rail-related volume constraints, inflation-driven cost
pressures, and lower-than-anticipated productivity rates, we expect
to generate significant amounts of discretionary cash flow in the
year's second half, and to return this cash flow to stockholders
according to the clearly articulated tenets of our recently
established capital return formula."
"Looking ahead, we fully expect our world-class metallurgical
asset base, premium High-Vol A product slate, highly fortified
financial position, top-tier marketing and logistics expertise, and
industry-leading ESG performance to continue to differentiate Arch
from its competitors and to drive exceptional value for our
stakeholders."
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2022
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Tons
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$ per ton
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Sales Volume (in millions of tons)
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Coking
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8.2
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8.6
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Thermal
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73.0
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-
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77.0
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Total
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81.2
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85.6
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Metallurgical (in millions of tons)
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Committed, Priced
Coking North American
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0.7
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$216.36
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Committed, Unpriced
Coking North American
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0.2
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Committed, Priced
Coking Seaborne
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3.6
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$284.82
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Committed, Unpriced Coking Seaborne
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2.0
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Total Committed
Coking
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6.5
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Committed, Priced
Thermal Byproduct
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0.4
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$23.48
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Committed, Unpriced Thermal
Byproduct
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-
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Total Committed Thermal
Byproduct
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0.4
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Average Metallurgical
Cash Cost
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$86.00 -
$92.00
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Thermal (in
millions of tons)
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Committed,
Priced
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73.9
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$18.57
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Committed, Unpriced
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1.4
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Total Committed
Thermal
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75.3
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Average Thermal Cash
Cost
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$13.25 -
$13.95
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Corporate (in
$ millions)
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D,D&A
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$135.0
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-
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$140.0
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ARO
Accretion
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$18.0
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-
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$21.0
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S,G&A -
cash
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$73.0
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-
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$77.0
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S,G&A -
non-cash
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$25.0
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-
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$28.0
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Net Interest
Expense
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$17.0
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-
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$19.0
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Capital
Expenditures
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$150.0
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-
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$160.0
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Tax Provision
(%)
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Approximately
0%
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Note: The company is unable to present a quantitative
reconciliation of its forward-looking non-GAAP Segment cash cost
per ton sold financial measures to the most directly comparable
GAAP measures without unreasonable efforts due to the inherent
difficulty in forecasting and quantifying with reasonable accuracy
significant items required for the reconciliation. The most
directly comparable GAAP measure, GAAP cost of sales, is not
accessible without unreasonable efforts on a forward-looking basis.
The reconciling items include transportation costs, which are a
component of GAAP cost of sales. Management is unable to predict
without unreasonable efforts transportation costs due to
uncertainty as to the end market and FOB point for uncommitted
sales volumes and the final shipping point for export shipments. In
addition, the impact of hedging activity related to commodity
purchases that do not receive hedge accounting and idle and
administrative costs that are not included in a reportable segment
are additional reconciling items for Segment cash cost per ton
sold. Management is unable to predict without unreasonable efforts
the impact of hedging activity related to commodity purchases that
do not receive hedge accounting due to fluctuations in commodity
prices, which are difficult to forecast due to their inherent
volatility. These amounts have historically varied and may continue
to vary significantly from quarter to quarter and material changes
to these items could have a significant effect on our future GAAP
results. Idle and administrative costs that are not included in a
reportable segment are expected to be between $10 million and $20
million in 2022.
Arch Resources is a premier producer of high-quality
metallurgical products for the global steel industry. The
company operates large, modern and highly efficient mines that
consistently set the industry standard for both mine safety and
environmental stewardship. Arch Resources from time to time
utilizes its website – www.archrsc.com – as a channel of
distribution for material company information. To learn more
about us and our premium metallurgical products, go to
www.archrsc.com.
Forward-Looking Statements: This press release contains
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended - that is, statements
related to future, not past, events. In this context,
forward-looking statements often address our expected future
business and financial performance, and future plans, and often
contain words such as "should," "could," "appears," "estimates,"
"projects," "targets," "expects," "anticipates," "intends," "may,"
"plans," "predicts," "believes," "seeks," "strives," "will" or
variations of such words or similar words. Actual results or
outcomes may vary significantly, and adversely, from those
anticipated due to many factors, including: impacts of the COVID-19
pandemic; changes in coal prices, which may be caused by numerous
factors beyond our control, including changes in the domestic and
foreign supply of and demand for coal and the domestic and foreign
demand for steel and electricity; volatile economic and market
conditions; operating risks beyond our control, including risks
related to mining conditions, mining, processing and plant
equipment failures or maintenance problems; weather and natural
disasters; the unavailability of raw materials, equipment or other
critical supplies, mining accidents, and other inherent risks of
coal mining that are beyond our control; loss of availability,
reliability and cost-effectiveness of transportation facilities and
fluctuations in transportation costs; inflationary pressures and
availability and price of mining and other industrial supplies; the
effects of foreign and domestic trade policies, actions or disputes
on the level of trade among the countries and regions in which we
operate, the competitiveness of our exports, or our ability to
export; competition, both within our industry and with producers of
competing energy sources, including the effects from any current or
future legislation or regulations designed to support, promote or
mandate renewable energy sources; alternative steel production
technologies that may reduce demand for our coal; the loss of key
personnel or the failure to attract additional qualified personnel
and the availability of skilled employees and other workforce
factors; our ability to secure new coal supply arrangements or to
renew existing coal supply arrangements; the loss of, or
significant reduction in, purchases by our largest customers;
disruptions in the supply of coal from third parties; risks related
to our international growth; our relationships with, and other
conditions affecting our customers and our ability to collect
payments from our customers; the availability and cost of surety
bonds, including potential collateral requirements; additional
demands for credit support by third parties and decisions by banks,
surety bond providers, or other counterparties to reduce or
eliminate their exposure to the coal industry; inaccuracies in our
estimates of our coal reserves; defects in title or the loss of a
leasehold interest; losses as a result of certain marketing and
asset optimization strategies; cyber-attacks or other security
breaches that disrupt our operations, or that result in the
unauthorized release of proprietary, confidential or personally
identifiable information; our ability to acquire or develop coal
reserves in an economically feasible manner; our ability to comply
with the restrictions imposed by our term loan debt facility and
other financing arrangements; our ability to service our
outstanding indebtedness and raise funds necessary to repurchase
our convertible notes for cash following a fundamental change or to
pay any cash amounts due upon conversion; existing and future
legislation and regulations affecting both our coal mining
operations and our customers' coal usage; governmental policies and
taxes, including those aimed at reducing emissions of elements such
as mercury, sulfur dioxides, nitrogen oxides, particulate matter or
greenhouse gases; increased pressure from political and regulatory
authorities, along with environmental and climate change activist
groups, and lending and investment policies adopted by financial
institutions and insurance companies to address concerns about the
environmental impacts of coal combustion; increased attention to
environmental, social or governance matters; our ability to obtain
and renew various permits necessary for our mining operations;
risks related to regulatory agencies ordering certain of our mines
to be temporarily or permanently closed under certain
circumstances; risks related to extensive environmental regulations
that impose significant costs on our mining operations, and could
result in litigation or material liabilities; the accuracy of our
estimates of reclamation and other mine closure obligations; the
existence of hazardous substances or other environmental
contamination on property owned or used by us; risks related to tax
legislation and our ability to use net operating losses and certain
tax credits; and our ability to pay base or variable dividends in
accordance with our announced capital return program. All
forward-looking statements in this press release, as well as all
other written and oral forward-looking statements attributable to
us or persons acting on our behalf, are expressly qualified in
their entirety by the cautionary statements contained in this
section and elsewhere in this press release. These factors are not
necessarily all of the important factors that could cause actual
results or outcomes to vary significantly, and adversely, from
those anticipated at the time such statements were first made.
These risks and uncertainties, as well as other risks of which we
are not aware or which we currently do not believe to be material,
may cause our actual future results and outcomes to be materially,
and adversely, different than those expressed in our
forward-looking statements. For these reasons, readers should not
place undue reliance on any such forward-looking statements.
These forward-looking statements speak only as of the date on which
such statements were made, and we do not undertake, and expressly
disclaim, any duty to update our forward-looking statements,
whether as a result of new information, future events or otherwise,
except as may be required by the federal securities laws. For a
description of some of the risks and uncertainties that may affect
our future results, you should see the risk factors described from
time to time in the reports we file with the Securities and
Exchange Commission.
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|
1
Adjusted EBITDA is defined and reconciled in the "Reconciliation
of Non-GAAP measures" in this release.
|
Arch Resources, Inc.
and Subsidiaries
|
Condensed
Consolidated Income Statements
|
(In thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2022
|
|
2021
|
|
|
2022
|
|
2021
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
1,133,358
|
$
|
450,389
|
|
$
|
2,001,294
|
$
|
807,932
|
|
|
|
|
|
|
|
|
|
|
Costs, expenses and
other operating
|
|
|
|
|
|
|
|
|
|
Cost of sales
(exclusive of items shown separately below)
|
|
639,760
|
|
355,329
|
|
|
1,147,985
|
|
665,235
|
Depreciation, depletion
and amortization
|
|
32,780
|
|
27,884
|
|
|
64,990
|
|
53,681
|
Accretion on asset
retirement obligations
|
|
4,430
|
|
5,437
|
|
|
8,860
|
|
10,874
|
Change in fair value of
coal derivatives and coal trading activities, net
|
|
1,877
|
|
8,762
|
|
|
17,396
|
|
9,290
|
Selling, general and
administrative expenses
|
|
26,516
|
|
24,119
|
|
|
53,164
|
|
45,599
|
Other operating expense
(income), net
|
|
5,238
|
|
(4,347)
|
|
|
1,799
|
|
(9,615)
|
|
|
710,601
|
|
417,184
|
|
|
1,294,194
|
|
775,064
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
422,757
|
|
33,205
|
|
|
707,100
|
|
32,868
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(5,138)
|
|
(2,941)
|
|
|
(12,185)
|
|
(7,069)
|
Interest and investment
income
|
|
528
|
|
147
|
|
|
552
|
|
474
|
|
|
(4,610)
|
|
(2,794)
|
|
|
(11,633)
|
|
(6,595)
|
|
|
|
|
|
|
|
|
|
|
Income before
nonoperating expenses
|
|
418,147
|
|
30,411
|
|
|
695,467
|
|
26,273
|
|
|
|
|
|
|
|
|
|
|
Nonoperating
expenses
|
|
|
|
|
|
|
|
|
|
Non-service related
pension and postretirement benefit costs
|
|
(459)
|
|
(539)
|
|
|
(1,332)
|
|
(2,066)
|
Net loss resulting from
early retirement of debt
|
|
(9,629)
|
|
-
|
|
|
(13,749)
|
|
-
|
|
|
(10,088)
|
|
(539)
|
|
|
(15,081)
|
|
(2,066)
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes
|
|
408,059
|
|
29,872
|
|
|
680,386
|
|
24,207
|
Provision for income
taxes
|
|
496
|
|
2,006
|
|
|
951
|
|
2,383
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
407,563
|
$
|
27,866
|
|
$
|
679,435
|
$
|
21,824
|
|
|
|
|
|
|
|
|
|
|
Net income per
common share
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
24.26
|
$
|
1.82
|
|
$
|
42.14
|
$
|
1.43
|
Diluted earnings per
share
|
$
|
19.30
|
$
|
1.66
|
|
$
|
32.21
|
$
|
1.31
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
|
|
Basic weighted average
shares outstanding
|
|
16,801
|
|
15,294
|
|
|
16,124
|
|
15,289
|
Diluted weighted
average shares outstanding
|
|
21,452
|
|
16,756
|
|
|
21,362
|
|
16,598
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per
common share
|
$
|
8.11
|
$
|
-
|
|
$
|
8.36
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
(A)
|
$
|
459,967
|
$
|
66,526
|
|
$
|
780,950
|
$
|
97,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) Adjusted EBITDA is
defined and reconciled under "Reconciliation of Non-GAAP Measures"
later in this release.
|
Arch Resources, Inc.
and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
2022
|
|
|
2021
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
281,944
|
|
$
|
325,194
|
Short-term
investments
|
|
-
|
|
|
14,463
|
Restricted
cash
|
|
1,100
|
|
|
1,101
|
Trade accounts
receivable
|
|
457,883
|
|
|
324,304
|
Other
receivables
|
|
12,847
|
|
|
8,271
|
Inventories
|
|
212,752
|
|
|
156,734
|
Other current
assets
|
|
54,805
|
|
|
52,804
|
Total current
assets
|
|
1,021,331
|
|
|
882,871
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
1,108,926
|
|
|
1,120,043
|
|
|
|
|
|
|
Other
assets
|
|
|
|
|
|
Equity
investments
|
|
16,786
|
|
|
15,403
|
Fund for asset
retirement obligations
|
|
100,000
|
|
|
20,000
|
Other noncurrent
assets
|
|
66,604
|
|
|
78,843
|
Total other
assets
|
|
183,390
|
|
|
114,246
|
Total assets
|
$
|
2,313,647
|
|
$
|
2,117,160
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Accounts
payable
|
$
|
165,143
|
|
$
|
131,986
|
Accrued expenses and
other current liabilities
|
|
191,125
|
|
|
167,304
|
Current maturities of
debt
|
|
55,920
|
|
|
223,050
|
Total current
liabilities
|
|
412,188
|
|
|
522,340
|
Long-term
debt
|
|
127,107
|
|
|
337,623
|
Asset retirement
obligations
|
|
194,249
|
|
|
192,672
|
Accrued pension
benefits
|
|
591
|
|
|
1,300
|
Accrued postretirement
benefits other than pension
|
|
74,300
|
|
|
73,565
|
Accrued workers'
compensation
|
|
222,289
|
|
|
224,105
|
Other noncurrent
liabilities
|
|
94,215
|
|
|
81,689
|
Total
liabilities
|
|
1,124,939
|
|
|
1,433,294
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
Common Stock
|
|
286
|
|
|
255
|
Paid-in
capital
|
|
774,144
|
|
|
784,356
|
Retained
earnings
|
|
1,234,979
|
|
|
712,478
|
Treasury stock, at
cost
|
|
(827,381)
|
|
|
(827,381)
|
Accumulated other
comprehensive income
|
|
6,680
|
|
|
14,158
|
Total stockholders'
equity
|
|
1,188,708
|
|
|
683,866
|
Total liabilities and
stockholders' equity
|
$
|
2,313,647
|
|
$
|
2,117,160
|
Arch Resources, Inc.
and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
2022
|
|
2021
|
|
|
(Unaudited)
|
Operating
activities
|
|
|
|
|
Net income
|
$
|
679,435
|
$
|
21,824
|
Adjustments to
reconcile to cash from operating activities:
|
|
|
|
|
Depreciation, depletion
and amortization
|
|
64,990
|
|
53,681
|
Accretion on asset
retirement obligations
|
|
8,860
|
|
10,874
|
Deferred income
taxes
|
|
-
|
|
11
|
Employee stock-based
compensation expense
|
|
14,552
|
|
8,498
|
Amortization relating
to financing activities
|
|
1,130
|
|
3,110
|
Gain on disposals and
divestitures, net
|
|
(697)
|
|
(413)
|
Reclamation work
completed
|
|
(8,204)
|
|
(28,218)
|
Contribution to fund
asset retirement obligations
|
|
(80,000)
|
|
-
|
Changes in:
|
|
|
|
|
Receivables
|
|
(138,155)
|
|
(49,568)
|
Inventories
|
|
(56,018)
|
|
(36,523)
|
Accounts payable,
accrued expenses and other current liabilities
|
|
37,083
|
|
14,590
|
Income taxes,
net
|
|
427
|
|
2,337
|
Coal derivative assets
and liabilities, including margin account
|
|
17,710
|
|
381
|
Other
|
|
20,054
|
|
25,525
|
Cash provided by
operating activities
|
|
561,167
|
|
26,109
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
Capital
expenditures
|
|
(53,157)
|
|
(147,957)
|
Minimum royalty
payments
|
|
(1,000)
|
|
(1,124)
|
Proceeds from disposals
and divestitures
|
|
1,547
|
|
438
|
Proceeds from sales of
short-term investments
|
|
14,450
|
|
68,986
|
Investments in and
advances to affiliates, net
|
|
(4,027)
|
|
(1,114)
|
Cash used in investing
activities
|
|
(42,187)
|
|
(80,771)
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
Payments on term loan
due 2024
|
|
(272,288)
|
|
(1,500)
|
Proceeds from tax
exempt bonds
|
|
-
|
|
44,985
|
Payments on convertible
debt
|
|
(129,941)
|
|
-
|
Net payments on other
debt
|
|
(19,939)
|
|
(18,795)
|
Debt financing
costs
|
|
-
|
|
(1,537)
|
Dividends
paid
|
|
(154,567)
|
|
-
|
Payments for taxes
related to net share settlement of equity awards
|
|
(4,908)
|
|
(1,316)
|
Proceeds from warrants
exercised
|
|
19,412
|
|
-
|
Cash (used in) provided
by financing activities
|
|
(562,231)
|
|
21,837
|
|
|
|
|
|
Decrease in cash and
cash equivalents, including restricted cash
|
|
(43,251)
|
|
(32,825)
|
Cash and cash
equivalents, including restricted cash, beginning of
period
|
|
326,295
|
|
193,445
|
|
|
|
|
|
Cash and cash
equivalents, including restricted cash, end of
period
|
$
|
283,044
|
$
|
160,620
|
|
|
|
|
|
Cash and cash
equivalents, including restricted cash, end of
period
|
|
|
|
|
Cash and cash
equivalents
|
$
|
281,944
|
$
|
153,516
|
Restricted
cash
|
|
1,100
|
|
7,104
|
|
|
|
|
|
|
$
|
283,044
|
$
|
160,620
|
Arch Resources, Inc.
and Subsidiaries
|
Schedule of
Consolidated Debt
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2022
|
|
|
2021
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Term loan due 2024
($8.0 million face value)
|
|
$
|
8,002
|
|
$
|
280,353
|
Tax exempt bonds ($98.1
million face value)
|
|
|
98,075
|
|
|
98,075
|
Convertible Debt ($30.0
million face value)
|
|
|
30,006
|
|
|
121,617
|
Other
|
|
|
50,931
|
|
|
70,836
|
Debt issuance
costs
|
|
|
(3,987)
|
|
|
(10,208)
|
|
|
|
183,027
|
|
|
560,673
|
Less: current
maturities of debt
|
|
|
55,920
|
|
|
223,050
|
Long-term
debt
|
|
$
|
127,107
|
|
$
|
337,623
|
|
|
|
|
|
|
|
Calculation of net
(cash) debt
|
|
|
|
|
|
|
Total debt (excluding
debt issuance costs)
|
|
$
|
187,014
|
|
$
|
570,881
|
Less liquid
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
281,944
|
|
|
325,194
|
Short term
investments
|
|
|
-
|
|
|
14,463
|
|
|
|
281,944
|
|
|
339,657
|
Net (cash)
debt
|
|
$
|
(94,930)
|
|
$
|
231,224
|
Arch Resources, Inc.
and Subsidiaries
|
Operational
Performance
|
(In millions, except
per ton data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30, 2022
|
|
Three Months
Ended
March 31, 2022
|
|
Three Months
Ended
June 30, 2021
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
Metallurgical
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons Sold
|
|
2.1
|
|
|
|
1.5
|
|
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Sales
|
$
|
605.3
|
$
|
286.40
|
$
|
394.3
|
$
|
255.52
|
$
|
180.1
|
$
|
89.71
|
Segment Cash Cost of
Sales
|
|
209.1
|
|
98.95
|
|
135.9
|
|
88.04
|
|
119.2
|
|
59.37
|
Segment Cash
Margin
|
|
396.2
|
|
187.45
|
|
258.4
|
|
167.48
|
|
60.9
|
|
30.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thermal
|
|
|
|
|
|
|
|
|
|
|
|
|
Tons Sold
|
|
17.8
|
|
|
|
18.2
|
|
|
|
15.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Sales
|
$
|
349.1
|
$
|
19.62
|
$
|
342.9
|
$
|
18.85
|
$
|
205.2
|
$
|
13.50
|
Segment Cash Cost of
Sales
|
|
257.7
|
|
14.48
|
|
244.3
|
|
13.43
|
|
165.3
|
|
10.88
|
Segment Cash
Margin
|
|
91.4
|
|
5.14
|
|
98.6
|
|
5.42
|
|
39.9
|
|
2.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Cash
Margin
|
$
|
487.6
|
|
|
$
|
357.1
|
|
|
$
|
100.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
(26.5)
|
|
|
|
(26.6)
|
|
|
|
(24.1)
|
|
|
Other
|
|
(1.2)
|
|
|
|
(9.4)
|
|
|
|
(10.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
460.0
|
|
|
$
|
321.0
|
|
|
$
|
66.5
|
|
|
Arch Resources, Inc.
and Subsidiaries
|
Reconciliation of
NON-GAAP Measures
|
(In thousands,
except per ton data)
|
|
|
|
|
|
Included in the
accompanying release, we have disclosed certain non-GAAP measures
as defined by Regulation G.
The following reconciles these items to the most directly
comparable GAAP measure.
|
|
|
|
|
|
Non-GAAP Segment
coal sales per ton sold
|
|
|
|
|
|
Non-GAAP Segment coal
sales per ton sold is calculated as segment coal sales revenues
divided by segment tons sold. Segment coal sales revenues are
adjusted for transportation costs, and may be adjusted for other
items that, due to generally accepted accounting principles, are
classified in "other income" on the consolidated Income Statements,
but relate to price protection on the sale of coal. Segment coal
sales per ton sold is not a measure of financial performance in
accordance with generally accepted accounting principles. We
believe segment coal sales per ton sold provides useful information
to investors as it better reflects our revenue for the quality of
coal sold and our operating results by including all income from
coal sales. The adjustments made to arrive at these measures are
significant in understanding and assessing our financial condition.
Therefore, segment coal sales revenues should not be considered in
isolation, nor as an alternative to coal sales revenues under
generally accepted accounting principles.
|
|
|
|
|
|
Quarter ended
June 30, 2022
|
Metallurgical
|
Thermal
|
All
Other
|
Consolidated
|
(In
thousands)
|
|
|
|
|
GAAP Revenues in the
Condensed Consolidated Income Statements
|
$
724,492
|
$ 408,866
|
$
-
|
$ 1,133,358
|
Less: Adjustments to
reconcile to Non-GAAP Segment coal sales
revenue
|
|
|
|
|
Coal risk management
derivative settlements classified in "other
income"
|
-
|
17,385
|
-
|
17,385
|
Coal sales revenues
from idled or otherwise disposed operations and pass through
agreements not included in segments
|
-
|
-
|
-
|
-
|
Transportation
costs
|
119,157
|
42,349
|
-
|
161,506
|
Non-GAAP Segment coal
sales revenues
|
$
605,335
|
$ 349,132
|
$
-
|
$
954,467
|
Tons
sold
|
2,114
|
17,792
|
|
|
Coal sales per ton
sold
|
$
286.40
|
$
19.62
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
March 31, 2022
|
Metallurgical
|
Thermal
|
All
Other
|
Consolidated
|
(In
thousands)
|
|
|
|
|
GAAP Revenues in the
Condensed Consolidated Income Statements
|
$
472,171
|
$ 395,765
|
$
-
|
$
867,936
|
Less: Adjustments to
reconcile to Non-GAAP Segment coal sales
revenue
|
|
|
|
|
Coal risk management
derivative settlements classified in "other
income"
|
-
|
9,074
|
-
|
9,074
|
Coal sales revenues
from idled or otherwise disposed operations and pass through
agreements not included in segments
|
-
|
-
|
(1)
|
(1)
|
Transportation
costs
|
77,863
|
43,744
|
1
|
121,608
|
Non-GAAP Segment coal
sales revenues
|
$
394,308
|
$ 342,947
|
$
-
|
$
737,255
|
Tons
sold
|
1,543
|
18,195
|
|
|
Coal sales per ton
sold
|
$
255.52
|
$
18.85
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
June 30, 2021
|
Metallurgical
|
Thermal
|
All
Other
|
Consolidated
|
(In
thousands)
|
|
|
|
|
GAAP Revenues in the
Condensed Consolidated Income Statements
|
$
219,448
|
$ 230,759
|
$ 182
|
$
450,389
|
Less: Adjustments to
reconcile to Non-GAAP Segment coal sales
revenue
|
|
|
|
|
Coal risk management
derivative settlements classified in "other
income"
|
-
|
651
|
-
|
651
|
Coal sales revenues
from idled or otherwise disposed operations and pass through
agreements not included in segments
|
-
|
-
|
181
|
181
|
Transportation
costs
|
39,348
|
24,899
|
1
|
64,248
|
Non-GAAP Segment coal
sales revenues
|
$
180,100
|
$ 205,209
|
$
-
|
$
385,309
|
Tons
sold
|
2,007
|
15,204
|
|
|
Coal sales per ton
sold
|
$
89.71
|
$
13.50
|
|
|
Arch Resources, Inc.
and Subsidiaries
|
Reconciliation of
NON-GAAP Measures
|
(In thousands,
except per ton data)
|
|
|
|
|
|
Non-GAAP Segment
cash cost per ton sold
|
|
|
|
|
|
Non-GAAP Segment cash
cost per ton sold is calculated as segment cash cost of coal sales
divided by segment tons sold. Segment cash cost of coal sales is
adjusted for transportation costs, and may be adjusted for other
items that, due to generally accepted accounting principles, are
classified in "other income" on the consolidated Income Statements,
but relate directly to the costs incurred to produce coal. Segment
cash cost per ton sold is not a measure of financial performance in
accordance with generally accepted accounting principles. We
believe segment cash cost per ton sold better reflects our
controllable costs and our operating results by including all costs
incurred to produce coal. The adjustments made to arrive at these
measures are significant in understanding and assessing our
financial condition. Therefore, segment cash cost of coal sales
should not be considered in isolation, nor as an alternative to
cost of sales under generally accepted accounting
principles.
|
|
|
|
|
|
Quarter ended
June 30, 2022
|
Metallurgical
|
Thermal
|
All
Other
|
Consolidated
|
(In
thousands)
|
|
|
|
|
GAAP Cost of sales in
the Condensed Consolidated Income Statements
|
$
328,302
|
$ 303,970
|
$
7,487
|
$
639,760
|
Less: Adjustments to
reconcile to Non-GAAP Segment cash cost of coal
sales
|
|
|
|
|
Diesel fuel risk
management derivative settlements classified in "other
income"
|
-
|
3,939
|
-
|
3,939
|
Transportation
costs
|
119,157
|
42,349
|
-
|
161,506
|
Cost of coal sales from
idled or otherwise disposed operations and pass through agreements
not included in segments
|
-
|
-
|
4,331
|
4,331
|
Other (operating
overhead, certain actuarial, etc.)
|
-
|
-
|
3,156
|
3,156
|
Non-GAAP Segment cash
cost of coal sales
|
$
209,145
|
$ 257,682
|
$
-
|
$
466,827
|
Tons sold
|
2,114
|
17,792
|
|
|
Cash cost per ton
sold
|
$
98.95
|
$
14.48
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
March 31, 2022
|
Metallurgical
|
Thermal
|
All
Other
|
Consolidated
|
(In
thousands)
|
|
|
|
|
GAAP Cost of sales in
the Condensed Consolidated Income Statements
|
$
213,728
|
$ 288,084
|
$
6,413
|
$
508,225
|
Less: Adjustments to
reconcile to Non-GAAP Segment cash cost of coal
sales
|
|
|
|
|
Diesel fuel risk
management derivative settlements classified in "other
income"
|
$
-
|
$
27
|
$
-
|
27
|
Transportation
costs
|
77,863
|
43,744
|
1
|
121,608
|
Cost of coal sales from
idled or otherwise disposed operations and pass through agreements
not included in segments
|
-
|
-
|
3,704
|
3,704
|
Other (operating
overhead, certain actuarial, etc.)
|
-
|
-
|
2,708
|
2,708
|
Non-GAAP Segment cash
cost of coal sales
|
$
135,865
|
$ 244,313
|
$
-
|
$
380,178
|
Tons sold
|
1,543
|
18,195
|
|
|
Cash cost per ton
sold
|
$
88.04
|
$
13.43
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
June 30, 2021
|
Metallurgical
|
Thermal
|
All
Other
|
Consolidated
|
(In
thousands)
|
|
|
|
|
GAAP Cost of sales in
the Condensed Consolidated Income Statements
|
$
158,539
|
$ 190,245
|
$
6,545
|
$
355,329
|
Less: Adjustments to
reconcile to Non-GAAP Segment cash cost of coal
sales
|
|
|
|
|
Transportation
costs
|
39,348
|
24,899
|
1
|
64,248
|
Cost of coal sales from
idled or otherwise disposed operations and pass through agreements
not included in segments
|
-
|
-
|
4,354
|
4,354
|
Other (operating
overhead, certain actuarial, etc.)
|
-
|
-
|
2,190
|
2,190
|
Non-GAAP Segment cash
cost of coal sales
|
$
119,191
|
$ 165,346
|
$
-
|
$
284,537
|
Tons sold
|
2,007
|
15,204
|
|
|
Cash cost per ton
sold
|
$
59.37
|
$
10.88
|
|
|
Arch Resources, Inc.
and Subsidiaries
|
Reconciliation of
Non-GAAP Measures
|
(In
thousands)
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA is
defined as net income attributable to the Company before the effect
of net interest expense, income taxes, depreciation, depletion and
amortization, accretion on asset retirement obligations and
nonoperating expenses. Adjusted EBITDA may also be adjusted for
items that may not reflect the trend of future results by excluding
transactions that are not indicative of the Company's core
operating performance.
|
|
Adjusted EBITDA is not
a measure of financial performance in accordance with generally
accepted accounting principles, and items excluded from Adjusted
EBITDA are significant in understanding and assessing our financial
condition. Therefore, Adjusted EBITDA should not be considered in
isolation, nor as an alternative to net income, income from
operations, cash flows from operations or as a measure of our
profitability, liquidity or performance under generally accepted
accounting principles. The Company uses adjusted EBITDA to measure
the operating performance of its segments and allocate resources to
the segments. Furthermore, analogous measures are used by industry
analysts and investors to evaluate our operating performance.
Investors should be aware that our presentation of Adjusted EBITDA
may not be comparable to similarly titled measures used by other
companies. The table below shows how we calculate Adjusted
EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
Net income
|
$
|
407,563
|
|
$
|
27,866
|
|
$
|
679,435
|
|
$
|
21,824
|
Provision for income
taxes
|
|
496
|
|
|
2,006
|
|
|
951
|
|
|
2,383
|
Interest expense,
net
|
|
4,610
|
|
|
2,794
|
|
|
11,633
|
|
|
6,595
|
Depreciation, depletion
and amortization
|
|
32,780
|
|
|
27,884
|
|
|
64,990
|
|
|
53,681
|
Accretion on asset
retirement obligations
|
|
4,430
|
|
|
5,437
|
|
|
8,860
|
|
|
10,874
|
Non-service related
pension and postretirement benefit costs
|
|
459
|
|
|
539
|
|
|
1,332
|
|
|
2,066
|
Net loss resulting from
early retirement of debt
|
|
9,629
|
|
|
-
|
|
|
13,749
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
459,967
|
|
$
|
66,526
|
|
$
|
780,950
|
|
$
|
97,423
|
EBITDA from idled or
otherwise disposed operations
|
|
3,957
|
|
|
3,997
|
|
|
6,348
|
|
|
7,563
|
Selling, general and
administrative expenses
|
|
26,516
|
|
|
24,119
|
|
|
53,164
|
|
|
45,599
|
Other
|
|
(678)
|
|
|
8,376
|
|
|
8,804
|
|
|
7,111
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
from coal operations
|
$
|
489,762
|
|
$
|
103,018
|
|
$
|
849,266
|
|
$
|
157,696
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
Metallurgical
|
|
396,426
|
|
|
61,246
|
|
|
655,430
|
|
|
102,843
|
Thermal
|
|
93,336
|
|
|
41,772
|
|
|
193,836
|
|
|
54,853
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Adjusted
EBITDA
|
$
|
489,762
|
|
$
|
103,018
|
|
$
|
849,266
|
|
$
|
157,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discretionary cash
flow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
2022
|
|
|
|
|
|
2022
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Cash flow from
operating activities
|
$
|
268,228
|
|
|
|
|
$
|
561,167
|
|
|
|
Less: Capital
expenditures
|
|
(30,869)
|
|
|
|
|
|
(53,157)
|
|
|
|
Discretionary cash
flow
|
$
|
237,359
|
|
|
|
|
$
|
508,010
|
|
|
|
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SOURCE Arch Resources, Inc.