Arch Coal, Inc. Reports Third Quarter 2012 Results

              Arch Coal, Inc. Reports Third Quarter 2012 Results

Quarterly Adj. EBITDA increased to $257 million, 21% higher than a year ago

Shipments up 19% versus second quarter 2012 on improving thermal trends

Company reduces cost-per-ton guidance in key regions for full year 2012

PR Newswire

ST. LOUIS, Oct. 26, 2012

ST. LOUIS, Oct. 26, 2012 /PRNewswire/ --

Earnings Highlights
                                    Quarter Ended           Nine Months Ended
In $ millions, except per share     9/30/12     9/30/11     9/30/12   9/30/11
data
Revenues                            $1,087.6    $1,198.7    $3,190.8  $3,057.1
Income (Loss) from Operations       136.0       76.3        (398.9)   273.8
Net Income (Loss) ^1                45.8        8.9         (388.3)   70.8
Diluted EPS/LPS                     0.22        0.04        (1.83)    0.39
Adjusted Net Income ^1,2            41.8        7.4         12.0      143.9
Adjusted Diluted EPS ^2             0.20        0.03        0.06      0.78
Adjusted EBITDA ^2                  $256.5      $211.5      $617.3    $650.7
1/- Net income attributable to
ACI.
2/- Defined and reconciled under "Reconciliation of
non-GAAP measures."

Arch Coal, Inc. (NYSE: ACI) today reported net income of $46 million, or $0.22
per diluted share, for the third quarter of 2012 compared with net income of
$9 million, or $0.04 per diluted share, for the third quarter of 2011.
Excluding acquired sales contract amortization, exit costs arising from mine
closures and the related tax effect of these items, third quarter adjusted
earnings were $0.20 per share.

(Logo: http://photos.prnewswire.com/prnh/20120727/CG47668LOGO)

Arch shipped 37.5 million tons of coal in the third quarter of 2012, a
decrease of 6 percent when compared with the third quarter of 2011 but an
increase of 19 percent versus the second quarter of 2012. Adjusted earnings
before interest, taxes, depreciation, depletion and amortization ("EBITDA")
totaled $257 million in the third quarter of 2012, 21 percent higher than in
the prior-year quarter and 41 percent higher than in the second quarter of
2012. Revenues totaled $1.1 billion in the third quarter of 2012, a decline
versus the prior-year quarter but an increase when compared with the second
quarter of 2012. Results for the third quarter of 2012 include an $80 million
benefit from the reversal of a previously recorded legal contingency, or $54
million when adjusted for taxes and previously accrued interest expense.

"Arch's third quarter performance reflects improvement over the second quarter
due to our cost control efforts and modestly better domestic thermal markets
driven by favorable summer weather and higher competing fuel prices," said
John W. Eaves, Arch's president and chief executive officer. "During the
third quarter, we saw margins in both of our western regions expand due to
increased shipment levels, higher price realizations and strong cost
control."

For the first nine months of 2012, Arch generated adjusted EBITDA of $617
million versus $651 million in the prior-year period. Revenues rose 4 percent
to $3.2 billion year-to-date in 2012. Over this same time period, cash flow
from operations totaled $356 million, while capital expenditures were $304
million, resulting in free cash flow of $52 million.

"Looking ahead, we believe global coal markets are in the process of
correcting – with the domestic thermal market building some momentum while
metallurgical markets are bottoming out," said Eaves. "Because we expect
global coal market conditions to remain challenging in 2013, Arch is executing
a strategy to successfully navigate this weak market. Our plan is focused on
improving operational efficiency, optimizing our asset base and preserving
liquidity so we are well positioned to capitalize as the market recovers."

Executing Our Plan
"We are prudently matching our production levels to market demand, reducing
costs and lowering capital spending," said Paul A. Lang, Arch's executive vice
president and chief operating officer. "We anticipate that 2013 will be a
difficult year for the coal industry, but we believe our ongoing efforts will
allow Arch to emerge from this cyclical downturn as an even stronger company."

In the third quarter, Arch took steps to rationalize its higher-cost
metallurgical coal supply, including idling three smaller mines in
Appalachia. The operations affected were Bismarck, Carlos and Imperial, which
produced a total of 1.0 million tons of coal in 2011. At the same time, Arch
continued to optimize its diverse, low-cost asset portfolio with the build out
of the high-quality Leer metallurgical coal mine in the region. The Leer
mine's development is on track, with the continuous miner equipment and
preparation plant now in operation. On Oct. 23, 2012, Leer shipped its first
train, with customers in Europe as the coal's final destination. Arch
currently expects the longwall at Leer to start up in the third quarter of
2013.

Arch also continued to demonstrate strong cost control at its operations
during the third quarter, driven by ongoing efforts to improve operational
efficiencies across all regions, as well as increased shipment levels in the
Powder River Basin and in the Western Bituminous Region. As a result, the
company has further reduced its full year 2012 cash cost guidance range in
each of its key operating regions.

Arch continues to evaluate current market conditions when assessing its future
capital expenditure plans. The company expects capital spending of
approximately $350 million for 2013, below its estimated 2012 capital spending
range of $410 million to $430 million.

Enhancing Liquidity
At Sept. 30, 2012, Arch had $650 million in available funds on its balance
sheet, comprising $551 million in cash and $99 million in short-term
interest-bearing securities. The company also had more than $350 million of
additional liquidity, primarily consisting of available capacity under its
revolving credit facility and other short-term borrowing programs, bringing
its total liquidity position at Sept. 30 to more than $1 billion. Moreover,
the company has no significant debt maturities before 2016.

"During the third quarter, we increased our cash position by more than $135
million and ended the quarter with no borrowings under our revolver," said
John T. Drexler, Arch's senior vice president and chief financial officer.
"We are free cash flow positive year-to-date in 2012, and expect to end the
year with roughly $600 million of cash and available funds on hand. We remain
committed to preserving and enhancing our liquidity as we position Arch to
successfully navigate the current market conditions."

Core Values
Arch operations received nine national, multi-state and statewide safety and
environmental awards in the third quarter of 2012. Most significantly, the
Dugout Canyon mine in Utah was honored with the prestigious Sentinels of
Safety award as the nation's safest operation in the large underground mine
category for 2011. Also in the third quarter, Arch was the first mining
company honored with the Conservation Legacy Award from the National Museum of
Forest Service History for the company's voluntary environmental efforts on
public and private lands.

Arch's third quarter 2012 lost-time safety incident rate of 0.67 per 200,000
employee-hours worked was three times better than the national coal industry
average and 14 percent better than the company achieved in the third quarter
of 2011. Six of Arch's operations and facilities attained A Perfect Zero – a
dual goal of operating without a reportable safety incident or an SMCRA
environmental violation – for the three months ended Sept. 30, 2012.

"We commend the hard work by our employees at the six locations that achieved
A Perfect Zero," said Lang. "We are always striving for continuous
improvement in our safety performance – with a goal of achieving A Perfect
Zero at all of our operations, every year."

Operational Results
"Strong cost control in the third quarter led to higher cash margins in Arch's
western operating regions," said Eaves. "In Appalachia, the effect of lower
thermal volumes drove third quarter cash costs higher versus the second
quarter. In addition, we shipped 2.1 million tons of metallurgical coal from
Appalachia in the third quarter – 11 percent more than in the second quarter –
and we expect to ship 7.5 million tons of coal into metallurgical markets
during 2012."

                               Arch Coal, Inc.
                                     3Q12                 2Q12         3Q11
Tons sold (in millions)              37.5                 31.5         39.9
Average sales price per ton          $25.57               $28.44       $27.87
Cash cost per ton                    $20.16               $22.42       $21.59
Cash margin per ton                  $5.41                $6.02        $6.28
Total operating cost per ton        $23.50               $26.57       $25.03
Operating margin per ton             $2.07                $1.87        $2.84
Consolidated results may not tie to regional breakout due to exclusion of
other assets, rounding.
Operating cost per ton includes depreciation, depletion and
amortization per ton.
Amounts reflected in this table have been adjusted for certain
transactions.
For a description of adjustments, refer to the regional schedule at
http://investor.archcoal.com

Third quarter 2012 consolidated per-ton operating margin expanded 11 percent
versus the second quarter. Sales volumes increased 19 percent in the third
quarter versus the prior-quarter period, driven by increased shipments in the
company's western operating regions. Consolidated sales price per ton
declined 10 percent over the same time period, reflecting a larger percentage
of Powder River Basin tons in Arch's overall volume mix as well as lower
volumes shipped from Appalachia. Compared with the second quarter,
consolidated cash cost per ton declined 10 percent in the third quarter,
driven by strong operating performances in the company's western regions and a
larger percentage of lower-cost tons in the company's overall volume mix. 

                              Powder River Basin
                                   3Q12                 2Q12           3Q11
Tons sold (in millions)            27.7                 21.8           28.8
Average sales price per ton        $13.79               $13.65         $13.62
Cash cost per ton                  $10.92               $11.01         $10.68
Cash margin per ton                $2.87                $2.64          $2.94
Total operating cost per ton      $12.51               $12.71         $12.16
Operating margin per ton           $1.28                $0.94          $1.46
Operating cost per ton includes depreciation, depletion and amortization per
ton.
Amounts reflected in this table have been adjusted for certain
transactions.

In the Powder River Basin, third quarter 2012 operating margin per ton
increased 36 percent versus the second quarter, due to higher average realized
prices and lower costs per ton. Sales volumes increased 27 percent in the
third quarter versus the prior-quarter period as shipments rose on improving
trends in domestic thermal markets. Average sales price rose $0.14 per ton
over the same time period, due to a larger percentage of higher-priced tons in
the company's regional volume mix. Cash cost decreased $0.09 per ton in the
third quarter versus the second quarter, benefiting from the effect of higher
shipment levels and strong cost control. 

                                   Appalachia
                                        3Q12               2Q12        3Q11
Tons sold (in millions)                 4.7                5.2         6.3
Average sales price per ton             $83.84             $85.45      $86.50
Cash cost per ton                       $69.19             $67.78      $67.62
Cash margin per ton                     $14.65             $17.67      $18.88
Total operating cost per ton           $82.41             $81.85      $79.23
Operating margin per ton                $1.43              $3.60       $7.27
Operating cost per ton includes depreciation, depletion and
amortization per ton.
Amounts reflected in this table have been adjusted for certain
transactions.

In Appalachia, Arch recorded an operating margin of $1.43 per ton in the third
quarter of 2012 versus $3.60 per ton in the second quarter. Sales volumes
declined 10 percent in the third quarter compared with the second quarter, as
lower thermal sales offset higher metallurgical coal shipments. Average sales
price per ton declined over the same time period, driven by lower prices on
metallurgical shipments. Third quarter cash cost per ton increased slightly
versus the prior-quarter period, due to the effect of lower volume levels and
a larger percentage of metallurgical sales in the company's regional volume
mix. Third quarter 2012 cash cost per ton in Appalachia would have been $1.35
per ton lower if the impact of previously announced idled operations were
excluded.

                             Western Bituminous Region
                                  3Q12                 2Q12            3Q11
Tons sold (in millions)           4.6                  4.0             4.2
Average sales price per ton*      $35.50               $33.35          $36.09
Cash cost per ton*                $23.94               $24.25          $25.77
Cash margin per ton               $11.56               $9.10           $10.32
Total operating cost per          $27.84               $28.88          $30.29
ton*
Operating margin per ton          $7.66                $4.47           $5.80
*Sales prices and costs in the region are presented f.o.b. point for domestic
customers.
Operating cost per ton includes depreciation, depletion and amortization per
ton.
Amounts reflected in this table have been adjusted for certain
transactions.

In the Western Bituminous Region, third quarter 2012 operating margin per ton
expanded 71 percent when compared with the second quarter. Shipments rose in
the third quarter versus the prior-quarter period despite the planned longwall
move at Skyline, as mine inventory across the region was reduced due to
improving domestic demand. Average sales price increased $2.15 per ton over
the same time period, benefitting from a favorable mix of customer shipments.
Third quarter cash cost decreased $0.31 per ton versus the second quarter,
reflecting solid cost control across the operations, particularly at Arch's
West Elk and Sufco mines. Looking ahead, the longwall at Skyline is expected
to restart at the end of October. 

Market Trends
Arch believes several factors will help rebalance global coal market
fundamentals and set the stage for the next rebound:

  oPrompt month natural gas prices have risen nearly 25 percent since the end
    of August and the forward curve is above $4 per million Btu, making
    western coals a competitively priced fuel for power generation.
  oWhile U.S. coal demand for power generation is set to decline by more than
    100 million tons in 2012 due to one of the mildest winters on record and
    decade-low natural gas prices, Arch believes coal consumption will grow
    again in 2013. Coal demand could regain ground lost to competing fuels,
    including natural gas and hydroelectric power, and should increase on more
    normal winter temperatures.
  oCoal stockpiles at U.S. power generators have declined from the record
    levels set in May 2012, and internal estimates suggest customer stockpiles
    could dip below 180 million tons at year's end. Over the course of 2013,
    Arch expects further liquidation of coal inventories at domestic power
    generators, helping to set the stage for a more balanced market.
  oU.S. coal exports are projected to reach a record 125 million tons in 2012
    even with anticipated slowing in the fourth quarter. This record level
    would represent a more than doubling of coal exports since 2007. During
    the next five years, Arch continues to expect U.S. exports to grow
    meaningfully as domestic port capacity is expanded, new power plants are
    built around the world and growing global infrastructure needs bolster
    steel and metallurgical coal demand.
  oDespite strong hydroelectric generation year-to-date and recent reductions
    in steel production in China, that country is on pace to import between
    220 million and 225 million metric tonnes of coal in 2012. In addition,
    India's recent blackouts may spur reform in the power and coal sectors,
    and encourage incremental infrastructure investment and coal imports over
    time. Longer term, roughly 85 percent of the world's 7 billion people
    will live in emerging economies – with 1.3 billion estimated to move into
    the middle class by 2020. This class migration will drive resource demand
    over the next decade.
  oMetallurgical markets are weak currently, as global steel demand has been
    temporarily constrained by the economic recession in Europe and
    slower-than-expected growth in China. However, announced infrastructure
    spending in China and Brazil and stimulus spending in developed economies
    – along with global production curtailments and delayed mining capital
    investments – should tighten metallurgical markets in the future.

"While our third quarter results benefitted from the modest improvement in
domestic thermal demand, the uncertainty in global and domestic economies
could affect coal markets in 2013," said Eaves. "Longer term, we remain
encouraged by the opportunities in seaborne coal markets and our forecast of 2
billion tonnes of seaborne coal demand by 2020 has not changed." 

Company Outlook

                                   2012                     2013
                                   Tons     $ per ton   Tons $ per ton
Sales Volume (in million tons)
Thermal                            129-135
Metallurgical                      7.5
Powder River Basin
Committed, Priced                  105.7      $13.63        70.0   $14.14
Committed, Unpriced                0.4                      10.9
Total Committed                    106.1                    80.9
Average Cash Cost                             $11.00 -
                                              $11.30
Western Bituminous
Committed, Priced                  14.9       $35.75        10.7   $39.10
Committed, Unpriced                0.2                      0.6
Total Committed                    15.1                     11.3
Average Cash Cost                             $23.00 -
                                              $25.50
Appalachia
Committed, Priced Thermal          10.9       $66.26        4.4    $62.12
Committed, Unpriced Thermal        0.3                      0.3
Total Committed Thermal            11.2                     4.7
Committed, Priced                  7.2        $115.01       0.4    $117.55
Metallurgical*
Committed, Unpriced                0.1                      0.3
Metallurgical
Total Committed Metallurgical      7.3                      0.7
Average Cash Cost                             $68.00 -
                                              $71.00
Illinois Basin
Committed, Priced                  2.2        $41.49        1.9    $41.72
Average Cash Cost                             $34.00 -
                                              $36.00
*Includes tonnage shortfall and carry over
into 2013
Corporate (in $ millions)
D,D&A                              $500 - $515
S,G&A                              $125 - $135
Interest Expense                  $300 - $310
Capital Expenditures               $410 - $430

"On the marketing front, we continue to manage our exposure by layering in
sales as appropriate while maintaining leverage to capture potential upside,"
said Eaves. "We are also working with some metallurgical and thermal
customers to shift previously committed tons into 2013, and are selectively
placing small tonnage into the export market for the fourth quarter."

"Looking ahead, we will prudently manage our capital, control our costs and
preserve our liquidity under current market conditions," added Eaves. "We
will also retain the flexibility to respond to improving coal market
fundamentals, which we believe will occur over the course of 2013 and 2014.
As market conditions improve, Arch will leverage its superior low-cost asset
base to create substantial value for shareholders."

A conference call regarding Arch Coal's third quarter 2012 financial results
will be webcast live today at 11 a.m. Eastern time. The conference call can
be accessed via the "investor" section of the Arch Coal website
(http://investor.archcoal.com).

U.S.-based Arch Coal is a top five global coal producer and marketer. Arch is
the most diversified American coal company, with mining complexes across every
major U.S. coal supply basin. Its core business is supplying cleaner-burning,
low-sulfur thermal and metallurgical coal to power generators and steel
manufacturers on five continents.

Forward-Looking Statements: This press release contains "forward-looking
statements" – 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 often contain words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," or "will."
Forward-looking statements by their nature address matters that are, to
different degrees, uncertain. For us, particular uncertainties arise from
changes in the demand for our coal by the domestic electric generation
industry; from legislation and regulations relating to the Clean Air Act and
other environmental initiatives; from operational, geological, permit, labor
and weather-related factors; from fluctuations in the amount of cash we
generate from operations; from future integration of acquired businesses; and
from numerous other matters of national, regional and global scale, including
those of a political, economic, business, competitive or regulatory nature.
These uncertainties may cause our actual future results to be materially
different than those expressed in our forward-looking statements. We do not
undertake to update our forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by law.
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.

Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
                      Three Months Ended          Nine Months Ended
                       September 30,              September 30,
                      2012           2011          2012           2011
                      (Unaudited)                (Unaudited)
Revenues              $ 1,087,618   $ 1,198,673  $ 3,190,807   $ 3,057,139
Costs, expenses and
other
 Cost of sales       896,809        952,850       2,628,939      2,322,124
 Depreciation,
depletion and         126,838        139,547       399,672        320,320
amortization
 Amortization of
acquired sales        (4,093)        (12,698)      (22,561)       (5,492)
contracts, net
 Change in fair
value of coal
derivatives and coal  5,840          8,360         (29,827)       9,248
trading activities,
net
 Selling, general
and administrative    33,266         33,275        99,305         92,749
expenses
 Legal               (79,532)       -             (79,532)       -
contingencies
 Mine closure and
asset impairment      (2,194)        -             523,568        7,316
costs
 Goodwill impairment -              -             115,791        -
 Acquisition and
transition costs -    -              4,694         -              46,044
ICG
 Other operating     (25,276)       (3,611)       (45,605)       (9,018)
income, net
                      951,658        1,122,417     3,589,750      2,783,291
 Income (loss)   135,960        76,256        (398,943)      273,848
from operations
Interest expense,
net:
 Interest expense   (75,710)       (77,694)      (229,210)      (154,523)
 Interest and        1,459          840           3,568          2,341
investment income
                      (74,251)       (76,854)      (225,642)      (152,182)
Other nonoperating
expenses
 Bridge financing    -              -             -              (49,490)
costs related to ICG
 Net loss resulting
from early retirement -              (1,708)       (19,042)       (1,958)
and refinancing of
debt
                      -              (1,708)       (19,042)       (51,448)
 Income (loss)   61,709         (2,306)       (643,627)      70,218
before income taxes
Provision for
(benefit from) income 15,958         (11,427)      (255,363)      (1,407)
taxes
 Net income      45,751         9,121         (388,264)      71,625
(loss)
 Less: Net
income attributable   -              (231)         (268)          (822)
to noncontrolling
interest
 Net income                     $                         $  
(loss) attributable   $   45,751  8,890        $  (388,532)  70,803
to Arch Coal, Inc.
Earnings (loss) per
common share
Basic earnings (loss) $          $         $          $    
per common share      0.22          0.04         (1.83)         0.39
Diluted earnings      $          $         $          $    
(loss) per common     0.22          0.04         (1.83)         0.39
share
Weighted average
shares outstanding
 Basic               212,053        211,337       211,931        182,898
 Diluted             212,076        211,974       211,931        183,850
Dividends declared    $          $         $          $    
per common share    0.03          0.11         0.17          0.32
Adjusted EBITDA ^(A)  $  256,511   $  211,458  $  617,259   $  650,739
^(A)Adjusted EBITDA is defined and reconciled under "Reconciliation of
Non-GAAP Measures" later in this release.



Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
                                             September 30,   December 31,
                                            2012               2011
                                            (Unaudited)
Assets
 Current assets
 Cash and cash equivalents               $     550,756  $    138,149
 Restricted cash                         3,450              10,322
 Short term investments                  99,359             -
 Trade accounts receivable               277,634            380,595
 Other receivables                       71,114             88,584
 Inventories                             391,526            377,490
 Prepaid royalties                       12,120             21,944
 Deferred income taxes                   65,395             42,051
 Coal derivative assets                  40,837             13,335
 Other                                   67,495             110,304
 Total current 1,579,686          1,182,774
assets
 Property, plant and equipment, net        7,372,063          7,949,150
 Other assets
 Prepaid royalties                       85,842             86,626
 Goodwill                                480,312            596,103
 Equity investments                      237,645            225,605
 Other                                   180,306            173,701
 Total other   984,105            1,082,035
assets
 Total assets  $    9,935,854  $  10,213,959
Liabilities and Stockholders' Equity
 Current liabilities
 Accounts payable                        $     304,442  $    383,782
 Coal derivative liabilities             3,498              7,828
 Accrued expenses and other current      355,448            348,207
liabilities
 Current maturities of debt and          115,695            280,851
short-term borrowings
 Total current 779,083            1,020,668
liabilities
 Long-term debt                            4,465,445          3,762,297
 Asset retirement obligations              426,044            446,784
 Accrued pension benefits                  45,160             48,244
 Accrued postretirement benefits other     41,061             42,309
than pension
 Accrued workers' compensation             85,251             71,948
 Deferred income taxes                     746,079            976,753
 Other noncurrent liabilities              182,464            255,382
 Total         6,770,587          6,624,385
liabilities
 Redeemable noncontrolling interest      -                  11,534
Stockholders' Equity
 Common stock                            2,141              2,136
 Paid-in capital                         3,024,435          3,015,349
 Treasury stock, at cost                 (53,848)           (53,848)
 Retained earnings                      197,749            622,353
 Accumulated other comprehensive loss    (5,210)            (7,950)
 Total         3,165,267          3,578,040
stockholders' equity
 Total         $9,935,854         $  10,213,959
liabilities and stockholders' equity



Arch Coal, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
                                             Nine Months Ended September 30,
                                             2012               2011
                                             (Unaudited)
Operating activities
Net income (loss)                            $ (388,264)        $  71,625
Adjustments to reconcile to cash provided
by operating activities:
 Depreciation, depletion and amortization   399,672            320,320
 Amortization of acquired sales contracts,  (22,561)           (5,492)
net
 Bridge financing costs related to ICG      -                  49,490
 Net loss resulting from early retirement   19,042             1,958
of debt and refinancing activities
 Noncash mine closure and asset impairment  501,942            7,316
costs
 Goodwill impairment                        115,791            -
 Prepaid royalties expensed                 19,802             26,880
 Employee stock-based compensation expense  9,435              9,019
 Amortization relating to financing         14,345             9,854
activities
 Changes in:
 Receivables                            102,252            (35,874)
 Inventories                            (16,635)           (23,716)
 Coal derivative assets and liabilities (29,523)           15,199
 Accounts payable, accrued expenses and (51,968)           3,742
other current liabilities
 Income taxes, net                      22,048             (21,971)
 Deferred income taxes                  (255,530)          17,062
 Other                                  (83,453)           25,955
 Cash provided by operating activities    356,395            471,367
Investing activities
Acquisition of ICG, net of cash acquired     -                  (2,894,339)
Change in restricted cash                    6,872              (5,939)
Capital expenditures                         (303,968)          (215,899)
Proceeds from dispositions of property,      22,624             25,133
plant and equipment
Purchases of short term investments          (99,628)           -
Investments in and advances to affiliates    (12,685)           (56,827)
Purchase of noncontrolling interest          (17,500)           -
Additions to prepaid royalties               (9,192)            (26,135)
 Cash used in investing activities        (413,477)          (3,174,006)
Financing activities
Proceeds from the issuance of senior notes   -                  2,000,000
Proceeds from term note                      1,386,000          -
Proceeds from the issuance of common stock,  -                  1,267,776
net
Payments to retire debt                      (452,806)          (604,096)
Net increase (decrease) in borrowings under
lines of credit and commercial paper         (381,300)          283,096
program
Payments on term note                        (3,500)            -
Net payments on other debt                   (13,078)           (8,792)
Debt financing costs                         (34,686)           (114,587)
Dividends paid                               (36,072)           (57,470)
Issuance of common stock under incentive     5,131              1,628
plans
 Cash provided by financing activities    469,689            2,767,555
Increase in cash and cash equivalents        412,607            64,916
Cash and cash equivalents, beginning of      138,149            93,593
period
Cash and cash equivalents, end of period     $ 550,756          $ 158,509



Arch Coal, Inc. and Subsidiaries
Schedule of Consolidated Debt
(In thousands)
                                                   September 30,  December 31,
                                                   2012           2011
                                                   (Unaudited)
Indebtedness to banks under credit facilities      $  100,000    $  481,300
Term loan due 2018                                 1,383,375      -
6.75% senior notes ($450.0 million face value)     -              450,971
due 2013
8.75% senior notes ($600.0 million face value)     590,475        588,974
due 2016
7.00% senior notes due in 2019 at par              1,000,000      1,000,000
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                                              7,290          21,903
                                                   4,581,140      4,043,148
Less: current maturities of debt and short-term    115,695        280,851
borrowings
Long-term debt                                     $4,465,445     $3,762,297



Arch Coal, Inc. and Subsidiaries
Reconciliation of Non-GAAP Measures
(In thousands)
Included in the accompanying release, we have disclosed certain non-GAAP
measures as defined by Regulation G.
The following reconciles these items to net income and cash flows as reported
under GAAP.
Adjusted EBITDA
Adjusted EBITDA is defined as net income attributable to the Company before
the effect of net interest expense, incometaxes, depreciation, depletion and
amortization, and the amortization of acquired sales contracts.Adjusted
EBITDA may also be adjusted for items that may not reflect the trend of
future results.
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. We believe that Adjusted
EBITDA presents a useful measure of our ability to incur and service debt
based on ongoing operations. Furthermore, analogous measures are used by
industry analysts to evaluate our operating performance. In addition,
acquisition related expenses are excluded to make results more
comparablebetween periods. 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          Nine Months Ended
                    September 30,               September 30,
                    2012           2011          2012            2011
                    (Unaudited)
Net income (loss)  $ 45,751      $  9,121    $(388,264)      $ 71,625
 Income tax       15,958         (11,427)      (255,363)       (1,407)
expense (benefit)
 Interest       74,251      -  76,854        225,642         152,182
expense, net
 Depreciation,
depletion and       126,838        139,547       399,672         320,320
amortization
 Amortization
of acquired sales   (4,093)        (12,698)      (22,561)        (5,492)
contracts, net
 Acquisition
and transition      -              8,584         -               55,569
costs
 Mine closure
and asset           (2,194)        -             523,568         7,316
impairment costs
 Goodwill       -              -             115,791         -
impairment
 Other
nonoperating        -              1,708         19,042          51,448
expenses
 Net income
attributable to     -              (231)         (268)           (822)
noncontrolling
interest
Adjusted EBITDA     $256,511       $211,458      $ 617,259       $650,739
Adjusted net income and adjusted diluted earnings per common share
Adjusted net income and adjusted diluted earnings per common share are
adjusted for the after-tax impact of acquisition related costs and are not
measures of financial performance in accordance with generally accepted
accountingprinciples. We believe that adjusted net income and adjusted
diluted earnings per common share better reflect the trend of our future
results by excluding items relating to significant transactions. The
adjustments made to arrive at these measures are significant in understanding
and assessing our financial condition. Therefore, adjusted net income and
adjusted diluted earnings per share should not be considered in isolation,
nor as an alternative to net income or diluted earnings per common share
under generally accepted accounting principles.
                    Three Months Ended          Nine Months Ended
                    September 30,               September 30,
                    2012           2011          2012            2011
                    (Unaudited)
Net income (loss)
attributable to     $ 45,751      $  8,890    $(388,532)      $ 70,803
Arch Coal
 Amortization
of acquired sales   (4,093)        (12,698)      (22,561)        (5,492)
contracts, net
 Acquisition
and transition      -              8,584         -               55,569
costs
 Mine closure
and asset           (2,194)        -             523,568         7,316
impairment costs
 Goodwill      -              -             115,791         -
impairment
 Other
nonoperating        -              1,708         19,042          51,448
expenses
 Tax impact of 2,326          890           (235,261)       (35,709)
adjustments
Adjusted net income
attributable to     $ 41,790      $  7,374    $  12,047      $143,935
Arch Coal
Diluted weighted
average shares      212,076        211,974       211,931         183,850
outstanding
Diluted earnings    $   0.22     $   0.04    $   (1.83)    $   0.39
(loss) per share
 Amortization
of acquired sales   (0.02)         (0.06)        (0.11)          (0.03)
contracts, net
 Acquisition
and transition      -              0.04          -               0.30
costs
 Mine closure
and asset           (0.01)         -             2.47            0.04
impairment costs
 Goodwill      -              -             0.55            -
impairment
 Other
nonoperating        -              0.01          0.09            0.28
expenses
 Tax impact of 0.01           -             (1.11)          (0.20)
adjustments
Adjusted diluted    $   0.20     $   0.03    $   0.06     $   0.78
earnings per share

SOURCE Arch Coal, Inc.

Website: http://www.archcoal.com
Contact: Jennifer Beatty, Vice President, Investor Relations, +1-314-994-2781
 
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